Promoting Intra-Asean Trade

10:56:42 AM | 6/3/2020

Enhancing intra-ASEAN trade in a cohesive and responsive approach is one of the topics of interest in the working agenda of ASEAN 2020 chaired by Vietnam.

Average growth rate of 5.4%

With 10 members and a population of over 650 million, ASEAN is claimed to be the most dynamic region in the world with an overall economic growth of 5.4%, while the global average is 4%.

In trade, ASEAN is also the fourth largest trading economy in the world in terms of trade in goods with a total value of more than US$700 billion. Foreign direct investment (FDI) in ASEAN expands about 4.4%, much higher than that of other developing economies, making ASEAN the 3rd largest FDI recipient in the world.

Speaking at the high level Symposium on intra-ASEAN Trade and Investment named "Enhancing intra-ASEAN trade and investment for a cohesive and responsive ASEAN" held recently, Vietnamese Deputy Minister of Industry and Trade Tran Quoc Khanh said that the ASEAN economic community is one of the typical examples of regional benefits brought about by collective strength. The region's total trade value has increased from about US$89 billion in 1996 to US$520 billion in 2019. This is a spectacular growth of intra-regional trade. However, Mr. Tran Quoc Khanh emphasized, this growth is still not commensurate with the potential of the region.

“Thanks to the ASEAN Trade in Goods Agreement, 98% of import taxes have been reduced to 0 - 5%, but trade growth only reached 5.8% in 2019, lower than expected. The region's goal is to double growth by 2025, with a population of 650 million, ASEAN has become the sixth largest economy. Besides, the removal of tariff barriers will bring opportunities to promote intra-ASEAN trade," Deputy Minister Khanh shared.

Mr. Aladdin D. Rillo, Deputy Secretary General of ASEAN in charge of ASEAN Economic Community (ASEAN Secretariat) also said that intra-ASEAN trade has been on a downward trend in recent years and currently accounts for only 23%.  Intra-regional trade needs to reach an average annual growth rate of 9.1% to meet the goal of doubling by 2025.

Barriers need removing

Despite maintaining high rankings and good growth momentum, ASEAN still faces many challenges. Within ASEAN, competition is still greater than cooperation between economies.

Former Deputy Minister of Foreign Affairs, Mr. Pham Quang Vinh said that ASEAN members can create a good cooperative platform. Meanwhile, in recent years, ASEAN countries have tended to cooperate outside the bloc instead of internally. In the face of challenges in promoting intra-regional trade, ASEAN needs to have trade diversity among its member countries; attaching importance to the complementarity between the intra-regional economy and the efficient exploitation of potential fields.

Deputy Minister of Industry and Trade Tran Quoc Khanh added two other major barriers to ASEAN trade and investment: non-tariff barriers and ASEAN businesses' capacity.

“Tariffs used to be the biggest barrier to trade in ASEAN, but now it's time for ASEAN to come up with documents to help businesses run smoothly. Most ASEAN companies are not big enough to reach out to the region. This is also a factor that makes the trade value and intra-ASEAN investment modest,” Deputy Minister Tran Quoc Khanh emphasized.

According to Mr. Saysana Sayakone, ASEAN Senior Economic Official of Laos, if reducing policy barriers and non-tariff measures, intra-regional trade will be promoted because in fact, the ASEAN countries tend to reduce tariffs but increase non-tariff measures to protect domestic production, which will be a major challenge to promote intra-ASEAN trade. Meanwhile in ASEAN, most of the tariffs between member countries are zero, with particular emphasis on investment and services.

Chairman of the Vietnam National Committee for Pacific Economic Cooperation (VNCPEC) Vo Chi Thanh said that the first thing to do is focusing on services and logistics to meet the transition from the "original manufacturer" "to “final consumers." At the same time, we should promote the digital economy, create a start-up ecosystem in ASEAN, focus on the foundation for small and medium enterprises in ASEAN such as financial access, etc. to help bolster the internal strength of ASEAN businesses.

By Giang Tu, Vietnam Business Forum