AEC, a year in review

09:31 | 25/01/2017 Vietnam - Asean

(VEN) - One year after the establishment of the ASEAN Economic Community (AEC), some changes are evident in the investment environment and business opportunities of the bloc. However, there’s broad agreement that the AEC still has a long way to go to achieve its potential.  

aec a year in review

Nguyen Xuan Phuc speaks at the ASEAN Business Summit 2016 held in Hanoi in December

Early days

Luu Duc Khanh, managing director of the country’s first private airline, VietJet Air, says Vietnam’s deeper integration in the world economy, including the establishment of the AEC, has contributed to the company’s success.

With a growing number of investors, experts and workers traveling to Vietnam, and Vietnamese traders visiting other countries in the region to seek business opportunities, the number of VietJet Air’s passengers has significantly increased.

The establishment of a single market for ASEAN members has given rise to the free flow of goods, services, investment and skilled laborers among member states. VietJet Air has thus been able to recruit good managers from regional countries such as the Philippines, Indonesia and Malaysia.

However, Lito Camacho, the deputy chairman of Credit Suisse for Asia Pacific, says he has not seen many changes since the AEC was established. Only trade issues in ASEAN have changed, including tariff reduction to zero percent for some goods, but he attributes this to the ASEAN Free Trade Area agreement, not the establishment of the AEC.

Chairman of the Board of Directors of the technology corporation FPT, Truong Gia Binh, also says he has not seen significant changes since the establishment of the AEC.

But one must keep in mind that these are early days for the agreement that lays out a blueprint for promoting economic, political, social and cultural cooperation across the 10-member states by 2025.

Challenges and potential

The AEC has not achieved results as expected because many regional countries have not paid attention to the development of a single market, explained Prime Minister Nguyen Xuan Phuc in a speech to the ASEAN Business Summit 2016 held in Hanoi last month.

The world and the ASEAN region are facing enormous challenges in the areas of security, economics, food, currencies and climate change, the prime minister said. In this context, ASEAN countries need to show solidarity, promote economic links and strengthen the development of transport infrastructure in order to create the most favorable conditions for the free flow of goods, services, investment, and skilled laborers within ASEAN.

According to Prime Minister Phuc, each ASEAN member cannot grow and develop based solely on the exploitation of its resources. They need to work together to implement technology innovation, enhance competitiveness, participate in the global supply chain and produce more added-value products.

ASEAN is home to over 600 million people with a total GDP of nearly US$3 trillion. It is expected that this figure will reach US$4.7 trillion by 2020. According to forecasts, ASEAN has a potential to become the fourth largest economy in the world by 2030. However, to achieve this goal, business communities in the region need to further promote cooperation and make the most of opportunities provided by the AEC.

Businesses in the ASEAN region need to create a breakthrough in their development and investment attraction.

Nguyen Hoa & Quynh Nga