Vietnam’s industrial sector will face fiercer competition when the ASEAN – China Free Trade Area (ACFTA) tariff-cutting agreement comes into effect by 2015, warned experts from the Ministry of Finance’s International Co-operation Department.
The ACFTA incorporates under its umbrella not only the liberalization of trade in goods, services and investments but also elements of economic operation.
Ministry experts are also concerned that if domestic enterprises do not sharpen their products’ competitiveness, Vietnam will be China’s market when ACFTA is fully realized.
The challenges facing domestic enterprises stem from the huge gap between the competitiveness of Vietnamese and Chinese products, according to a report released by the department, which forecasts ACFTA’s impact on Vietnamese industrial products.
Chinese products rank 44th, whereas Vietnamese products take the 60th position in terms of competitiveness according to a 2003 report by the World Economic Forum, the department’s representative, Ngo Viet Son, stressed.
"Chinese industrial products are endowed with a higher competitive edge as compared to those from Vietnam, particularly light-industry products," said Son.
The establishment of the ACFTA has put enormous competitive pressure on Vietnamese enterprises in their domestic market, he added.
Local industries to feel the most pressure from the ACFTA implementation are the electronics, information technology and automobile sectors, which are already China’s strongholds.
Labor-intensive industries including textile and garment, footwear, agricultural and forestry processing must also enhance their competitiveness, said officials.
On the other hand, becoming a member of the free trade zone makes Vietnamese enterprises more easily accessible to China’s large potential market, highly applicable technology and attractive investment sources, said Nguyen Thi Bich, head of the department.
Under these circumstances, industrial producers are urged to upgrade production technology, improve productivity and quality and tighten production cost management, thereby fuelling their competitive power in order to integrate successfully.
Minister of Industry Hoang Trung Hai said his ministry will help enterprises overcome the competitive challenge by further streamlining administrative procedures, reforming policies and regimes and reducing operation costs.
Vietnam reached total industrial production value of VND416.86 trillion (US$26.38 billion) in 2005, an on-year increase of 17.2 per cent. Industrial export value was estimated at US$24.5 billion in the year, including US$7.4 billion from crude oil, US$5.2 billion from textiles and garments, US$3 billion from footwear, US$1.52 billion from wooden furniture, and US$1.44 billion from PCs and electronics products.
Negotiations for the establishment of ACFTA were launched in October 2001 by the leaders of the 11 ASEAN countries and China.
There has been a gradual growth in ASEAN-China economy and trade in the past years with 15 per cent annual increase in trade.
ASEAN-China integration will create a market for 1,700 million consumers, one third of the world population.
Two-way trade between Vietnam and China has increased markedly in recent years. It was US$4.6 billion in 2003, up by 42 per cent compared to 2002. The number in 2004 was US$5 billion and nearly US$8 billion in 2005.
Vneconomy
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