Vietnam preparing for the ASEAN Economic Community
The Vietnamese economy is not fully used to free trade and has only recently began privatization in earnest, being encumbered by bureaucracy for much of its recent history- a potential perfect storm in the light of the upcoming opening of the ASEAN Economic Community on January 1st 2016.
The AEC will create a single market for the 10 nations in ASEAN. The markets of each country will be opened up, creating a duty-free movement of services, products and talents within member countries. This will allow easier penetration into the total ASEAN market of 600 million.
Nonetheless, the Vietnamese private sector may not be ready for the AEC as many firms have yet to comprehend the reality of what the revolutionized regional market will entail in terms of opportunities and increased competition. Indeed, recent years have seen Vietnam engage in a multitude of FTAs (Free Trade Agreements) spanning the globe, from Australasia to America. The American TPP (Trans-Pacific Partnership) and the AEC stand out due to their sheer size and potential impact. Hence, the country is poised to undergo rapid economic upheaval and its adaptive ability is imperative for the country’s survival.
In response, Vietnam has been making preparations for the AEC in earnest. Vietnamese Prime Minister Nguyen Tan Dung in September 2015 ordered all ministers to set targets and benchmarks on logistics and trade facilitation to meet the rigorous standards of the AEC. Also, a national coordination committee has been established to review targets.
Younger Vietnamese in higher education are now the recipients of a revamped curriculum with a focus on ASEAN and the myriad of opportunities the AEC will provide for the first time in Vietnamese history. Efforts are paying off. For instance, Vietnam National University, which now teaches a compulsory class on the AEC, reports that students have been motivated to excel to take advantage of the opportunities of the AEC.
BDG Insight: FTAs are notorious for requiring substantial changes to countries’ economic infrastructures. Nonetheless, Vietnam has risen to the occasion splendidly, proving itself an able trading partner. Perhaps this is the reason behind the international spate of desire to engage it in FTAs.