Vietnamese enterprises lack interest in ASEAN

Speaking to Saigon Investment, Ms. Pham Chi Lan said that even though ASEAN is considered a dynamic region with excellent potential, Vietnamese companies have not shown sufficient interest towards it.

Illustrative photo.

Illustrative photo.

JOURNALIST: - What do you think about the great potential of ASEAN Economic Community (AEC), which is closest to Vietnam?

Ms. PHAM CHI LAN: - It has been predicted that AEC will become the world’s fourth biggest market by 2030. This promises a joint market and gives companies access to a large market where free trade agreements (FTA) will help them establish relationships with partners outside. Reality shows that growth of AEC economy has always been stable over the past several years. Since the 1980s, the average GDP growth rate of ASEAN has been 4.5% while the trade value of commodities has made up 104% of GPD in the region. The major business partners of the region are the US, EU, Japan and China.

By 2010, the tariff among the six developed countries in ASEAN (Brunei, Indonesia, Malaysia, Singapore, Thailand and the Philippines) had gone down to 0%, proving remarkable progress in this region. Since then, less than 5% of trade transactions in ASEAN have incurred a tariff of more than 10%, and 99% of the commodities traded in the ASEAN-6 have enjoyed 0% tariff rate. The new members in ASEAN like Cambodia, Laos, Myanmar and Vietnam have also been making rapid growth thanks to the increasing supply chain in the region.

- What do you think about the ability of Vietnamese companies to take advantage of opportunities over the past four years since Vietnam joined AEC?

- AEC officially went into effect in late 2015, but nearly four years since Vietnam joined AEC, Vietnamese companies still ignore and have not taken interest in this market. Most of the Vietnamese companies have not felt the "heat" from joining AEC, which has reflected in the fact that not many Vietnamese companies have taken interest and sought investment and business opportunities in AEC. It seems that they have shown less interest in AECFTA than they have done in EU-Vietnam FTA (EVFTA) or other FTAs. This has resulted in no increase or even a certain decrease in Vietnam's export to other ASEAN members while Vietnam continues to have an excess of imports from these countries. In July, for instance, Vietnam's imports from Thailand were more than USD 4 billion.

Meanwhile, investments from other ASEAN countries into Vietnam have been increasing. Therefore, as far as the bilateral relationship is concerned, Vietnam has refused acceptance, and also Vietnam's investments in other ASEAN countries have been modest. This modest contribution may partly show that Vietnamese companies have not fully understood the ASEAN market so that they can take opportunities. On the other hand, it also indicates that Vietnamese companies are still weak, and they have not dared to make investments abroad.

- Is it true that Vietnamese companies have ignored AEC because they have not clearly understood it or they have not felt attracted to this market?

- It is still commonly known that Vietnamese companies have not thought highly of the ASEAN market. When it comes to exports, they just dream of exports to the USA, EU and Japan. Even taking investments, they just show interest in investments from countries with better development, better technology and better management skills. Even the ministries' ideas about competition have some problems. Some government officials say that competition is good, but they have not been able to introduce measures to make such competition beneficial to Vietnam. More often than not, the responsibility for improving competitiveness has been pushed to companies while the government agencies have not had measures to improve the competitive base.

The government commitments to remove difficulties and create favorable opportunities for domestic companies have not been fulfilled effectively. Lots of administrative formalities still make things too difficult for domestic companies, causing Vietnamese companies to hardly take any interest in AEC.
There has been a paradox that, while we strictly comply with commitments with other countries about opening our market, we do not have necessary tools of protection for domestic companies. This matter is highly considered in other countries. Take the eight fields with free trade among AEC, for example, Thailand has introduced certain reasonable requirements. For instance, foreign workers must understand Thai laws and must speak Thai to provide services for Thai people. However, Vietnam has not introduced similar requirements. This may make it impossible for Vietnamese workers to enter the Thai market, but Thai people can easily enter Vietnam to provide their services.

The technical barrier for products has been the same. It seems that we have ignored and not checked the quality of commodities from other countries. We have imposed serious quality control management on domestic companies, but we have not seriously checked the quality of products from outside. This is unreasonable. Additionally, while we have introduced free trade for foreign companies, we have not done it to domestic companies. The government commitments to remove difficulties and create favorable opportunities for domestic companies have not been fulfilled effectively. Lots of administrative formalities still make things too difficult for domestic companies. I strongly believe that it is part of the fact that Vietnamese companies have not taken interest in AEC.

- With the current economic uncertainties in the world, some people think Vietnamese companies should consider it an optimum choice to enter the AEC market. What do you think?

- Vietnam and other ASEAN members share certain advantages when AEC was established based on the foundation of ASEAN, which is "a growing center" of world economies. I believe that we should not only try to find a position in AEC during the current economic uncertainties of the world, but in the long run we should also think highly of AEC because this market is dynamic and close to us, and we also have certain competitive advantages. First, Vietnamese companies should seek more opportunities in our country and see how foreigners find opportunities here in our country. Vietnam’s population of 96 million is a large market which is very important for a big number of companies. Why have companies from other ASEAN countries been successful here while they can’t speak Vietnamese and they do not understand our market as well as we do?

By comparison with companies in other ASEAN countries, Vietnamese companies are still behind, have limited capacities and experience and are not competent in foreign languages. These are major hurdles for Vietnamese companies in AEC. At present, Vietnam still has difficulty dealing with technical barriers that can help protect domestic production and consumers. Yet I believe that we will surely be able to take opportunities and make a success if domestic companies and the competent government agencies can work together to promote the business environment.

- Thank you very much.

Hoang Son (Interviewer)

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