Vietnam’s ASEAN Economic Community membership: Success relies on internal strengths and efforts

11:45 | 13/04/2015 Cooperation

(VEN) - The Association of Southeast Asian Nations (ASEAN) was established as a result of the Bangkok Declaration which was inked on August 8, 1967. The first five members are Indonesia, Malaysia, Singapore, Thailand, and the Philippines. ASEAN admitted Brunei in 1984, Vietnam in 1995, Laos and Myanmar in 1997, and Cambodia in 1999.

Vietnam’s ASEAN Economic Community membership: Success relies on internal strengths and efforts

The Hoa Sen Group is one of leading Vietnamese businesses in terms of regional integration

Important milestones

ASEAN’s initial goal is political connection.

The Kuala Lumpur Declaration, dated November 1971, was to establish a Zone of Peace, Freedom and Neutrality (ZOPFAN).

The Bali Declaration, which was made in 1976, affirms five principles under a Treaty  of Amity and Cooperation in Southeast Asia (TAC). Also in 1976, ASEAN began to shift to economic and cultural cooperation and established an ASEAN Secretariat.

ASEAN modified Articles 14 and 18 of the TAC in 1987 allowing countries outside the region to join it, while at the same time adopting an ASEAN Agreement  for the Promotion  and Protection of Investments and an ASEAN Preferential Trading Arrangements (PTA ).

With the Singapore Declaration on the conclusion of an Agreement regarding the Common Effective Preferential Tariff (CEPT) for the ASEAN Free Trade Area (AFTA), ASEAN decided to organize an ASEAN Summit every three years and established an AFTA Council for ASEAN Senior Economic Officials Meetings (SEOM).

ASEAN began to focus on economic cooperation and development, and reduced the schedule for the establishment of the AFTA from 15 to 10 years in 1995, while signing an ASEAN Framework Agreement on Services (AFAS).

Vietnam joined the CEPT/AFTA in 1996.

An ASEAN Vision for 2020 was set forth in 1997. One year later, ASEAN concluded an ASEAN Framework Agreement on the Facilitation of Goods in Transit, an ASEAN Framework Agreement on Mutual Recognition, and an ASEAN Comprehensive Investment Agreement (ACIA). It signed an Initiative for ASEAN Integration (IAI) in 2000 and a Ha Noi Declaration on Narrowing the Development Gap for Closer ASEAN Integration in 2001.

Since 2002, ASEAN has concluded a series of agreements on economic and trade cooperation with China, Japan, the Republic of Korea, Australia, New Zealand, and India. In doing so, ASEAN has become a center for economic and trade cooperation with Asia and Australasia.

To enter a new stage, ASEAN completed its itinerary on tariff reductions from between zero and five percent for the six old member countries in 2010, and the four new member countries from 2013-2017, excluding flexible and special items such as gasoline, oil, and tobacco. During this time, ASEAN countries concluded an ASEAN Trade in Goods Agreement (ATIGA), an AFAS, and an ACIA with an increased level of liberalization.

In 2007 ASEAN adopted an ASEAN Charter and a Master Plan on the establishment of an ASEAN Economic Community (AEC) by 2015.

In terms of trade, ASEAN grew from 2003-2014 with trade revenue from US$8.8 billion in 2003 to US$42 billion in 2014, an increase of almost 4.5-fold.

The AEC is slated to be launched in December 2015, offering new opportunities for all members, including Vietnam. With a population of 600 million, almost US$3 trillion in gross domestic product (GDP), and the free circulation of goods, services, investments, and skilled workers, ASEAN is expected to provide many new opportunities for businesses.

Opportunities for Vietnamese businesses

After import tariffs are reduced to between zero and five percent, businesses will need to apply new business strategies for the production of products, not only for more than 90 million people in Vietnam, but also the whole AEC. Businesses which did this very well include Vinamilk, Hoa Sen, Hoang Anh Gia Lai, and several enterprises in the areas of seafood, coffee, and pepper.

Small and medium-sized enterprises (SMEs) will face great challenges to compete both at home and abroad after existing tariff barriers are removed.

Since the negotiations on the AEC were concluded in 2007, Vietnam has had eight years to prepare for it. Advantages are visible. However, whether businesses reap a success relies greatly on the internal strength and effort of businesses, the government, and the people.

To survive and grow, they first need to ally with each other to create a market and mutual clients, while at the same time making their products different and competitive.

After Vietnam became a member of ASEAN in 1995, many state managers and businesspeople were worried. However, the last 20 years gave them a positive answer. Since the negotiations on the AEC were concluded in 2007, Vietnam has had eight years to prepare for it. Advantages are visible. However, whether businesses reap a success relies greatly on the internal strength and effort of businesses, the government, and the people. It is certainly necessary to sharpen competitiveness in terms of the state, businesses, and products.

The government is actively reforming administration by reducing customs, tax, and licensing procedures, while increasing people’s understanding of tariff lines, sectors, and services in the AEC.

Businesses need to quickly invest in new technology to make competitive products, along with R&D activities. It is also important to build capacity to manage risks, improve officials’ abilities in terms of foreign languages and technical operations, keep abreast of opportunities, and overcome challenges.

As for the government, apart from creating favorable conditions for domestic and foreign investors in Vietnam, it needs to accelerate the pace of equitization, i.e. transforming state-owned enterprises into joint stock companies. The government also needs to put in place technical barriers to protect the Vietnamese economy and help it grow in a sustainable manner without violating Vietnam’s commitments and international rules. 

 

BY LUONG VAN TU, FORMER DEPUTY MINISTER OF INDUSTRY AND TRADE

 

 

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