December 14, 2018 16:36

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It takes a long time to integrate and the exploitation is still faded.

09:41 | 11/10/2018

VCN- The ASEAN Free Trade Area (AFTA) is the first free trade agreement (FTA) that Vietnam joined, and it formed an important part for the formation of the ASEAN Economic Community (AEC) at the end of 2015. This deep integration has helped the trade relations between Vietnam and the ASEAN grow significantly, but Vietnam still runs a trade deficit with the ASEAN.

it takes a long time to integrate and the exploitation is still faded
Agricultural and fishery products are the main export items to ASEAN, but it is not stable. Photo: Nguyen Thanh.

Trade deficit is overwhelming.

The ASEAN Free Trade Area (AFTA) was formally established in 1992. Vietnam entered into the Common Effective Preferential Tariff (CEPT) Agreement to establish AFTA in 1996. As committed, Members must reduce their import duty to 0-5% within 10 years. In order to keep pace with the trend of regional integration and globalization, ASEAN countries have pledged to eliminate all tariffs in 2010 for the ASEAN-6 (including Brunei, Indonesia, Malaysia, Philippines, Singapore and Thailand) and by 2015, there will be flexibility by 2018 for the new member countries of Laos, Cambodia, Myanmar and Vietnam. By 2015, Vietnam has basically eliminated tariffs on goods.

By joining the FTA with ASEAN, the import and export rank of Vietnam and ASEAN member countries increased markedly during that time.

According to the World Trade Organization (WTO), in its annual report of “WTO Trade Profiles 2017”: Vietnam's export rank climb from 50 in 2007 to 26 in 2016. Meanwhile, Vietnam's imports also increased from 41st in 2007 to 25th in 2016.

Deepening the trade relations between Vietnam and the ASEAN, although the overall value increases, it is easy to see that the main trade deficit is Vietnam’s. According to the General Department of Customs, from 2011 to 2016, Vietnam's trade deficit from the ASEAN in turn is $US 7.32 billion, $US 3.68 billion, $US 3.21 billion, $US 4.1 billion, $US 5.66 billion and $US 6.7 billion. In 2017, although Vietnam's exports to ASEAN increased by 23.9%, reached $US 21.51 billion, but the import figures were $US 28.02 billion from ASEAN, trade deficit continued to favor other countries with $US 6.51 billion.

According to the Ministry of Industry and Trade, Vietnam's exports to the ASEAN are mainly agricultural products, seafood and minerals. These commodities are mostly entitled to preferential import tariffs under the ASEAN Trade in Goods Agreement (ATIGA) in importing countries, but their prices depend on global fluctuations, so export turnover is not stable. In the industrial group, except for computers and electronic components, other manufactured and processed consumer goods such as garments and footwear,... accounted for a relatively small proportion of total turnover export to ASEAN. Recently, Vietnam has started exporting some manufactured goods to ASEAN such as electric wire and cable, children's toys, bicycles and bicycle accessories. These goods are still very promising, but the turnover is still quite modest. Meanwhile, in terms of imports, the General Department of Customs analyzed: ASEAN has been the second largest partner (after China) to export goods of ASEAN origin to Vietnam for many years. Many kinds of goods imported from this market account for a large proportion of total import turnover of Vietnam, including petroleum, crude oil, paper of all kinds, raw materials, vegetable grease, wood and wood products,...

Regarding the preferential use of certificates of origin (C/O) in the export of goods to the ASEAN market, the data of the Import-Export Department and the E-Commerce and Economic Department (Ministry Trade shows that the figure is also quite modest. Specifically, in the first half of this year, the rate of using C/O sample D for the export goods only reached 33%.

It can be seen that AFTA and later AEC which are the FTAs, have the "longevity" that is longer than one of the FTAs that Vietnam has joined. However, it must be acknowledged that during that time, the ability to take advantage of opportunities to promote export and exploit ASEAN market has not achieved the expected results. Speaking about this matter, Assoc. Prof. Pham Tat Thang, senior researcher of the Institute for Trade Research (Ministry of Industry and Trade): Vietnam has not made good use of this opportunity. Meanwhile, many countries have taken advantage of opportunities, such as Thailand. Thailand has a series of activities to buy or pour capital into the famous brands such as BigC, Metro... Many Thailand convenience stores have crept deep into the corners of most provinces and cities. “Not only Thailand, Singapore and Indonesia, and even countries that are considered as weak competition such as Cambodia have also invaded the Vietnamese market,” Dr.Pham Tat Thang said.

