Catching opportunities from ASEAN economic community – Part 5

Part 5: Boosting development of industries

In the ASEAN Economic Community (AEC), there are 12 prioritized integration sectors, comprising of air transport, automobiles, electronics, rubber, textile-garments, wooden products….

Heat from AEC

One of Vietnamese enterprises’ immediate doings is to reinforce domestic market. In the situation, diversifying industries is the key for them to promote the use of domestic goods among customers. This is because there will be a severe competitiveness in each ASEAN country when the AEC officially opens up the market.

 Production of Dong Hung Joint Stock Company in Di An town

According to Dr.Vu Tien Loc, Chairman of the Vietnam Chamber of Commerce and Industry (VCCI), AEC is an integration process, not an agreement and is a desire, not an obligation of the AEC. Thus, the AEC is a process and January, 2016 is a moment of time to declare the formation of AEC and is the beginning in the course of building the AEC. It takes quite a long time to build an economic community like the EU.

Among free trade agreements (FTAs), AEC tariff reductions are currently the highest. Opportunities for businesses following the formation of the AEC are opening up the market for businesses and creating a new impetus and motivation for them. However, the AEC will also bring about numerous challenges, for instance businesses will have to compete with foreign rivals from a lower level of development…

Leaders of Binh Duong Furniture Association said that domestic woodwork industry is facing a great pressure of competitiveness. Many businesses in the province have also felt heat from other AEC members in industries of garment, footwear, electronics, beverage, confectionary…Obviously, the AEC playground is gradually hot although January 1, 2016 is only the beginning in the course of building the AEC.

Promoting advantageous industries

China is ASEAN’s largest partner and ASEAN is the country’s fourth-largest partner. Whist, Japan is China’s third-largest partner. The trade growth between Japan and ASEAN reached 16% a year during the recent decade. Regarding investment, Japan is the second largest investor in ASEAN after EU. The ASEAN-Japan free trade agreement is expected to be implemented in 2018 when the AEC comes into effect.

Pham Sy Thanh, Director of the Chinese Economic Studies Program under the Vietnam Institute for Economic and Policy Research (VEPR) said that over 90% of tariff lines among ASEAN countries were be cut before the AEC is formed. Hence, the AEC does not create a breakthrough with great significance for businesses. After the AEC takes effect, the remaining 669 tariff lines pertaining to automobile industry, steel, milk and milk products will be gradually cut, creating advantageous conditions for Vietnam to import components for auxiliary industries. In a certain aspect, this will help reduce Vietnam’s dependance on Chinese market.

Many businesses in Binh Duong have also attached special importance to making investment in ASEAN countries with industries in terms of telecommunications, banking-finance, real estate, garment, beverage…But, businesses in Vietnam in general and in Binh Duong in particular have been in disadvantageous position compared to foreign ones from Thailand and Singapore.

Dr Pham Thi Thu Hang, VCCI General Secretary said that Vietnamese businesses have shown some major limitations for change, including low labour productivity because of the private sector difficultly developed and shallow participation in global value chains…

According to experts, Vietnam also needs to boost administrative procedure reform to ensure its integration from the AEC playground and the Trans-Pacific Strategic Economic Partnership Agreement (TPP). Vietnam is among the world’s top 50 economies. The AEC and TPP are expected to bring Vietnam opportunities in order to be named in the list of the global top 20 economies in the coming time.

Reported by Phung Hieu-Translated by K.T