Towards Greater Connectivity and More Expansion of ASEAN Economic Community

More than 15 years after entering ASEAN, Vietnam has asserted its position and prestige. ASEAN member countries and external partners have all appreciated Vietnam’s active participation and contribution to ASEAN consolidation and development as well as ASEAN cooperation with dialogue countries. The carrying out of extensive and intensive integration commitments to the formation of the ASEAN Economic Community has been practically contributing to the improvement of the domestic legal environment, thus laying a foundation for Vietnam to join other bilateral and multilateral cooperation frameworks. Besides opportunities, the AEC also poses numerous challenges to enterprises’ production and business activities, and to the country’s economic growth in general, especially when global economies are showing signs of slowing growth and facing risk.

 

The most important goal, for not only Vietnam but also other ASEAN countries, is to make reforms meet requirements that Vietnam has agreed with other ASEAN countries and satisfy requirements for realisation of initiatives that ASEAN countries have put forth.

 

Vietnam has done a lot. In terms of trade in goods, Vietnam has fulfilled all ASEAN’s commitments. As regards framework agreement on service, Vietnam has completed the eighth package and is continuing with the 9^th and 10^th packages.

 

As to investment, Vietnam has successfully fulfilled ASEAN commitment packages. ASEAN praised Vietnam as one of best countries in accomplishing commitments and implementing ASEAN initiatives.

 

Notably, on January 9, the new ASEAN General Secretary Le Luong Minh, Vietnamese Deputy Foreign Minister, officially assumed office in Jakarta, Indonesia. This is the first time a Vietnamese person has served as ASEAN General Secretary. He was nominated by Vietnam and ratified by the leaders of 10 ASEAN member states at the 21st ASEAN Summit in Phnom Penh, Cambodia in November 2012.

 

According to statistics, as of September 2012, ASEAN member states only completed 30 per cent of connectivity criteria and 70 per cent of economic criteria for full economic integration by 2015. Given general hardship, the carrying out of such commitments meets with numerous difficulties. But, important commitments are being actively carried out by ASEAN members in order to take advantage of our important geostrategic location. Together with opening policies and huge contributions, ASEAN has become an indispensable partner of big countries and major world centres.

 

AFTA created the basis for regional economic integration and development. Since 2010, all tariffs on intra-regional trade were abolished. ASEAN is building a linked market and a common production base by adopting a series of initiatives like ASEAN Trade in Goods Agreement (ATIGA) and ASEAN Comprehensive Investment Agreement (ACIA). The second-phase deployment of ASEAN Integration Initiative (2009-2015) continues to be a priority effort in boosting regional integration and narrowing the gap considered a major flaw inside ASEAN. Besides, for the East Asian region, ASEAN has promoted connectivity with East Asia in width and in depth by building, signing and deploying the Economic, Commercial, Investment and Service Cooperation Agreement. ASEAN has completed free trade agreements (FTAs) with six out of eight East Asian countries: China, Japan, South Korea, India, Australia and New Zealand. Undeniably, these FTAs have helped ASEAN economies to overcome challenges and difficulties in the times of economic, financial and public debt crisis in the world.

 

For Vietnam, AFTA signing means that ASEAN companies will have the opportunity to cover this huge market of 500 million people. Import duty cuts on ASEAN goods help businesses reduce input costs and thus cut prices. The opening also helps them compete with major rivals in the area and enhance the competitiveness of Vietnamese products.

 

However, AFTA membership also present huge challenges, particularly stiff competition from cheap but good quality products from Thailand, Malaysia or Indonesia.

Since Vietnam entered ASEAN and implemented AFTA commitments, trade turnover between Vietnam and ASEAN keeps rising. Although the value of goods imported from ASEAN countries is greater than the amount Vietnam earns from exports, the export growth rate is higher than that of imports (19.5 per cent a year).

 

Although businesses face plenty of challenges as Vietnam gradually fulfils its commitments, AFTA benefits are undeniable. Moreover, we cannot always protect domestic production industries while standing by to see other countries in the ongoing current of international integration. Nonetheless, the overprotection of some industries leads to inefficiency. Hence, the sooner we integrate, the sooner we cure “stagnation” and “reliance” diseases carried by many businesses.

 

Long and unselected protection by import tariff and special consumption tax makes it difficult for Vietnam to form industries as expected like sugar, automobile and electronics. This indeed undermines the autonomy of enterprises in production, business, technological innovation and competitiveness improvement. Meanwhile, enterprises with good preparations and reasonable business strategies are still alive and developing.

