Vietnamese businesses are still fumbling on the way to AEC market

With 630 million consumers and US$2.55 trillion in 2016, expected to become the fourth largest economy in the world by 2030, AEC is believed to bring great opportunities to regional enterprises, according to Nguyen Thi Tue Anh, deputy head of the Central Institute of Economic Management (CIEM).

What AEC can bring is not only the 630 million consumer market, but also opportunities to approach other markets thanks to FTAs between AEC and its partners, including  ASEAN-South Korea, ASEAN-Japan and ASEAN-China FTAs.

According to the HCMC Industry and Trade Department director Pham Thanh Kien, to date, Vietnam has slashed import tariffs for 10,000 tax lines to 0-5 percent within the framework of ATIGA (ASEAN Trade in Goods Agreement), or 98 percent of total tax lines.

The ATIGA membership allows Vietnamese enterprises to have bigger opportunities to export their advantageous products such as agricultural, forestry and seafood products. In the first nine months of 2018, Vietnam exported $3.1 billion worth of vegetables and fruits.

However, as CIEM reported, Vietnam’s total turnover from the exports to the region just accounted for 9.8 percent of total export turnover in 2016. The proportion of Vietnamese exports to ASEAN in 2017 increased to 11 percent, while the figure was 24 percent for ASEAN countries on average.

Kien explained that in 2015-2017, the exports from HCMC to ASEAN increased every year, but the increase was insignificant after the formation of AEC. This shows the low capability of Vietnamese enterprises to exploit the tariff cuts to boost their exports.

Meanwhile, imports from ASEAN increased continuously. In 2016, Vietnam imported $7.2 billion worth of products from ASEAN, and the figure rose to $8.15 billion in 2017.

According to Anh from CIEM, Vietnam’s product prices are uncompetitive and the distribution network is not good. In addition, Vietnamese businesses still do not have deep knowledge about technical and legal barriers set by import countries.

Another reason lies in the quality of the workforce, which is lower than that in leading ASEAN countries.

Vietnam gets 3.39 out of 10 points in high-quality Human Resources in rankings, lower than Thailand’s 4.94 points and Malaysia’s 5.59 points.

With sharp tariff cuts, goods from ASEAN countries will flood the Vietnamese market in the near future. If Vietnamese enterprises cannot improve their products, they will lose the home market.

Ha Xuan Anh, chair of Son Viet Garment said 10 years ago Son Viet had tried to approach the Singaporean, Thai and Malaysian markets, but it still cannot succeed. The plan has been suspended, and the company has been focusing on Laos, Cambodia and Myanmar.

RELATED NEWS

Vietnam’s businesses still not tapping AEC market

AEC a catalyst for reform in Vietnam