Economic Integration: Policy Space Needs Expanding for Better Business Support

 

Integration information has been intensified by ministries and central agencies quite soon. However, information is still generic, not specific and detailed, for each agreement. Meanwhile, businesses are now very much interested in tariff lines and enforcement roadmaps specified in trade agreements to better prepare for their production and business operations. Particularly, the Vietnam Logistics Business Association is very concerned about mechanisms, policies and developments of target markets to support logistics companies and become an information provider for media agencies. Several agreements were already signed and some newspaper agencies contacted us for opinion sharing but we could not answer because we did not have precise information about tariff lines in those agreements with respect to our industry. In my opinion, it is essential to inform detailed contents of very agreement, including agreements prepared to be negotiated, agreements under negotiation and their progress, or agreements signed.

 

For example, such agreements such Trans-Pacific Partnership (TPP) Agreement, Vietnam - EU FTA and Vietnam-Korea FTA, what items and what parts will largely or directly affect Vietnam’s export sectors? How should businesses behave to grasp opportunities and limit disadvantages? Then, these new agreements should open a new easier way of integration for Vietnamese businesses as well as the entire economy with major trade partners. Besides, with the fulfilment of commitments, Vietnam’s investment and business environment will also improve strongly, provide favourable conditions for enterprises to boost their creativity and entrepreneurship to get personal riches and enrich the nation. However, it seems to be apparent that potential enormous benefits from these trade agreements have been not yet realised much.

For example, at present, only around 30 per cent of Vietnam's exports are granted FTA-based preferential tariffs. Meanwhile, the domestic market has witnessed a rapid advent of foreign goods and services. It seems that Vietnamese companies have not sought out methods for effective integration after two decades of integration, dating from the entry to ASEAN.

 

Integration quiz first of all rests in their capacities in finding ways to enhance the competitiveness and sustainable development in the time of integration. However, in another angle, governmental supports are essential for Vietnamese businesses which remain small, nascent and fragile in the competition against stunned, experienced rivals, to survive, grow, strengthen and compete face to face with them in globalised economy.

 

In my opinion, businesses very much need State supports. The Government, ministries and central agencies should take measures to create an environment and mechanism for business associations to have room for development by completing legal regulations on association, gradually transferring public services to relevant business associations, and enhancing the effect of regulations on business involvement in policymaking process.

 

Besides, it is necessary to enhance resources, operational capacity of business associations, especially in matters relating to integration like placing orders for business associations to perform research and development activities and business supports (using State budget).

 

The lack of specific information, clear guidance and explanations to commitments is regarded as one of underlying causes leading to Vietnamese businesses’ failure in capturing tremendous opportunities brought by international trade commitments. Therefore, information, support and consultation for businesses need to be increasingly emphasised.

 

The Government, ministries, and central agencies should have appropriate measures to address these restrictions to substantially enhance the effectiveness of business supports in integration like supporting resources for leading information providers, and boosting publicity and transparency of information on commitment contents in agreements. Currently, Vietnam has signed 11 bilateral and regional free trade agreements (FTAs), including six FTAs in the ASEAN cooperation framework and five bilateral FTAs. Basically, FTAs have contributed actively to boosting exports and imports, stepping up economic restructuring and improving the competitiveness of domestic goods and services. However, many businesses are still unaware of opportunities and challenges that FTAs bring in because of the shortage of specific information, clear guidance, explanations to commitment contents, and qualified personnel.

 

If we look at the overview picture of Vietnam’s logistics industry, foreign firms are standing on a higher ground. However, domestic firms still have certain advantages. Firstly, Vietnamese companies possess a majority of warehousing facilities, thus forcing foreign firms to sublease, cooperate or enter joint ventures to provide logistics services. Secondly, domestic companies understand the local market, customer psychology, geography, weather and indigenous cultures. Thirdly, smart Vietnamese workers will easily capture processes and advanced technologies from foreign partners.

 

Against this backdrop, Vietnamese logistics companies must take actions to address these weaknesses. They must pursue market-based business and coordinate with other partners to set up mutually beneficial economic relations. Each of them must focus on their strengths and hire services they are not strong at. Cooperation and coordination is essential to Vietnamese firms.

 

The current legal framework for regulating logistics operations is no longer appropriate and updated in relation to international logistics. Therefore, logistics services market still lacks transparency, healthy competition, and conditions for sustainable development of this sector. Underdeveloped infrastructure facilities are also major constraints to logistics development. Main operations of logistics companies are limited in scale, capital and human resources. Exporters and logistics companies are weakly connected. To develop and enhance competitiveness of Vietnamese logistics industry, it is necessary to have synchronous movements and the efforts from many sides.

 

The logistics sector needs development strategies and policy supports as well. Completing the transparent and appropriate legal framework for logistics, facilitating trade and promoting logistics development in Vietnam are also important works. Besides, it is necessary to reform customs procedures, carry out the national single-window mechanism, electronic customs declaration, e-commerce application, and administrative procedure reform to support importers, exporters and logistics service firms to cut costs and improve competitive advantages. Furthermore, it is important to establish the National Commission on Logistics, an agency responsible for enforcing joint sector programmes and goals and advising Vietnam’s overall logistics development planning and strategy to 2020, with a vision to 2030. It is also necessary to invest and upgrade synchronous infrastructure facilities to meet development demands of the logistics industry. Accordingly, it is important to soon complete ports, inland clearance depots, roads, warehouses, equipment and related institutions.

 

The Vietnam Logistics Business Association is assigned a key task of connecting logistics businesses, creating leading logistics firms, joining forces to share advantages to reduce logistics costs, create a healthy and highly competitive playground for logistics firms to link importers, exporters and logistics service businesses, enhancing competitiveness, increasing investment for information technology, facilities, personnel training and development to match national, regional and international standards.

 

Logistics businesses need to develop logistics services towards 3PL direction (full and integrated services), increase added values for customers, seek flexible, effective and cost-effective solutions, utilise local advantages in cooperation with foreign enterprises, approach customers towards risk mitigation and full supply chain service, and finally cooperate with Vietnamese exporters to change from buying on CIF and selling on FOB to buying on FOB and selling on CIF.