ASEAN Economic Community - Opportunities and challenges for Vietnam In recent years, Vietnam has participated in building the AEC with a proactive spirit [...]
Over the past years, Vietnam has participated in building the AEC with a proactive, positive and responsible spirit. Promoting the establishment of AEC is always one of the highest priorities cof Vietnam in the process of international economic integration.
At the 14th ASEAN Summit held in February 2009 in Thailand, the Leaders issued the Cha-am Hua Hin Declaration on the Roadmap for building the ASEAN Community (2009-2015) with three main pillars: the ASEAN Economic Community, the ASEAN Political-Security Community and the ASEAN Socio-Cultural Community.
The conference also approved the Master Plan for building the ASEAN Economic Community with specific measures and schedules for implementing the AEC, including the following contents:
(i) Building a common market and unified production base through measures to remove barriers to the free flow of goods, services, investment, and skilled labor as well as facilitate the freer flow of capital flows, measures on priority areas of integration.
(ii) Turn ASEAN into a highly competitive economic region based on the implementation of competition policy, consumer protection, intellectual property rights, infrastructure development, and e-commerce.
(iii) Equitable economic development through implementing measures to develop small and medium-sized enterprises, the ASEAN Integration Initiative aims to help CLMV countries (Cambodia, Laos, Myanmar and Vietnam) improve their capacity.
(iv) Effective integration into the global economy by participating in Free Trade Agreements (FTAs), actively participating in the global supply chain.
Over the past years, Vietnam has participated in building the AEC with a proactive, positive and responsible spirit. Promoting the establishment of AEC is always one of Vietnam's highest priorities in the process of international economic integration. Together with ASEAN, Vietnam is determined and devotes its best efforts to implementing commitments, programs and initiatives towards the goal of establishing the ASEAN Economic Community (AEC) by the end of 2015, especially priority measures to implement the AEC Master Plan.
According to the most recent Report of the ASEAN Secretariat on the implementation rate of measures in the Roadmap for building the ASEAN Economic Community (AEC), ASEAN has implemented 91.5% of priority measures with great impact on trade and investment. Vietnam is one of the leading countries in terms of implementation rate (implementation rate of priority measures reached 94.5%). To continue promoting the implementation of measures to build the AEC, ASEAN countries agreed on a number of directions, in addition to other measures, as follows: evaluate unfinished measures to determine whether the reason for their incompleteness is technical or policy issues; continue to promote the implementation of remaining measures in the overall roadmap for building the AEC.
Implementing the direction of ASEAN Leaders on building the ASEAN Community Vision after 2015, Vietnam and other ASEAN countries have completed the draft Master Roadmap for building the AEC after 2015 to 2025, expected to be approved by ASEAN Leaders at the upcoming November Summit in Malaysia. The main content of this document is strategic measures to build an integrated, competitive, dynamic, people-centered ASEAN economy, developing advantageous industries and looking globally. This will also be the framework for all specialized agencies in the AEC pillar to develop specialized action plans until 2025.
Vietnam's readiness for the formation of the ASEAN Economic Community at the end of 2015 is also demonstrated through the implementation of Vietnam's specific commitments in many fields with some outstanding results as follows:
Domestic:
In terms of policy:
– Vietnam's main advantage in building the AEC is the determination of the Party and State to proactively integrate into the international economy, especially regional economic integration and actively participate in negotiating and signing free trade agreements to open the market for export goods in which Vietnam has a competitive advantage, taking advantage of imported resources with lower costs; At the same time, it creates external pressure to promote domestic reform in the direction of transparency and openness, creating more favorable conditions for business and investment activities.
– Promote propaganda information about AEC in 2015 to raise awareness of people and businesses about the benefits and challenges of AEC.
– Closely coordinate ASEAN economic integration with economic integration of other regions (such as the Trans-Pacific Partnership Agreement, Vietnam-EU Free Trade Agreement, Vietnam-European Union... are being negotiated and will be signed in the near future) so that Vietnamese businesses and people can benefit maximally from the economic integration process for the economic integration period after 2015.
– Promote domestic economic structural reform at a pace consistent with the ASEAN economic integration process.
– Strengthen coordination among ministries and branches participating in Vietnam's AEC through the coordinating role of the Ministry of Industry and Trade.
In terms of implementing commitments, Vietnam has implemented them seriously, fully and on time:
– Issue legal documents to implement tax cuts.
– Enhance trade facilitation through the implementation of electronic customs, the single-window mechanism, and reform of administrative procedures related to import and export to shorten customs clearance time and reduce requirements for declaration documents, thereby minimizing business costs of businesses.