 

So AFTA is important to the future of the Vietnamese economy. AFTA challenges require Vietnam to enhance flexibility and efficiency of the whole economy and the path to AFTA demands the country to place efficiency standards at the forefront. Vietnam has to redouble efforts to reform economy, public administration, and State-owned enterprises to boost productivity.

 

Not staying out of the world development trend while serving as a component of the intra-regional trade liberalisation process, ASEAN member countries understand the need of formulating a single-window mechanism for the ASEAN community to sharpen the competitive edge of ASEAN goods in the international arena. In the United States, the European Union, Japan, South Korea, Singapore, Canada and Australia, the single window mechanism is built and operated on automated information system of customs and transportation management agencies connected with other authorities in the overall connectivity model of the National Single Window (NSW) system. The deployment of a NSW facility has brought great benefits for international trade and State management activities. This is an important driving force to bring e-commerce to life.

 

According to the ASEAN Single Window Establishment and Implementation Agreement, this is an environment where NSW operates and links to each other. NSW is a system allowing one-time presentation of data and information; one-time and real-time processing of data and information, and one-time decision making concerning release and clearance of goods. One-time decision-making infers that the customs agency is the only decision-making body for the release of goods, on the basis of decisions made and promptly sent to customs offices by relevant agencies.

 

Thus, ASW will be a securely connected environment. But instead of connecting traders and transportation communities with government agencies as the NSW system in each nation does, ASW will connect all NSW systems of member states. Accordingly, the information about traders, transport units, freights and management status of government agencies can easily be shared, referred and compared in all member states.

 

According to commitments to the Protocol on ASW Establishment and Implementation, the deployment of ASW will be carried out in accordance with a roadmap and connected with every member state based on the NSW implementation progress. Brunei, Indonesia, Malaysia, the Philippines, Thailand and Singapore (ASEAN 6) applied NSW in 2008. Cambodia, Laos, Myanmar and Vietnam started it in 2012.

 

Up to now, technically, ASEAN has developed the ASEAN data model, version 2.0, with major data being customs declarations and certificates of origin; developed information exchange processes for documents in the ASEAN data model on the ASW medium; deployed pilot ASW model construction projects in some member states; and prepared technical and professional standards for the finalisation of ASW. Legally, ASEAN adopted the memorandum of understanding (MoU) on the execution of pilot projects for ASW model construction and prepared the foundation for legal framework construction for ASW later; drafted a protocol on legal framework for ASW construction and implementation; and coordinated with the US Agency for International Development (USAID) to carry out a legal gap analysis project in some ASEAN member countries.

 

For its part, all activities related to NSW and ASW in Vietnam are on the right track, according to the General Department of Customs, ASW coordinator and guide.

According to recommendations by the Vietnam Chamber of Commerce and Industry (VCCI), to facilitate ASW and NSW processes, it is necessary to perform a business survey on ASW and NSW-related administrative procedures: Investigating and surveying enterprises’ requirements for administrative procedures related to single-window mechanism, particularly troublemaking, time-consuming and bureaucratic procedures. In addition, it is also helpful to organise seminars on single window related administrative procedures, and on agency-to-agency e-commerce connectivity roadmaps. Moreover, businesses also need to be fully and officially informed of information disclosure in some information and communication agencies. Especially, in deploying the application to VCCI’s C/O granting authority and selected sample companies (Electronics C/O is one of preferred procedures in the first phase deployment of ASW mechanism), VCCI will test some sample companies to identify pros and cons before broader application.

 

In the ASEAN region, the EU concluded negotiations on the Free Trade Agreement with Singapore - the 13th largest trading partner of the EU and the destination of more than 8,000 EU businesses. Despite negotiations completed by EU High Commissioner for Trade Karel Degucht and Singapore Minister for Trade and Industry Lim Hng Kiang, the Agreement still needs a time to be approved. Currently, the two sides continue discussing investment issues. The EU and Singapore hope to have a draft agreement in the spring of 2013.

 

The EU is also negotiating bilateral free trade agreements with other ASEAN countries, including Malaysia and Vietnam. The ultimate goal is the FTA between the EU and ASEAN.

 

Vietnam and the EU signed an MoU certifying that the European Free Trade Association (EFTA) officially recognised the market economy status of Vietnam and officially started free trade agreement negotiations with Vietnam.

 

With this MoU, Vietnam and EFTA have full basis to promote economic and trade relations. Vietnam and EFTA’s FTA negotiation and signing will benefit both sides.