Capacity competition.

Referring to the impact of the FTA with the ASEAN region from the point of view of customs revenue, representative of the Budget Management Division, Import -Export Tax Department, General Department of Customs said: with the implementation of the ATIGA Agreement, almost all tariffs on January 1, 2015 items have been cut to 0%. In 2018, the implementation of FTAs will continue to have a profound impact on the state budget revenues of the Customs sector, particularly the implementation of the ATIGA Agreement. Because approximately 7% of flexible tariff lines, equivalent to 687 items that are considered sensitive by agreement with ASEAN, will be abolished (except for gasoline with its own route). The strongest are some items with high revenue, high tax rates such as cars reduced from 30% to 0%; spare parts 5%, 20% to 0%; Iron and Steel 5% to 0%; agricultural products, tobacco, alcohol ...

Why do countries in the region make good use of opportunities from the opening of integration, especially tariff preferences from the FTA to exploit the Vietnamese market, excluding Vietnam? In response to this question, Le Quoc Phuong, former Deputy Director of the Information Center for Industry and Trade (Ministry of Industry and Trade), said that the competitiveness of enterprises and goods of ASEAN countries are higher than Vietnam’s. Specifically, ASEAN goods have good quality, beautiful design and reasonable price. Enterprises of ASEAN countries have product strategy as well as good marketing strategy. In particular, ASEAN businesses are involved in many mergers and acquisitions. This shows that they have a strategy to approach and expand the market. In the opposite direction, the quality of Vietnamese goods is poor, prices are not competitive. In addition, marketing strategy and product strategy of Vietnamese enterprises is also poor...

From the perspective of business, Vu Hai Bang, Chairman of the Board of Woodsland Joint Stock Company (exporter of wood and wood products) said that ASEAN is a market that has simpler requirements than the hard market, like the EU. However, difficulties of Vietnamese enterprises when exporting to ASEAN is very high fees. The fees comes from the cost of the ports, the cost of transportation on the road ... All of which make Vietnamese goods difficult to compete with other countries in the ASEAN region.

Regarding the utilization of opportunities and incentives to promote the export to the ASEAN market, Mr. Doan Trong Ly, Chairman of the Animal Production Processing Import and Export JSC, said:, fruits and vegetables, for example, from Vietnam are quite popular in many countries. However, the number of such items is not great while the strength is not superior. According to Mr. Ly, ASEAN countries have similar environmental and climate conditions. The key is the seeds and who is first. When many countries participate in production, the market for the product will be saturated.

Representatives of a number of enterprises specializing in exporting agricultural products to ASEAN market said that, in fact, enterprises still lack market information, do not know the strategy to attack this potential market. Therefore, in order to make better use of opportunities from FTAs, promote the export of goods, the enterprises hope the Government and authorities promote policies, information and guidance to enterprises to reach the partners in the ASEAN.

Regarding this issue, Mr. Thang added: the ASEAN is a region with many similarities with Vietnam, but the “difference” is quite clear. For example, this market requires food products, vegetables, fruits, rice, etc… that may be considered as the strength of Vietnam, but this area has both Muslims and Buddhists... with different needs. Therefore, it needs to find the difference, to understand each object to invest in the right direction, to adjust production to make the “supply” meet the “demand”.

Mr. Tran Thanh Hai, Deputy Director of Import-Export Department (Ministry of Industry and Trade): Participating in FTA, Vietnam must accept trade deficit with some big markets

Vietnam is an active participant in FTA negotiations. The goal of the FTA is the market. In addition, Vietnam has other goals such as creating impetus to transform the production structure in the country or attract investment or... open the door to create conditions for export enterprises, in addition to facilitate enterprises which are using domestic raw materials have more options, avoiding dependence on certain markets. Compared with no FTA, Vietnam export enterprises have increased export turnover quite a lot. In the opposite direction, besides increasing export, Vietnam also has to accept more importing levels, making trade deficit with some larger markets. That is the problem that the Government has now realized. Basically, we recognize that FTAs bring benefits to businesses, both the economy as well as the government to help promote the better production, export and business activities of enterprises. The Government has also paid particular attention to the possible negative effects and impacts that could be expected to be mitigated or prevented.

By Thanh Nguyen/ Kieu Oanh