– Efforts to simplify the system of licenses and certificates including export and import licenses, certificates of origin (C/O), hygiene and quarantine certificates, and food safety certificates. For example, the implementation of the eCoSys system (online C/O application system), automatic import licensing.
– Towards service liberalization, Vietnam has amended a number of related Laws such as the Investment Law, Commercial Law, Enterprise Law and issued many Decrees and documents guiding these Laws.
– Amend and promulgate new policies to implement commitments in each specific industry, typically in the distribution services, banking, insurance, securities, and telecommunications industries to be consistent with commitments in the ASEAN Framework Agreement on Services (AFAS) as well as GATS.
– For priority service industries including healthcare, tourism, logistics, e-ASEAN and aviation, Vietnam has also seriously complied with commitments and actively participated in related agreements.
– Currently, Vietnam is considered one of the countries with a fairly comprehensive Competition Law that applies to the entire economy and has supervisory agencies implementing this law along with Indonesia, Singapore and Thailand...
In terms of coordination with businesses:
– Negotiate commitments to international economic integration with an appropriate transition roadmap so that businesses have time to prepare in intra-ASEAN and ASEAN+1 FTAs with partners China, Korea, Japan, India, Australia and New Zealand.
– Negotiations promote the opening of ASEAN markets and partners for Vietnamese businesses.
– Actively coordinate with businesses to resolve new trade restriction measures in export markets, including measures such as technical barriers, anti-dumping, anti-subsidy, and self-defense.
– Proactively apply self-defense and anti-dumping measures to deal with imported goods that negatively affect or unfairly compete with domestically produced goods.
– Support businesses through economic cooperation, trade promotion and investment channels to learn, penetrate and develop the market.
– Implement propaganda and promotion for businesses and people in localities throughout the country about the opportunities and challenges of economic integration, especially the ASEAN Economic Community.
– Encourage the development of supporting industries to contribute to attracting investment, ensuring investment spillover effects, bringing direct and practical benefits to businesses and local people, and building long-term capacity for future economic integration.
– Last and not least is the negotiation to open new markets, both for the purpose of diversifying the market, avoiding deep dependence on regional markets, and taking into account the complementary nature of the Vietnamese economy, a prominent example of which is the EU market, through the negotiation of the Vietnam-EU Free Trade Agreement.
Together with other ASEAN member countries:
In the field of commodity trade
Vietnam has seriously implemented the Tax Reduction Roadmap to implement the ASEAN Trade in Goods Agreement (ATIGA) inherited from the CEPT/AFTA Program. As of 2015, Vietnam has completed reducing import taxes to 0-5% for 97% of tariffs, of which about 90% of tariff lines are at 0%. By 2018, Vietnam will have to eliminate import taxes on about 97% of the tariff schedule and eliminate tariff quotas on poultry eggs, sugar, and salt. Regarding trade facilitation, Vietnam and ASEAN countries actively implement initiatives and content in the Working Program on Trade Facilitation for the period 2007-2015 approved by ASEAN Economic Ministers, notably:
– Vietnam has built a national single-window mechanism and is one of the leading ASEAN countries connecting to the ASEAN single-window mechanism.
– Vietnam and ASEAN countries have also agreed on a Working Program to resolve non-tariff barriers (NTMs), including activities such as updating the database on ASEAN's existing NTMs, identifying and handling/removing trade barrier elements in NTMs. On Vietnam's side, domestic measures are consistent with international commitments and Vietnam still actively coordinates with ASEAN countries to discuss and find ways to remove difficulties for businesses.
– Vietnam and a number of ASEAN countries have participated in the second Self-Certification of Origin pilot project.
In the field of trade and services
Vietnam and ASEAN countries have completed the 9th Commitment Package and are actively building the 10th Commitment Package within the framework of the ASEAN Framework Agreement on Services (AFAS). Although the content of Package 10 sets quite high requirements for commitment to opening up, Vietnam still shows efforts and actively resolves problems to soon complete the commitments in Package 10 with ASEAN member countries.
In the field of investment
The ASEAN Comprehensive Investment Agreement (ACIA) was signed in February 2009, and is the successor and synthesis of the ASEAN Investment Agreement (AIA) and a number of other previous agreements. Since the Agreement took effect, ASEAN countries have focused on reducing and gradually eliminating measures in their Reservation Lists, aiming to build a free and open investment environment by 2015.
