Firms to face stiff competition under AEC (ASEAN Economic Community)

Economic experts said enterprises in Viet Nam will face fierce competition under the ASEAN Economic Community, so they should establish relationships with large firms in the region and globally in order to better develop their businesses.

Domestic enterprises see great opportunities from attractive tax rates under the ASEAN Economic Community (AEC) despite higher competitive pressure and stricter commitment.

However, they should hold on to the opportunities to develop further production and business in the future.

Experts told Vietnam News Agency’s reporter about those issues.

Vo Tri Thanh, deputy director of the Central Institute of Economic Management (CIEM):

Viet Nam should look to develop during integration into the world economy. Domestic enterprises should establish relationships with large firms in the region and the world to receive lessons from them in developing businesses.

To take full advantage of free trade agreements (FTAs) negotiated and signed in 2015, I think that local enterprises should study carefully the impacts from the FTAs in all fields connected to them and the local markets.

Reduction of tariffs will create a chance for the domestic industry to reduce their production cost and then have capital for promoting investment and exports. The local enterprises should take advantage to cut production and business costs and improve competitiveness of their goods and services.

In addition, the FTAs will open great opportunities for Viet Nam in attracting investment, especially foreign capital, and expanding local investment. Viet Nam can approach large markets with high purchasing power. That is a great opportunity for local enterprises to develop their business and foreign investors to study Viet Nam’s market.

However, domestic small- and medium-sized enterprises will still face many challenges in grabbing those opportunities because they have many weak spots with regard to production and business.

Nguyen Thi Van Tho, deputy general financial director of Danapha Pharmaceutical Joint Stock:

While integrating into the international economy, establishment of the AEC will open more doors for local products, including Danapha products, to enter markets at home and abroad.

In addition, tax policies will create favourable conditions for domestic enterprises to approach new markets and promote exports to foreign markets.

However, local firms as well as Danapha will face fierce competition and suffer high pressure from strict commitments on quality, origin and production technology.

Therefore, local companies need reform and investment for research and development activities, and must improve the quality of workers.

Now, Danapha has a VND60 billion (US$2.7 million) factory in Hoa Khanh Industrial Zone (Da Nang) meeting GMP-WHO standards, a research and development centre, a high-tech pharmaceutical factory and some other training projects to improve its competitiveness in the future.

Danapha expects those activities to support the company in becoming one of the 10 leading pharmaceutical producers in Viet Nam with a popular pharmaceutical brand in the Southeast Asian region.

Phan The Rue, chairman of Viet Nam Petroleum Association:

Commitments under the ATIGA, the first comprehensive agreement of the AEC, will affect all commercial activities for commodities, including petrol products.

Viet Nam will join the abolition of most tariffs for petrol and gas products under a schedule until 2018.

The new tax policies of AEC will bring sustainable benefit for enterprises, market and consumers on the petrol market.

However, Viet Nam’s enterprises need flexibility in the State’s policies for implementing the schedule on cutting tax of petrol and gas to help them have reasonable business strategies.

Do Ha Nam, chairman and general director of Intimex Group Joint Stock Company:

Viet Nam’s coffee is one of the commodities selling around the world.

Coffee beans are not to be taxed but processed coffee products must be imposed a high tax rate. Viet Nam has mainly exported coffee beans and its enterprises have not developed coffee processing activities because they have not had the conditions to make investments in production technology.

When Viet Nam joins the Trans Pacific Partnership (TPP) deal, the AEC as well as FTAs, local firms will have an advantage in exporting coffee beans to those markets and good tax policies will also help local firms to promote coffee processing activities.

Local firms should focus on research and development for processing coffee powder and instant coffee products. They should also develop markets in Asian region.

In recent years, Viet Nam has increased the output of processed coffee products and exported those products to Asian markets, especially Southeast Asian region.