AEC Entry: Work Together to Go Far

The ASEAN Economic Community (AEC) is a pillar of the ASEAN Community. The advent of AEC is a turning point, marking the comprehensive regional integration of Southeast Asian economies, moving towards an economic, social and security community model, enhancing the competitiveness of the regional economy, and making ASEAN a huge market with over 600 million people with a total annual GDP of about US$2,000 billion and a major exporter of the world.

 

However, most Vietnamese businesses are not yet fully aware of AEC challenges or ready to take advantage of opportunities it generates. Businesses are optimistically confident that increased labour mobility, reduced barriers to trade and liberated investment flows will enhance competitiveness. Nevertheless, only 40 per cent of them fully understand AEC implications on their business operations. This is a relatively low rate compared to other ASEAN countries.

 

AEC can be directed by governments, but it is unlikely to be a success without the active participation of companies and the public. To catch opportunities and respond to challenges and risks following the formation of AEC, Vietnamese businesses, government and citizens must take notice of the following four issues.

 

Firstly, it is very important to shape positive mindset toward integration. Businesses need to increase their awareness and understanding of integration and regard economic integration programmes as an economic commitment to which both cooperation and competition exist. They need to make ASEAN as important as US and EU markets, as this neighbouring market requires lower costs while its potential for expansion is immense.

 

ASEAN needs to be seen as the home market. They must be aware that if they cannot compete and develop with ASEAN, it will be impossible to advance effective integration into global markets. Businesses need to conduct deeper research on ASEAN market and AEC policies to outline business and export promotion strategies and invest more into this potential market.

 

Secondly, companies need to improve and promote their core values to enhance their competitiveness. A business must be regarded as a chain of added values generated by its direct business and production operations and support activities.

A production and business operation comprises the creation, marketing, distribution and after-sales service of products. Support activity includes resources, input infrastructure, leadership, law, culture, information technology and other factors that support the creation of added values and reduce costs.

 

The capacity of a company is a collection of value-added chains of these activities and these are the core values of that company. Differentiating core values will provide its advantages over other competitors and bring in profits for it. To have that differentiation, a company must develop its own competitive analysis tools such as SWOT (strengths, weaknesses, opportunities and threats), competitors and the market.

 

Thirdly, modern business trends move towards joint and cross-sector value chains. Therefore, businesses, particularly in business associations and banks, must learn from each other about business competition strategies, join together in value chains to form economies of scale and better promote comparative advantages.

 

When AEC is established, many foreign companies are expected to enter Vietnam to invest and they will penetrate and take away the market share from Vietnamese enterprises. To compete with foreign rivals, Vietnam businesses, which are mostly small and medium in scale, must join forces to form a common force.

 

They should also increase exchanges and dialogues with government agencies as well as business associations to promptly grasp new information and policies and report their difficulties and obstacles to competent authorities for changes to fit reality. In addition, they must cooperate with other ASEAN businesses to increase competitiveness against non-ASEAN companies.

 

Fourthly, in addition to improving the quality of oriented negotiations and expanding the market, the Government and relevant authorities must have support activities and programmes to improve and disseminate knowledge of AEC to the business community.

 

It is essential to make institutional reforms, build a consistent, clear, transparent, open and predictable regulatory framework, and create a more favourable environment for business and investment activities. It is important to set development roadmaps and strategic plans for Vietnamese commodities and industries to fully leverage advantages in geographical location and human resources. Moreover, they need policies to develop and protect interests for businesses and prevent financial risks (especially for small and medium enterprises) in developing domestic and ASEAN markets.

 

Political and social organisations, citizens and consumers in Vietnam also need to shape a smart consumer culture and science and improve the competitiveness of enterprises and the country.