In the field of investment promotion and liberalization, Vietnam and ASEAN countries have achieved certain results such as publishing the Investment Guidebook for businesses and the annual ASEAN Investment Report; organize seminars and forums on investment promotion; Build an ASEAN information page on investment, etc.
Other content
Vietnam also proactively cooperates with ASEAN countries in implementing activities in the following fields, notably:
– The ASEAN Connectivity Initiative was approved at the High Level Conference (HNCC)-15 in 2009 with the goal of strengthening infrastructure connectivity (both hardware and software) to narrow the economic gap in the region and the Master Plan on ASEAN Connectivity (MPAC) at HNCC-17 in 2010 in Hanoi to implement the Connectivity Initiative. MPAC focuses on three areas: hardware connectivity, institutional connectivity and human connectivity.
– Financial cooperation: ASEAN countries have negotiated 6 Financial Services Liberalization Packages within the AFAS framework and are currently preparing to negotiate Package 7. The Working Committee on Capital Account Liberalization is building a capital account liberalization framework to assess the level of liberalization of each country, which is the basis for member countries to update their country's capital account liberalization roadmap. In addition, countries also implemented policy dialogue on defense mechanisms for capital account liberalization to monitor the fluctuating trend of capital flows in ASEAN to identify potential risks and ensure macroeconomic, financial and monetary stability.
– In addition, Vietnam has been actively working with ASEAN countries to implement cooperation in a number of other issues such as competition, consumer protection, support for small and medium enterprises, etc.
III. Vietnam's role and position in the AEC building process:
In the context of building AEC, the position and role of Vietnam's economy should be viewed both within the intra-ASEAN framework and integrating into the global economy as follows:
Within the internal framework:
– ASEAN has been Vietnam's most important trading partner for many years. With the advantage of being a dynamic, geographically close developing region, trade relations between Vietnam and ASEAN have a high growth rate.
– Vietnam's export structure to ASEAN is changing in a positive direction, upgrading in both quality and value. Our exports to ASEAN accounted for 11.4% of the country's total export turnover in the first 9 months of 2015. From traditional products that we have strengths in such as semi-processed agricultural products and raw materials such as rice, coffee, rubber, and crude oil with low processed content, in recent times, Vietnam has exported many consumer goods and industrial goods such as computer components, textiles, and processed agricultural products with high and stable value. Vietnam and other ASEAN countries join the club of the world's largest exporters of rice, rubber, coffee, cashew nuts, and textiles.
– Vietnam is a quite attractive investment destination for ASEAN investors and other investors based in ASEAN. By the end of 2014, Singapore, Malaysia, and Thailand were three ASEAN member countries on the list of 10 partners with the largest registered FDI capital in Vietnam.
Within the framework of regional and global economic integration:
– The focus of the ASEAN Economic Community is the initiative to develop the common ASEAN market and production base based on connecting the strength of the market of 10 ASEAN countries with more than 600 million consumers and a total GDP of nearly 3,000 billion USD/year.
– Vietnam has a population of 90 million people, with a high proportion of young population, total GDP of 184 billion US dollars in 2014, economic growth rate of 5.9% in 2014 and 6.3% in the first half of 2015. Therefore, Vietnam contributes significantly to ASEAN in both market significance and production base.
– Vietnam has cooperated with ASEAN countries extensively with many important partners, especially on the basis of FTAs between ASEAN with India, Korea, Japan, Australia, New Zealand and China, actively promoting the negotiation of the Regional Comprehensive Economic Partnership Agreement (RCEP). These cooperation contents place ASEAN at the center of the emerging regional economic integration structure and become an important production and market center of the world.
– Vietnam also participates in many FTAs with partners outside the bloc such as the Trans-Pacific Partnership Agreement, FTAs with the EU, with the Eurasian Economic Union, etc. further expand market access and improve stability and sustainability of trade and investment through commitments on the business, trade and investment environment.
– Therefore, Vietnam acts as an important destination for foreign investment in production for the ASEAN region and many important markets. Along with investment comes the flow of goods, services and skilled labor that Vietnam needs to increase its manufacturing capabilities. Vietnam needs high quality goods for production and consumption, advanced and modern technology to improve competitiveness in the context of integration.
– Therefore, it is expected that Vietnam will make good use of the ASEAN regional economic integration platform to strengthen economic links and integration with the global economy, participating in the world's supply chains and value chains in the future.
– The decision to join ASEAN is a correct strategic step, bringing important and practical benefits to Vietnam. This is an important milestone, the first breakthrough in Vietnam's international integration process, contributing to implementing the Party and State's policy of proactive and positive international integration, including international economic integration.
