Vietnam has fully engaged in the trade liberalisation progress of ASEAN with other countries and regions in the world. This process creates not only opportunities but also difficulties and challenges for Vietnamese enterprises, especially in 2015 when the ASEAN Economic Community is established and provides a broad market with about 600 million consumers and a business community with tens of millions of small and medium-sized enterprises (SMEs).
Numerous opportunities, enormous challenges
At a recent workshop entitled “Vietnamese SMEs and ASEAN market opportunities with free trade agreements" jointly organised in Hanoi by the Foreign Office of the United Kingdom, the International Institute for Sustainable Development (IISD), the ASEAN Business Advisory Council (ASEAN BAC), the Vietnam Chamber of Commerce and Industry (VCCI), and the Vietnam Prosperity Joint Stock Commercial Bank (VPBank), Dr Doan Duy Khuong, VCCI Vice President and Chairman of ASEAN BAC Vietnam, said that ASEAN free trade agreements and ASEAN+ free trade agreements have facilitated equitable economic development in the region and created a highly competitive economic area fully integrating into the global economy. By making good use of FTA opportunities, Vietnam and other ASEAN countries will enjoy a lot of benefits like stepping up reforms of institutional mechanisms, policies and business environment, quickening economic growth, creating more jobs, attracting more foreign direct investment (FDI), better reallocating resources, and enhancing production capacity and competitiveness.
Ms Tran Thi Thu Huong, Director of VCCI Centre for Certifying Commercial Documents (COVCCI), said ASEAN is the third largest export market for Vietnam, just after the United States (US) and the European Union (EU). Rice and crude oil account for approximately 30 percent of the country’s total export turnover to this market. Conversely, ASEAN is the second largest input supplier for Vietnam, after China. This market mainly supplies machinery, crude oil, vehicles, tools, paper and steel. According to statistics, the annual import spending of ASEAN bloc (excluding Myanmar) is about US$1,329 billion, while its export revenue is some US$1,460.8 billion a year. Vietnam accounts for 7.36 percent of exports and 8.5 percent of imports.
Dr Khuong said FTAs also pose numerous challenges to Vietnamese enterprises, especially SMEs, because of heavy competitive pressures from foreign firms. Currently, Vietnam's economy still has a lot of difficulties and Vietnamese businesses are struggling to survive and grow. FTAs cause most pressure on merchandise trade because of huge tax cuts stated in ASEAN and ASEAN+6 FTAs: about 90 percent of tariff lines reduced to zero in 2015 and most to zero in 2018. Meanwhile, many Vietnamese exporters have yet to take maximum advantage of FTAs-induced tax cuts.
Furthermore, Vietnamese SMEs’ lack of information about market opportunities that FTAs bring in is a major obstacle. Especially, they also lack information about tax incentives related to the degree of domestically added value of goods and services and other technical barriers to improve performance and competitiveness in the process of sustainable development and integration.
What should SMEs do?
Ms Huong stressed the remaining time (to the effective date of FTAs with ASEAN) for Vietnamese enterprises is not much. So, from now, they must make more effort to renovate technologies and equipment and improve product quality to strengthen their position in the domestic market and, above all, take the opportunity to reach out to the world.
Mr Hoang Van Phuong, of the Department for Multilateral Trade Policy under the Ministry of Industry and Trade, advised Vietnamese SMEs to seek useful reference sources to learn about tax commitments and information in order to make use of preferential treatments from FTAs Vietnam signs. With good knowledge of commitments, they will be able to work out development strategies for the future, define market opportunities and anticipate potential developments to have backup solutions. SMEs need to look up taxes to calculate differences (between MFN (most favoured nation) taxes with preferential taxes; preferential taxes among FTAs to apply for the best ones before submitting C/O (certificate of origin) applications).
Phuong said Vietnam is now negotiating the Trans-Pacific Strategic Economic Partnership (TPP) Agreement, Vietnam - EU FTA, Vietnam - EFTA (European Free Trade Association) FTA, Vietnam -Korea FTA, Vietnam - Customs Union of Belarus, Kazakhstan, and Russia FTA, and ASEAN+6 FTA.
Emerging issues of FTA negotiations that Vietnam is undertaking are the broader scope of liberalisation, the higher level of liberalisation, further reductions of import tariffs and export taxes, increased protection of intellectual property rights, government procurement, e-commerce, labour, and environment. In addition, enhanced trade facilitation is taken into consideration where more simplified origin rules, origin certification application, and e-custom application are highlighted.
Quynh Chi
Vietnamese
