In implementation of the Agreement on Common Effective Preferential Tariff for the ASEAN Free Trade Area (AFTA), Vietnam, by January 1, 2006, has applied import tariff of 0-5% to 10,283 commodities, accounting for 96% of the total 10,689 commodities listed in Vietnam’s import-export tariff. Liberalisation of trade within ASEAN countries will boost imports from regional countries to Vietnam but also increase competitiveness on the domestic market for Vietnamese enterprises.

Since 2004, electrical and mechanical appliances centres and supermarkets in Ho Chi Minh City have constantly reduced the prices of products imported from ASEAN countries. Prices of household appliances such as irons, electric rice cooker, gas cooker, microwave ovens, ovens, and so on, have been reduced by 15-20% annually. From big to small markets, commodities imported from Thailand, Singapore, Malaysia, Indonesia, including cosmetics, footwear, garments, kitchen appliances and watches, are profuse and sold at reasonable prices.

Why are some commodities from ASEAN countries cheaper than Vietnamese ones? The answer is that Vietnamese product designs are poor-looking and unreliable. Moreover, labour productivity, production efficiency, management capability, technological and scientific level are insufficiently developed. These contribute to the high cost of Vietnamese products. in 2004, Vietnam earned around US $3 billion from export to regional countries, a little more than that of 2001, while import turnover increased sharply.

Bui Quang Do, president of the Vietnam Electronics Association; Hong Ky general director of Tan Binh Viettronic; Nguyen Van Binh, general director of Bien Hoa Viettronic Joint Stock Company, Nguyen Van Dao, from Samsung, Nguyen Dinh Tuong from Viet Tien Garment Company, Ho Thi Kim Thoa from Dien Quang Company and Kieu Lien from Vinamilk all declared that their enterprises have been well-prepared for international economic integration and the tariff reduction road-map within the ASEAN free trade area.

According to survey by the Vietnam Electronics Association, sharp price reduction is only seen in popular household appliances. Vietnamese middle and high-grade commodities such as flat screen TVs, washing machines, refrigerators, air-conditioners and electric fans, are not at all inferior, and even better in designs and quality, to those from ASEAN countries.

Representatives from electrical enterprises stressed that with the advantage of home market and cheap labour costs, their products can compete imports, and will be exported back to regional countries once the tariff barrier is removed.

According to Cho Lon Plastic Company, “in order to co-exist with ASEAN-imported products,” the company has made big investment to modernise equipment and production lines for high quality products and keep changing designs constantly. Therefore, Cho Lon products have gradually won back the domestic market with high-quality and cheap products.

The Dien Quang Light Bulb Company has also invested in advanced equipment to be able to cope with economic integration. The company is capable of carrying out big orders and can compete with regional companies in both terms of quality and prices. Currently, the company’s products have been exported to 10 Middle East and Asian countries.

Last year, Vietnam earned US $1.3 billion from exporting 4.7 million tonnes of rice, a record during the past 17 years. Vietnamese rice traders constantly won contracts in the Philippines, Indonesia and Japan. In January 2006, the Vietnam Food Association won contracts to export a total of 1 million tonnes of rice, including 400,000 tonnes to the Philippines and 150,000 tonnes to Indonesia.

Other products including seafood, farm produce and milk products from Vinamilk are also competitive with regional products thanks to advanced equipment and technology.

Vinamilk targets to earn US $200 million from dairy products exports and VND 7,000 billion from domestic consumption.

The reduction of tariff according to AFTA road-map create favourable conditions the export of commodities from ASEAN countries to one another. During the past three years, Vietnam’s exports to ASEAN accounts for 15% of the country’s total export turnover while the figure for imports is 25%.

The limitation in penetration into regional markets from Vietnam is due to the fact that Vietnamese enterprises are overly fond of big markets such as EU, Japan and the US and ignore regional markets. Export turnovers of many Vietnam’s big enterprises to ASEAN are modest. Therefore, imports from ASEAN countries since late 2004 have increased sharply, mostly fertiliser, petrol, garments and textiles materials, equipment and machinery.

The most important things for domestic enterprise to be able to compete with regional enterprises, expand regional markets and have a firm foothold in the domestic market do not only consist of costs and quality of the products, but also the capability of marketing and developing the supporting industries to reduce trade deficit. Vietnamese enterprises should also take advantage of the opportunities to set up a delivery network of Vietnamese products in ASEAN countries.

By BANG CHAU

Source: Nhandan Online, 15/2/2006