Roundup: Integrating into ASEAN Economy, Vietnam on tenterhooks

The ASEAN Community will be established on Dec. 31, bringing about many political, economic and cultural benefits to its members, but Vietnam is left like a cat on hot bricks, as it is still slow in integrating into the community, local scholars told Xinhua.

The establishment the ASEAN economic community (AEC) will be a significant milestone in the economic integration of a wider market with 625 million people and GDP of about 2,700 billion U.S. dollars, Dr. Tran Dinh Lam, director of the Center for Vietnamese and Southeast Asian Studies, the Vietnam National University in Ho Chi Minh City, told Xinhua.

There will exist a common market with no trade barriers; tariffs of the countries in the region will be cut down to zero percent. People will have opportunities to use better quality goods at lower prices due to competition; skilled labor will be moved to appropriate places; it will be easier for ASEAN countries to attract investment of each other when legal procedures are removed.

With that, "Vietnam's economy will increase to 14.5 percent," Lam said.

However, the group of least developed countries in AEC will face more challenges, because their weak internal resources will make them difficult to compete with other nations which have more experience in controlling quality of goods and services, in attracting investment and organizing business.

In addition, a lack of proper human resources training in these countries would lead to low productivity. Small and medium enterprises in this group of countries do not care much about AEC, thus leading to inadequate preparation for integration.

According to a recent research by the Institute of Southeast Asian Studies in Singapore on the awareness of enterprises when Vietnam joins AEC by the end of this year, 63 percent of them think AEC will have minor effect on their business, Lam said.

A recent survey by the Hanoi Young Entrepreneurs Association shows that 80 percent of asked enterprises said they were "very indifferent to and not interested in" AEC integration, and only 20 percent of them, mostly large-scale ones, expressed their interest, he added.

Lam's statements are echoed by Tran Viet Thai, vice director of Vietnam's Institute for Foreign Policy and Strategic Studies.

When the ASEAN Community is formed, the Vietnamese government, small and medium enterprises, labor management agencies will receive the biggest impact, Thai said, noting that the Vietnamese Justice Ministry has recently reviewed some 500 legal documents to adjust them in line with the community.

Thai stated that Vietnam is gradually narrowing development gaps with some ASEAN members like Indonesia and the Philippines, but Vietnam's labor productivity and working performance are still lower than other members', including Singapore, Thailand and Malaysia.

Most of enterprises in Vietnam are small and medium, thus, when the market is opened up further, major foreign firms from such ASEAN members as Singapore and Malaysia will flood the Vietnamese market, Thai said, noting that Thai firm BJC has recently bought supermarket chain Metro Vietnam. "Competition in some industries such as paper, sugar and dairy product will surge. However, the impact rate will not be as big as that of the TPP (Trans-Pacific Partnership)," he stated.

According to Thai, in the short term, most of Vietnamese enterprises will be hit when integrating into the ASEAN Community, especially AEC, but in the long run, they will benefit from it, if the state has right supporting policies and transparent mechanisms. Specifically, some industries will be dominated by foreign companies, but Vietnamese enterprises will gradually adapt to regain their shares more or less, he said.

Evaluating Vietnam's adaptability to the ASEAN Community, Thai said "it is so-so" with certain accumulation of experience and qualified human resources. "Vietnamese people only know how to swim after being thrown into rivers; they cannot learn swimming on land," he said.

Nguyen Son, an official of the Vietnamese Ministry of Industry and Trade, said that when integrating into AEC, Vietnam will face many challenges in terms of trade in goods, investment and service.

Regarding trade in goods, the current biggest challenge is that from now to 2018, Vietnam will have to eliminate the remaining tariffs on some 400 product items, many of which, including sugar, automobile, confectionary and construction glass, have enjoyed high protection for years, Son said, adding that the high import tax rate of 80 percent and import quotas on sugar will be removed.

The second challenge is that ASEAN's investment climate is improving, but competition among ASEAN countries to lure investment is not decreasing, Son said, noting that Vietnam's competitiveness, according to the World Economic Forum, has never been higher than that of ASEAN-6 (six older members of the block, including Brunei, Indonesia, Malaysia, the Philippines, Singapore and Thailand).

When Vietnam removes tariffs on certain products, some foreign investors who are operating profitably but not very well in Vietnam might shift their investment to other ASEAN countries, Son said, noting that Sony Vietnam has already relocated its factory to Thailand. Regarding services, Son said Vietnam should have more proper mechanisms and policies to lure skilled labor of other ASEAN countries to fields it needs, and intensify manpower training so that Vietnamese people can do their jobs well in Vietnam as well as in other ASEAN members.

To overcome the above-mentioned challenges, "the Vietnamese government is focusing on measures which facilitate trade, helping enterprises reduce input cost and sharpen their competitive edge by shortening transaction time and slashing administrative cost," Son said.

Specifically, Vietnam is implementing a national single window system which enables cross-border traders to submit regulatory documents at a single location or single entity, with all relevant work being done electronically.

Addressing a workshop entitled "ASEAN Community and Vietnam's Action Plan" on Dec. 11, Vietnamese Deputy Prime Minister and Minister of Foreign Affairs Pham Binh Minh pointed out opportunities and challenges Vietnam will have when the community is established.

In the field of politics and security, Vietnam will have opportunities to reinforce a peaceful and friendly environment when ASEAN countries share and connect security interests more closely.

Regarding economic issues, Vietnam will have chances to expand goods and services markets, lure more foreign investment, speed up process of perfecting its economic institution, and gain an optimal location in regional production and distribution chains.

On the cultural and social front, Vietnam will have opportunities to establish and follow higher cultural and social standards as well as criteria for human rights protection, and enrich its cultural identities.

Realizing the opportunities will make practical contribution to Vietnam's socioeconomic development, maintenance of its stability, and enhancement of national status in the international arena.

"However, because our development in many spheres still lag behind many other ASEAN countries, the process of realizing the 2025 ASEAN Community Vision and overall plans to implement the vision on all the three pillars, especially on the economic pillar, is placing us at challenges bigger than those faced by other countries," stated the Vietnamese deputy prime minister. Enditem