Vietnam urged to strategically plan for AEC

For the past two years, the comprehensive integration of the ten South East Asian (SEA) member state economies has been on the fast-track and is fully expected to take shape by the end of 2015. With the end goal in sight, what should the Vietnam business community be doing to ready itself for the monumental move into the international arena?

Leading economists and financial experts are in general agreement that the event could potentially serve as a driving force for improving the nation’s export efficiency to ASEAN and other potential markets throughout the world.

The AEC bloc of nations has a population of 600 million people and annual GDP of US$2,000 billion. This opens up huge opportunities for bolstering sustainable comprehensive trade and investment.

However, these same experts, with near unanimity, caution that they estimate nearly 80% of Vietnamese domestic businesses do not fully comprehend the significance of the trade pact and are not adequately preparing for joining the AEC, which could result in devastating consequences for the them, and in turn, the nation’s economy.

Chu Duc Khai, Vice President and General Secretary of the Vietnam Steel Association (VSA) expressed concern over the lackadaisical attitude towards preparation exhibited by a number of major steel businesses.

In 2013, the steel market sector displayed a complete lack of enthusiasm about gearing up production and in fact, production was only at 60% of its capacity, he said.

“The sector exported just 1.74 million tonnes of product to ASEAN, grossing a disappointing US$1.4 billion.”

Major investment companies in Vietnam seem to be full of bluster and appear to be aggressively strategising on measures to fully capitalise on the global opportunities the pact presents.

Meanwhile, most small and medium-sized enterprises (SMEs) seem to be following the lead of the steel companies and are not fully addressing the key issues needed to fully participate in the benefits of AEC membership, he concluded.

Nguyen Cong Danh who is in charge of import-export activities of Toan Bo Materials and Equipment Joint Stock Company says that Vietnamese businesses have advantages in farm produce, but cautions that they cannot rest their laurels and expect to successfully compete only on price after the AEC is realised.

He added that his company exports motorbikes but faces tough competition from Thailand and China due to their cheap prices and attractive designs. Therefore, to be successful it has to compete in term of price and quality to penetrate the ASEAN market.

Dr Nguyen Duc Thanh from the Centre for Economic and Policy Research warns that Vietnamese businesses should be aggressively seeking information to learn about opportunities and devising specific concrete business plans to capitalise on them.

Vietnam has a favourable position in connecting ASEAN to the North East Asia. In the integration process, trade barriers will be reduced to facilitate connectivity among businesses in the region; he says therefore,  export and production activities should be highly specialised.

Tran Thanh Hai, Deputy Head of the Ministry of Industry and Trade’s Import-Export Department says that Vietnamese businesses should be fully aware that they are going to face difficult and, in some cases,  insurmountable challenges when joining the AEC.

Especially, businesses that want to enjoy preferential tariffs under the ASEAN Trade in Goods Agreement (ATIGA), need to be thoroughly knowledgeable on the regulations related to certificate of origin (CO) of products from ASEAN nations.

Hai said in spite of reduced tariffs, businesses face another hindrance in dealing with issues related to the CO of their products. This means that at least 40% of products produced within the ASEAN bloc can enjoy incentives. If businesses import too much from non-ASEAN member states, they will be denied these preferential taxes.

Therefore, these businesses need to be actively researching these regulations, to be prepared for both the positive and negative impact they may have on their business operations.

Hai also urged businesses to pay attention to other trade barriers such as anti-subsidy and anti-dumping measures.

The AEC has been established under the right roadmap and time. Vietnamese businesses, especially SMEs should be actively reaching out and grasping the opportunities it presents, seeking creative and competitive advantages.