Over the past decades, Vietnam has emerged as one of the most successful economies in Asia. Up until 2008, the country’s economy expanded at more than 8 percent annually, and has been lauded as one of the so-called ‘tiger’ economies of Asia. Despite the sluggish growth experienced by the country in the last few years, Vietnam’s economy is steadily recovering. The World Bank recently noted the country’s relatively stable macroeconomic conditions, with strong external (e.g. trade) balances.
Despite the promising economic outlook, Vietnam is increasingly faced with a new set of economic challenges. This is particularly so with regard to Vietnam’s active engagement in international trade. Whilst economic openness creates new commercial opportunities for Vietnamese exporters, it also sets the bar higher for Vietnamese businesses to compete in local and global markets.
Aside from pursuing unilateral and internal economic reform initiatives, Vietnam has also been fully engaging itself with trade liberalisation, such as through its membership in the Association of Southeast Asian Nations (ASEAN), including the processes leading to the creation of an ASEAN Economic Community (AEC) by the end of 2015. Vietnam is also part of the ASEAN-Plus frameworks with the grouping’s ‘strategic economic partners’ (e.g. China, Japan, South Korea, Australia, New Zealand and India).
Whilst these initiatives create significant opportunities in terms of export and investment opportunities, as well as labour mobility, at the same time, many challenges are also likely to be confronted by Vietnamese businesses, especially if they wish to remain competitive vis-a-vis their regional and global counterparts.
The challenge is even greater for the country’s small- and medium-sized enterprises (SMEs). As is the case with many of its Southeast Asian neighbours, SMEs play a significant role in the economy of Vietnam. These businesses, whose number has exploded in the last decade from 18,883 in 2000 to nearly 333,883 at the end of 2011, contribute around 39 percent of the country’s GDP, and provide for about 85 percent of the total employment in the country.
Notwithstanding the challenges set by the country’s more active engagement in regional and global trade liberalisation initiatives, Vietnamese SMEs need to keep a long-term perspective – in that they should empower themselves to reap the potential economic benefits from this economic policy direction.
One of the key challenges that has attracted the attention of observers and policy-makers alike is the relatively low use of free trade agreements (FTAs) under the ASEAN and ASEAN-Plus frameworks. Indeed, with the exception of the ASEAN-Korea FTA, the utilisation of other ASEAN and ASEAN-Plus FTAs amongst Vietnamese businesses to date remains below 30 percent on average. As in many of its ASEAN neighbours, firms capable of using such regional FTAs are predominantly multinationals.
Indeed, a survey carried out by the ASEAN Business Advisory Council (ASEAN-BAC) in 2012 also highlighted that a lack of information on ASEAN-led initiatives by SMEs is one of the major barriers to their engagement in regional and international trade. The survey also found that many SMEs feel that they lack opportunities to network regionally, such as through business missions to other ASEAN countries.
Overall, therefore, it can be argued that the promise of potential benefits from ASEAN-led FTAs does not appear to have reached the country’s SMEs.
Overall, therefore, it can be argued that the promise of potential benefits from ASEAN-led FTAs does not appear to have reached the country’s SMEs.
A recent workshop, jointly organised in Hanoi by the Vietnam Chamber of Commerce and Industry (VCCI), the International Institute for Sustainable Development (IISD), the ASEAN Business Advisory Council (ASEAN-BAC), the Vietnam Prosperity Joint Stock Commercial Bank (VPBank), and the Foreign and Commonwealth Office (FCO) of the United Kingdom, aimed to address the problem associated with information deficiency on ASEAN-led FTAs commonly found amongst Vietnamese SMEs.
At the workshop, Dr Doan Duy Khuong, VCCI Vice President and Chairman of the ASEAN-BAC Vietnam, stated that ASEAN-led FTAs have helped facilitate the creation of an equitable economic development in the region and a highly competitive economic area that is fully integrated into the global economy. However, Vietnam and its ASEAN counterparts could certainly do more to reap substantial benefits by making effective use of these FTAs, not only from the expansion of trade with, and attracting investment from, their strategic economic partners, but also in terms of internal reforms needed to sustain future economic growth, production capacity, and competitiveness.
The workshop, which was part of the series of similar public outreach initiative on ASEAN-led FTAs in other major ASEAN cities, offerred not only policy dialogue that allowed SMEs participants to pursue constructive engagement with relevant policy-makers pertaining to the country’s engagements in these commercial pacts, but also provided technical guidance for SMEs to enable them to make more effective use of these FTAs. The workshop also saw the sharing and exchanges of practical experiences between exporting firms and other SMEs.
Vietnamese SMEs were also encouraged to be more active in seeking relevant information that would enable them to make effective use of Vietnam’s FTA commitments. In the long-term, SMEs should also be facilitated by the government to innovate their technologies, and, accordingly, product quality so as to stregnthen their position in the domestic market and, above all, take the opportunity to reach out to the world market.
PV
Vietnamese
