ASEAN economic integration achievements and VN’s participation

Minister of Industry and Trade Tran Tuan Anh. Photo: VGP

The following is the translated version of his article:

The year 2018 marks the 11^th anniversary of Viet Nam’s accession to the World Trade Organization, 20^th anniverarsary of Viet Nam’s participation in the Asia-Pacific Economic Cooperation (APEC), 23^rd anniversary of Viet Nam’s official admission to the Association of Southeast Asian Nations (ASEAN), and 51^st founding anniversary of the bloc.

ASEAN was established in Bangkok on August 8, 1967 with the aim of rallying political power in order to promote economic cooperation and development towards shared prosperity and ensure peace and stability in Southeast Asia. The five original members, namely Indonesia, Malaysia, the Philippines, Singapore and Thailand agreed on the signing of the ASEAN Declaration. It was followed by the enlargement of ASEAN with Brunei joining the bloc on January 8, 1984, Viet Nam on July 28, 1995, Laos and Myanmar on July 23, 1997 and Cambodia on April 30, 1999.

After 51 years of cooperation and ceaseless development, ASEAN now comprises of 10 Southeast Asian countries, making it the 3rd biggest market in Asia with over 650 million population, accounting for 8.59% of the global population, and the GDP per capita reaching US$ 4,305 and the figure is expected to double by 2030, or the 7th biggest economic community in the world with total GDP of 2.766 billion.

Apart from Security-Politics and Culture-Social pillars, ASEAN has also focused on economic cooperation through the establishment of the ASEAN Economic Community, considering it one of the three major pillars to support co-development; build an ASEAN Community which is economically strong; healthy, multi-colored in terms of culture; and stable in terms of security and politics; prosperous in terms of social security. Despite differences in terms of religions, development levels, infrastructure, and information technology, etc, 10 ASEAN members have considered brothers of the same house in order to extend support and assistance for mutual development in all fields. The sound development and cooperation of ASEAN have significantly contributed to the overall achievements of the world in the new millennium in general, heighten the position of ASEAN countries on the globe in particular, as well as create premises for other regions to step up cooperation and consider ASEAN as the “pathfinder” in regional economic cooperation and connectivity. Beside intra-cooperation, ASEAN has also intensified cooperation and connectivity with many external partners through such mechanisms like ASEAN 3, ASEAN 6, etc., in various fields ranging from infrastructure, trade in goods, trade in services, fourth industrial revolution, value chain, and institutional-infrastructure-human connectivity.

The following are some of major achievements in economic cooperation pillar that ASEAN gained over the past years:

On trade in goods, through the ASEAN Trade In Goods Agreement (ATIGA), ASEAN-6 countries (five founding members and Brunei) have eliminated intra-ASEAN import duties on 99.2% of their tariff lines meanwhile Cambodia, Laos, Myanmar and Viet Nam (CMLV) have eliminated intra-ASEAN import duties on 90.9% of tariff lines as of 2017. It is expected that by the end of 2018, the rate of tariff elimination of ASEAN will increase to 98.67%. Apart from tariff elimination, ASEAN countries are also deploying measures to facilitate trade among regional businesses, such as the self-certification of origin and one stop shop mechanism in the customs sector, etc. Mutual recognition agreements (MRAs) in the fields of electricity-electronics, rubber, food processing, pharmacy and and medical equipment, et … Besides, Viet Nam and ASEAN countries have implemented the Mutual Recognition Agreement (MRA) on electricity and electronics, inspection of good practices in drug production; have signed the Mutual Recognition Agreement (MRA) for bioequipvalence study and for inspection and certification systems on food hygiene for prepared foodstuff in order to create a unified production area in ASEAN.

Regarding trade in services, liberation of trade in services is one of the key priorities of the ASEAN Economic Community as specified in the ASEAN Framework Agreement on Services (AFAS), signed in 1995 and has been negotiated to boost freedom of trade in services among ASEAN countries. At present, ASEAN countries set goal to complete talks and sign a Protocol to implement the Package 10 of the ASEAN Framework Agreement on Services (AFAS-10) in 2018.

On investment, amid increasing competition for foreign investment from other developing countries across the world, at the 5^th ASEAN Summit held in Thailand on December 15, 1995, ASEAN decided to establish ASEAN Investment Area (AIA), in order to enhance capital attraction and competitiveness to encournage foreign investment inflows into ASEAN that has a young, cheap and abundant labor force. Thanks to the bloc’s efforts in the implementation of the ASEAN Investment Area and ASEAN Comprehensive Investment Agreement (ACIA), in 2017, ASEAN countries signed the second Protocol to amend the ACIA and working towards signing of the third Protocol to amend the ACIA in a bid to increase foreign investment inflows in Southeast Asia.

In external cooperation, ASEAN has so far signed and implemented 6 free trade agreements: Including intra FTA (AFTA) and five FTAs between ASEAN and dialogue partners like China, the Republic of Korea, Japan, India, Australia and New Zealand. In November 2017, on the sidelines of of the 31^st ASEAN Summit, ASEAN countries aso signed free trade agreement and investment agreement with Hong Kong, China. Besides, ASEAN countries are now joining talks on the Regional Comprehensive Economic Partnerhip (RCEP) with all six dialogue partners, namely, China, the Republic of Korea, Japan, India, Australia and New Zealand in order to achieve higher level of commitments compared to the current commitments in separate FTA between ASEAN and each dialogue partner.

