Vietnam companies face fierce regional competition
VietNamNet Bridge – Vietnamese businesses could face losses in the domestic market as the country opens to the ASEAN member imports later this year in compliance with the ASEAN Trade in Goods Agreement (ATIGA), according to experts.
ATIGA, the bloc’s first comprehensive pact related to the intra-trade of goods, is based on the collection of commitments reached in the Agreement on the Common Effective Preferential Tariff Scheme for the ASEAN Free Trade Area (CEPT/AFTA) as well as related agreements and protocols.
Accordingly, member nations will remove tariffs on nearly all commodities, with the exception of unprocessed agricultural products which will only see tariff down to 5 percent. The agreement also stipulates that tariff removals by Vietnam, Cambodia, Laos, and Myanmar may be delayed until 2018.
The Ministry of Finance said since ATIGA took effect on May 17, 2010, Vietnam has lifted 6,859 tariffs, or 72 percent of its total. Another 1,720 (about 18 percent) were cut as of January 1, 2015.
The remaining 687 lines (about 7 percent) will be removed in 2018, including those on automobiles, motorcycles and spare parts; milk and milk products; vegetable oil; tropical fruits; confectionery; and animal feed.
Thus far, the ATIGA has brought about a number of advantages for domestic businesses who can now import materials at lower costs and better machinery.
However, it is also forecast to significantly impact local business activities, as eliminating tariffs will trigger an influx of goods from other ASEAN nations between now and 2018.
Nearly all Vietnamese exports are comparable to those of the regional countries which boast more competitive prices and higher quality.
Even top Vietnamese commodities, such as agricultural and consumer products, are also at risk of being deemed inferior to Thai and Cambodian counterparts, economists said.
Economist Nguyen Minh Phong predicted it will be hard for a number of Vietnamese firms that depend on materials imported from regional countries.
Economist Le Dang Doanh pointed out that Vietnam’s business sector lacks the necessary preparations for integration into ASEAN, as they have focused too heavily on the Trans-Pacific Partnership (TPP) Agreement and the Vietnam-EU Free Trade Agreement (VEFTA) which offer promising export boosts.
Nonetheless, the TPP and VEFTA have not been signed, postponing any possible implementation for at least three to five years. Meanwhile, the ASEAN Economic Community will go into effect within the year, he noted, warning that unless businesses play a more active role, they run the risk of missing valuable opportunities or even losing out in the domestic market.
Phong recommended companies protect their domestic market shares by improving product quality, design, and post-sale services as well as exploring niche markets.
To effectively compete with regional companies, experts have encouraged Vietnamese firms to design business strategies to maximise opportunities and respond to challenges.
They also urged groups to develop technical requirements for imported goods such as origin declaration, quality control, and certification so as to protect local products.