News Analysis: ASEAN Economic Community to bring opportunities, challenges to Vietnam

As a member of the Association of Southeast Asian Nations (ASEAN), Vietnam will face both opportunities for growth and challenges when the ASEAN Economic Community (AEC) is established by the yearend.

According to Le Dang Doanh, former head of Vietnam's Central Institute for Economic Management, AEC will create a single market with the free flow of goods, services and investments within the regional grouping.

Quoting statistics from the International Labor Organization (ILO), Doanh said that Vietnam's economy is forecast to achieve an extra growth of 14.5 percent after joining AEC, while the inflow foreign investments to Vietnam will increase.

"Vietnam will have a bigger market and exports to other ASEAN markets," Doanh said.

Once the ASEAN Community is fully established, Vietnamese exports to traditional ASEAN markets, such as Singapore, Indonesia, Thailand, and to the non-traditional markets such as Laos, Cambodia and Myanmar, will expand through tariff and non-tariff privileges, Doanh said.

"This is a big opportunity for Vietnam. A competitive economy will help improve Vietnamese enterprises, expand the quality of their products, human resources, capital resources and management capacity," Doanh said.

Doanh said that there is no other way for Vietnam but to take efforts to adapt and turn challenges into opportunities for economic growth. "Focusing on infrastructure development and information dissemination is among the keys for sustainable development."

He said that for Vietnam to be competitive there is a need to speed up infrastructure development, especially in transport, power, and communications, sectors where Vietnam is behind other more developed ASEAN member countries.

"Vietnamese enterprises will have to face stiff competition in terms of product quality, manpower resources, foreign investments inflow, trade protection, among others."

He said that under AEC, Vietnam will have to open its doors to skilled labor from other ASEAN members and this will put a strain on Vietnam's labor force, especially the unskilled.

But according to the website of Vietnam's Ministry of Labor, Invalids and Social Affairs (MOLISA), Vietnam will be one of the biggest beneficiaries from the AEC in terms of employment growth and labor productivity improvement.

Thai Phuc Thanh, deputy director general of the Department of Social Assistance under the MOLISA, said that once the community is established, ASEAN may become one of the world's most dynamic economic blocs that would be comparable to other regional groupings.

The number of additional jobs generated in Vietnam is predicted to rise to around 6 million by 2025 or 9.5 percent of the total jobs created within ASEAN, said Thanh.

But with the rise in labor productivity, Vietnam will also face a high risk of brain drain when qualified workers go elsewhere for better working conditions and wages, Thanh said.

The MOLISA said that AEC will cause a severe labor competition in Vietnam since Vietnamese workers cannot compete with others in the region unless their professional qualification, foreign languages and soft skills are improved.

As such, MOLISA has been working with the Vietnam's Ministry of Education and Training to design a national vocational qualification framework based on the ASEAN Qualifications Reference Framework and other frameworks of developed countries around the world.

Deputy Director of MOLISA's Research Institute for Vocational Training Science Nguyen Quang Viet said on Vietnam's state-run radio Voice of Vietnam (VOV) in October that 47 percent of Vietnam's workforce is currently working in agriculture with low productivity and income compared to other regional economies like Malaysia, Singapore and Thailand.

Luong Hoang Thai, director of the Multilateral Trade Policies Department under Vietnam's Ministry of Industry and Trade, said on VOV in September that Vietnam will be in the group of four countries receiving more priorities than the other six ASEAN countries.

The AEC will generate opportunities for Vietnam to deepen integration with other East Asian economies and push through its economic reforms, modernization, and industrialization, Thai said.

Pressure from competitiveness, according to Vietnamese senior economist Pham Chi Lan, is a worrying issue for Vietnam.

Speaking at a recent seminar, Lan said for Vietnam to successfully join the AEC, it should remove tax barriers for foreign countries based on foreign trade agreements (FTAs) that it has signed with other countries.

Lan also described the administrative procedures in the country as "extremely complicated" and should be simplified.

"Many Vietnamese state-owned enterprises do not care much about integration because they prefer business ventures that would provide large-scale official development assistance (ODA) funding," Lan said.

According to statistics by MOIT at the start of 2015, as many as 60 to 80 percent of Vietnamese enterprises did not understand or paid attention to the concept of an integrated economic structure in ASEAN. Endit