The Asean Economic Community (AEC) is drawing vast attention from regional businesses because of its potential in many aspects of the economy. Once established, AEC will create a huge attractive market; the population of ASEAN is more than 600 million people, 9 percent of the world population, and the grouping has a combined GDP of US$2.4 trillion, which is 3.1 percent of the world’s GDP. In order to implement the AEC successfully, real risks and challenges need to be addressed and managed effectively.
Vietnam became a full member of Asean in 1995. Since then, Vietnam has achieved wide and deep integration, as well as having a great influence in the region. It is obvious that without regional and international integration, the national economy can regress. However, participating in AEC in 2015 will be a new high level and thus Vietnam needs to be well prepared for tough yet equal competition from Asean members’ enterprises.
Joining the AEC 2015, Vietnam will see many fundamental changes; those include possible formation of industrial and businesses pillars, single market and production base. Free movement of goods, services, skilled labour, and the free flow of capital will ensure a complete regional economic integration.
Vietnam’s tariff barrier will be reduced to the lowest rates in 2018 to fully integrate with the AEC, a reduction which theoretically will enable further trading between the country and other member states. However, in reality, free trade often requires more than just a tariff reduction. Other non-tariff barriers, such as quotas, custom regulation and commodities standards, also need to be eliminated or re-regulated under the broad framework and vision shared among AEC members. Generally, this is a complicated procedure and often requires decades to complete.
Along with flow of goods, the services market will be open as well. In Vietnam, 30 percent of the total businesses are operating in the trading and services sector, which is making great potential contribution to the economy. Services such as tourism, transportation, banking and finance will have opportunities to operate their network throughout Asean market at significantly lower costs. However, deep market penetration from Asean -5 (Indonesia, Malaysia, the Philippines, Singapore and Thailand) service businesses in the fields of logistics, banking and finance with abundance resources, wide network and diversified products, will bring strong competition to Vietnam’s modest service sector. The tough competition is expected to push businesses to consolidate so that they can gain advantages, or at least balance regional competitors.
The AEC will also have effects on the export structure. Apart from traditional agricultural products and raw material at low level processing, such as rice, coffee, rubber and crude oil, Vietnam has been able to export consumer products, computer parts, cosmetics, textile products, etc. The geographic markets, after the AEC, will be broadening into full scale within Asean. Greatest potential new markets such as Indonesia, the Philippines, Thailand, Singapore and Malaysia will be accessible to Vietnam businesses without heavy pressure of regulation and taxation. Moreover, Vietnam can also benefit from all Free Trade Agreements (FTAs) as well as future Regional Comprehensive Economic Partnership (RCEP) between Asean and South Korea, Japan, China, India, Australia and New Zealand. Nevertheless, to utilize this golden opportunity, Vietnam enterprises have to grow in every aspect to increase their competitive ability against those more developed in the region.
A competitive economic environment will be the motivation for business renovation, from management strategies to capital and human resources. Free flow of investment, capital and especially labour, among AEC members will directly affect Vietnam enterprises. One of the main focuses will be the quality and competitiveness of human resources. There is concern that economic integration may exacerbate Vietnam’s shortage of skilled and experienced labour, creating a further barrier for Vietnam businesses in the context of a highly competitive labour market within the AEC. Therefore, Vietnam should deploy various human resource programs, such as enhancing foreign language proficiency, mainly English language, and extend vocational training facilities.
After all, the effects of AEC to Vietnam can be glorious bright or just gloomy. On the bright side, Vietnam can become a regional centre that gathers significant investment flow and skilled human resources, and that manufactures good quality products for Asean consumption. On the other hand, capital flow and skilled labour can move away from Vietnam, and as a result the country of more than 90 million people will become a promising market for products from all other members’ enterprises.
However, it is acknowledgeable that the drive for the inauguration of the AEC in 2015 is fairly reluctant. The slow progress in implementing the AEC is a result of the inadequate knowledge of Asean and AEC across the region. The commencement date of the AEC was delayed to December 31, 2015 from the original plan of January 1, 2015, and there is no guarantee that it might not be postponed once more. In order to accomplish the mission and foster the growth of Southeast Asia region, Asean members will need to move forward together, to make the AEC a reality in 2015. If the AEC is successfully implemented, Asean can become a significant pillar for world economic growth in the next era.