Vietnam gearing up for ASEAN Economic Community The establishment of the ASEAN Economic Community (AEC) in 2015 will mark a milestone in international integration of its ten Southeast Asian member economies, including Vietnam. The AEC, modelled after the EU style single market, is intended to enhance the national competitiveness of its members in preparation for a more open regional market economy in line with WTO commitments and free trade pacts such as the Trans-Pacific Partnership (TPP) and an EU Free Trade Agreement. Vietnam has revealed its plans on how it intends to raise its competitiveness by improving capacity, raising economic position and promoting institutional reform to better position itself to capitalise ON and seize the opportunities of both AEC membership and the open global marketplace to follow. Trinh Thi Thu Hien, an official from the Ministry of Industry and Trade (MoIT), says in 2012 Vietnam failed to make full use of tariff incentives and favourable conditions created by the rule of origin for Vietnamese goods. Last year, however, the country took advantage of the reductions in tariffs by complying with the rule of origin, and seafood businesses significantly benefited from the abolition of tariff barriers. A high number of Made-in-Vietnam products are qualified for the rule of origin, which is also easily met by other countries. Therefore, Hien suggests that businesses take advantage of the rule to fully develop the support industry for the garment, footwear and electronics sectors to stay competitive. Professor Hidetoshi Nishimura, Executive Director of the Economic Research Institute for ASEAN and East Asia (ERIA), recommends that regional countries accelerate comprehensive reform, pay due attention to the private economic sector and ensure effective coordination among Government agencies. Most AEC-related reforms require changes in procedures, customs, institution, and coordination of Government bodies, Nishimura says, adding that the AEC building plan should concentrate on improving administration mechanisms and broader institutional reform, which are considered big challenges for many countries, including Vietnam. Dr. Vo Tri Thanh, Deputy Director of the Central Institute for Economic Management (CIEM), says Vietnam is facing difficulties in increasing its competitive capacity, upgrading infrastructure, and facilitating trade liberalization to meet requirements from ASEAN and other regions in the world. Thanh also points out several shortcomings in Vietnam’s infrastructure, stressing that logistic services are in need of more investment, and that the logistic industry has become a lucrative market for many investors in the current State-owned enterprise (SOE) restructuring process. The AEC aims to create low-cost business transactions and transparent policies so as to facilitate the shift of goods and labour in member economies. Apart from boosting integration, each ASEAN member should deal with its internal problems to lure more investors, he notes. According to CIEM Director Dr. Nguyen Dinh Cung, Vietnam should give priority to boosting economic restructuring, reallocating resources, undertaking institutional reform and creating a healthy business climate by market principles, macro-economic stabilization, and human resource development. Comparing Vietnam’s economic reform to two wings of a bird – one being economic integration and the other marketization, Cung says the bird will fly high if its wings beat in harmony. Since Vietnam’s WTO admission in 2007, its reform process has slowed down to develop a market economy. Therefore, Cung posits that opportunities are only created by integration. He raises concern over the low competitive capacity of local businesses that receive State incentives, and suggests forming a healthy competitive environment by accelerating divestment and privatising several sectors. He also emphasizes the need to restructure public investment, reduce budget overspending, settle bad debts, and allocate credits in line with market mechanism in the next 3-5 years to achieve stronger growth. Cung proposes applying ASEAN 6 standards to improve Vietnam’s business climate, with a focus on tax on tax payment and cross-border trade. VOV