– After 20 years of joining ASEAN (July 28, 1995 - July 28, 2015), along with the strong development of the Association by promoting the process of forming the ASEAN Community at the end of 2015 and building the Community Vision 2025, Vietnam is facing many opportunities as well as challenges in the process of participating in ASEAN cooperation, specifically:
Opportunity:
– After being formed at the end of this year, AEC will basically become a common market of about 600 million consumers with a total GDP of nearly 3,000 billion USD, a unified production space, helping to promote the common advantages of the ASEAN region. Goods, services, capital, technology and skilled labor will flow freely within ASEAN without any barriers or discrimination between members.
– Vietnam will have the opportunity to easily access markets inside and outside the region, thereby expanding the market and diversifying export products; Stabilize import sources and lower imported input prices, thereby contributing to management reform, economic restructuring and implementation of socio-economic development goals.
So far, ASEAN has always been an important trading partner of Vietnam. As of the first 9 months of 2015, Vietnam's total import-export turnover of goods with the ASEAN market reached 31.3 billion USD. Vietnamese businesses have exported goods to the ASEAN market worth 13.7 billion USD and accounted for 11.4% of the country's export turnover to the world. In the opposite direction, Vietnamese businesses imported approximately 17.6 billion USD of goods originating from ASEAN countries, accounting for 14.1% of the country's total import turnover from all markets. As of September 2015, ASEAN is Vietnam's third largest export market, after the United States and the European Union, and Vietnam's third largest import market after China and South Korea.
– Vietnam will have the opportunity to increase FDI attraction as well as expand investment opportunities to ASEAN countries and business opportunities from outside; Access scientific and technological support sources, learn advanced management experiences, contribute to improving the qualifications and capacity of staff and training high-quality human resources.
\By the end of October 2015, ASEAN had 2,629 valid FDI projects with a total registered capital of 56.55 billion USD, an average project of 21.51 million USD/project, higher than the average investment of 1 foreign investment project in Vietnam of 13.9 million USD/project.
Singapore leads with 1,469 projects, total investment capital is 33.9 billion USD, accounting for 60% of total registered capital. Ranked 2nd is Malaysia with 510 projects, total registered capital of 13.36 billion USD, accounting for 24% of total investment capital. Thailand ranked 3rd with 406 projects, total investment capital of 7.03 billion USD, accounting for 12% of total investment capital.
– Businesses will benefit greatly by promoting efficiency from scale to increase productivity and reduce production costs, leading to competitive commodity prices. What is most expected is that the AEC can create chain links between ASEAN businesses, contributing to the growth and common prosperity of the region. In addition, the orientation to improve the business environment and facilitate trade that ASEAN is setting for the period after 2015 will contribute to promoting investment and business activities of businesses.
– ASEAN consumers will have more choices of goods and services with lower prices and higher quality. Intra-bloc trade and investment have opportunities to develop rapidly.
– Positive impacts from the AEC will contribute to creating changes in building and perfecting domestic policies, laws and procedures, more suitable to international integration requirements.
– The implementation of commitments within ASEAN creates a foundation for Vietnam to continue to expand and strengthen relations with partners outside of ASEAN, especially large countries, as well as participate more deeply in regional and international cooperation frameworks, thereby contributing to enhancing Vietnam's international role and position.
– In addition, participating in ASEAN economic cooperation creates opportunities for businesses to improve their competitiveness; creating opportunities for Vietnam to continue changing its export structure towards increasing added value (from exporting raw materials to high quality products); Improve the capacity and efficiency of Vietnamese human resources....
Challenge:
The biggest challenge for Vietnam is the more fierce competitive environment brought about by regional economic integration, especially when member countries have quite similar production characteristics and common strengths in many fields. Meanwhile, the competitiveness of the economy still needs to be improved further, related to many reasons such as infrastructure limitations, including both hard infrastructure elements (roads, seaports, energy,...) and soft infrastructure (legal system, administrative apparatus...), limitations in human resources, speed of economic structure adjustment so that the benefits of economic growth are distributed more evenly, limitations in awareness of all levels, sectors, businesses, etc. people in dealing with the economic integration process.
In addition, compliance with common rules of the game and implementation of common commitments and agreements of ASEAN and between ASEAN and partner countries require investing resources and adjusting appropriate policies and laws.
However, overall, the AEC will bring many opportunities and practical benefits to the economy, especially to Vietnamese businesses in particular and ASEAN businesses in general./.
Multilateral Trade Policy Department - Ministry of Industry and Trade
Procedures