Regarding economic development achievements, total trade in goods between ASEAN and the rest of the world rose from US$10 billion/year to US$2,575 billion in 2017. Total trade in services increased from US$140 billion in 1999 to a record of US$681 billion in 2016. According to preliminary data, ASEAN’s trade in goods in 2017 picked up 14.2% against the previous year, and higher compared to 11.6% growth rate of foreign investment inflows. China is the top trade partner of ASEAN with total volume of trade in goods reaching US$436.8 billion, accounting for 17.1%.

ASEAN has become an attractive destination for foreign investment as the capital inflows rose to US$137 billion last year compared to US$ 22 billion in 2000. Intra-ASEAN investment also rose from 5.6% to 24.7% in 2016. Service sector is magnet for foreign investment with the share of capital volume rising from 50.8% in 1999 to 80.8% in 2016, followed by industry, energy and agriculture.

Foreign investment inflows into ASEAN mainly come from dialogue partners like the European Union (EU), up 46% to US$30.5 billion; Japan from US$7.9 billion in 2015 to US$23.8 billion in 2016; China up 44% to US$9.2 billion; the Republic of Korea up 3% to US$6 billion; and Australia up 77% to US$3.4 billion. Japanese investors are interested in manufacturing (US$ 23.8 billion), Chinese investors focus on financial, wholesale and retailsale, logistics and real property sectors, while investors from Australia, the EU and the US are interested in services, mainly financial services. Intra-ASEAN investment also rose to a record high of US$24 billion in 2016, accounting for ¼ of the total foreign investment inflows into the bloc.

Viet Nam’s total trade value with ASEAN rose nearly 7.7 times, from US$5.91 billion in 1996 to US$45.23 billion in November 2017, in which Viet Nam’s exports to ASEAN climbed 12.4 times, from US$1.6 billion in 1996 to US$19.9 billion. By the end of June 2018, total trade value between Viet Nam  and ASEAN reached US$ 28.1 billion, of which export turnover was US$12.2 billion and import turnover was US$15.9 billion.

As of 2018, Viet Nam eliminated import duties on 98% of its tariff lines in line with ATIGA, the highest rate of tariff elimination among 10 effective FTAs that Viet Nam is a signatory to.

Singapore, as the ASEAN Chair in 2018, proposed priorities for ASEAN cooperation, including: i) ASEAN agreement on e-commerce and digital integration; ii) establishment of ASEAN innovation network; iii) putting into use the mechanism of certification of ASEAN origin and ASEAN Single Window; iv) signing an ASEAN agreement on trade in services; v) enhancing the ASEAN Comprehensive Investment Agreement; vi) ASEAN Declaration on cruise tourism; vii) enhancing ASEAN cooperation and trade in liquefied natural gas; viii) signing a memorandum of understanding with the International Renewable Energy Agency; ix) developing an ASEAN green building code, and x) continued acceleration of ASEAN external relations.

In order to realize the above-mentioned goals of ASEAN in 2018 and prepare for Viet Nam to assume the ASEAN Chair in 2020, Viet Nam will continue close coordination with ASEAN countries to deploy the AEC 2025 Strategic Action Plan (SAP); reach agreements on controversial contents to ensure that the RCEP is balanced in terms of interests and takes into account development gaps of the member countries, and suggest ASEAN dialogue partners to lower their ambitions so that the talks process could be completed in 2018; coordinate with ASEAN countries to continue reviewing the implementation of commitments within each of the FTA plus one, including the second phase of the AANZFTA and actively implement working programs with other ASEAN partners. In 2018, Viet Nam will also chair the CLMV Economic Ministers’ Meeting which will be held back to back with the ASEAN Economic Ministers’ Meeting in Singapore.

According to the Ministry of Industry and Trade’s data, in the first six months this year, the rate of taking advantage of C/O form specified in the FTA plus one by businesses in Viet Nam was: 23% with China, 29% with Japan, 30% with Australia and New Zealand, 33% with the Republic of Korea, and 44% with India. FDI businesses and big corporations tend to have higher rate of using the C/O form than small and medium sized ones. By sectors, businesses operating in garment and textile, footwear, mechanics, and agricultural processing take advantage of the C/O form betters than the others.

Viet Nam’s integration in ASEAN has proved to be effective, contributing to acceleration of economic growth over the past 20 years. However, Vietnamese businesses need to sharpen their competitiveness, find out proper product structures and improve awareness of Viet Nam’s rights and benefits as a signatory of the free trade agreements in order to grasp opportunities from the ASEAN Economic Community, ensure active integration, and better exploit advantages of the ASEAN led free trade agreements.

Meanwhile, ministries and agencies need to increase the effectiveness of collaboration and coordination in ASEAN economic integration process; reform participation in ASEAN technical meetings to save resources as well as identify policies in the negotiation process of free trade agreements from 2018 and years beyond./.