AEC formation- a win-win for Vietnamese businesses

Specifically, this translates to installing internal control systems to ensure product quality, timeliness of production and delivery of goods and services along with streamlining management and production processes to reduce costs and maintain price competitiveness and profits.

To capitalize on the preferential tariff reductions, they should have a solid and thorough understanding of the rules of origin along with policies and procedures firmly in place to maintain strict compliance with them.

The ASEAN Economic Community (AEC) will come into effect by the end of 2015, marking a milestone in comprehensive integration of South East Asian economies.

During a recent dialogue addressing the challenges posed by the formation of the AEC, leading market analysts and experts said that Vietnam’s economy will undergo significant changes brought about by regional integration.

Most significantly, they said the AEC will offer businesses more chances to expand into markets with lower input costs and more investment opportunities. However, business will face much stiffer competition on home turf, particularly in industrial and agricultural production.

The country will also be confronted with continuing problems related to retooling the infrastructure and human resource training in the early years of integration and most likely continue to encounter institutional discrepancies.

These are snags in the development process that will take time to work themselves out but problems that are more than offset by the opportunities regional integration brings with it.

From the perspective of Deputy Minister of Industry and Trade Nguyen Cam Tu the benefits of joining the AEC are that it will help businesses boost trade exchange, reduce import costs and improve price competitiveness in larger markets.

Tu said with the opening of regional markets for Vietnamese goods, Vietnam also opens its door to goods and services from other countries. AEC formation is a win-win situation for Vietnamese businesses that adequately prepare while those that don’t will fall by the wayside.

Businesses under pressure

Deputy Minister Nguyen Cam Tu said the establishment of AEC will remove tariff barriers to zero percent, which will accelerate exports, attract investment and boost economic growth from member nations. However, if these barriers have been removed completely, it will bring huge economic benefits.

Prof. Dr. Nguyen Hong Son, Headmaster from National Economics University said that while the government has actively revised laws and policies in line with the international integration process, the business community has failed to make thorough preparations to seize opportunities. Many businesses are not fully aware about the AEC to take advantage of opportunities from joining the community.

Chairman of Hanoi Young Entrepreneur Association Le Vinh Son said Up to 80% of small and medium-sized enterprises (SMEs) have had limited knowledge about integration while just 20%, mostly big companies are aware of the process but find it difficult to compete with large businesses from regional nations.

Another challenge for Vietnam is that the establishment of AEC will allow the free transition of highly skilled labourers and experts from ASEAN to engage in trade and investment activities via Vietnamese borders.

Son said the income difference among ASEAN countries will be the main reason for the transition of labourers between poor and rich nations and will pose great challenges to Vietnamese businesses. To turn challenges into opportunities, the Government should devise solutions for improving businesses’s competitive edge.