Vietnam joined the ASEAN Community - Opportunities and challenges faced by agricultural enterprises

Monday - 16/05/2016 14:44
Vietnam joined the ASEAN Community - Opportunities and challenges faced by agricultural enterprises
Ms. Cao Thi Thu Thuy
Government Official, Import – Export & Economic Integration Division
Quang Tri Department of Industry and Trade
              The year 2015 was of significant importance to all countries in the Association of Southeast Asian Nations (ASEAN), which was the signing ceremony of Kuala Lumpur Declaration dated 22 November 2015 amongst ten ASEAN Leaders regarding the establishment of the ASEAN Community on 31 December 2015. The ASEAN Community comprises three main pillars, including the ASEAN Economic Community (AEC), the ASEAN Political-Security Community (APSC) and the ASEAN Socio-Cultural Community (ASCC) with a view to achieving peace, stability, connectivity, development and people-orientation. Thus at the beginning of 2016, Vietnam officially joined the ASEAN Community, which requires the provinces and cities nationwide to change vigorously to keep pace with the trend of integration in the development period.
Quang Tri is the first point of the East-West Economic Corridor (EWEC), bordering Savannakhet and Salavan provinces of Lao PDR in the west, with Lao Bao International Border Gate - an important knot in the EWEC. Recognizing the province’s strategic location, Quang Tri Provincial Party Committee and People's Committee have directed all departments to deploy multiple solutions and implementation of the central mechanisms and policies on a timely basis in accordance with actual situations and conditions of the locality, especially in the context of the formation of the ASEAN Community. However, that the ASEAN Community officially puts into operation will bring many new opportunities and challenges for Vietnamese enterprises at large and companies in Quang Tri province particularly, including agricultural businesses.
Open development opportunities
               Although Vietnamese agriculture has dispersed and small-scale production, and most of the farmers get involved in the goods production process, the international trade expansion has brought extensive widespread effectiveness in creating jobs and increasing incomes for the majority of rural laborers. There is a bigger opportunity for Quang Tri province to export its agricultural commodities, specifically major export products such as coffee, tapioca starch, rubber, pepper, etc. Furthermore, that the ASEAN Community takes effect at the beginning of 2016 means enhancing the competitiveness of agricultural exports of Quang Tri enterprises by enjoying preferential tariff cuts. Moreover, the opening of import market will facilitate the development of various agricultural products that the Vietnamese goods does not have advantages, resulting in improving living standard, increasing people’s welfare, as well as giving domestic consumers access to better price and high quality goods, and developing fair and effective multilateral relations.
              Despite being subject to inevitable risks of international trade, producers in Vietnam have gradually become familiar and improved the competitiveness of agricultural products, not relied on the state’s subsidies and trade barriers. Vietnamese trade policy for agricultural products will have a positive impact on promoting the process of adaptation to the globalization of agricultural production and business. Besides, the integration facilitates extensive foreign investment attraction to Vietnam, especially to the provinces in the North Central region, including Quang Tri which depends mainly on agriculture. In addition, the establishment of the Southeast Economic Zone in Quang Tri (under Decision No. 42/2015/QD-TTg dated 09/16/2015 of the Prime Minister) is expected to boost socio-economic development of Quang Tri province in particular and link the East - West Economic Corridor with other countries through the East Sea, especially to attract foreign direct investment (FDI) capital to Quang Tri province, including FDI projects in the agriculture sector. In other words, together with foreign investment is the development of new technologies towards biotechnology and high-tech industries. These technologies contribute greatly to increasing productivity and efficiency in production, processing and trading of agricultural products. Currently in the province, Quang Tri Trading Corporation is a pioneer in the application of scientific and technical advances to production. In the early 2010, the Company invested in building the manufacturing plant of microbiological fertilizers and methane recovery sewage treatment systems at Huong Hoa Tapioca Starch Factory with total investment value  of over VND90 billion. Furthermore, in the past few years, the Company has developed and successfully applied ISO 9001:2008 Quality Management System, ISO 14001:2010 Environmental Management System at Cam Lo rubber-processing factory... The application of these systems has brought out many positive results for businesses and actively contributed to improving the goods productivity and quality of the Company, such achievements have been a significant encouragement for the Company in the context of the economic downturn in recent years.
In addition to the afore-mentioned opportunities, joining the ASEAN Community also brings huge opportunities for Vietnam to effectively improve the State’s institutions and policies. Along with that, enterprises in Vietnam and specifically in Quang Tri do have to change drastically to seize the opportunities of integration and enhance the competitiveness of enterprises.
But there are still many challenges to cope with
              Besides the positive aspects mentioned above, agriculture and rural areas also face many challenges which require the right policies to take advantage of opportunities and maximize the benefits of integration as well as minimize the adverse effects brought about by joining the ASEAN Community.
Participation in international trade agreements and regional implementation means the implementation of import tax reduction schedule for a number of agricultural products, food, especially processing meat, confectionery, beef, pork, milk and dairy products... Since 2011, Vietnam has committed to reduce taxes for some agricultural products, including milk, confectionery; and allowed foreign companies and individuals to export and import goods as Vietnamese companies and individuals do, including rice (by 1st January 2011). By the end of 2015, the implementation process of liberalization commitments within ASEAN to Vietnam was only 0%, for the majority of Chinese goods was 0-5%. Thus, the commodities in domestic markets are subject to fierce competition of imported goods from abroad.
What is more, Vietnam will incur new non-tariff and technical barriers, traceability requirements when exporting to high standard markets. The importers’ demands requires Quang Tri enterprises to continually improve production standards and guarantee safety and hygiene.
               Another important challenge is human resource factor, including levels of management, production and trading. In the context of integration, qualification requirements for all levels and sectors must be enhanced for adaptation to new demands. Nevertheless, current management skills of the staff and local enterprises have yet to meet the requirements of integration as well as the production level of local agriculture is outdated and fragmented...
From these opportunities and challenges, in order to survive and develop in the stage of extensive international integration, especially when the ASEAN Community has put into operation by early 2016, Quang Tri agricultural enterprises should:
First, to enhance competitiveness through corporate restructuring, activity reorganization, business strategy adjustment, investment in new technology, application of advanced management methods for labor productivity enhancement and maximizing business comparative advantage, enhancing value-added contents and quality of traditionally exported agricultural products, cutting export-related costs such as transportation and warehousing services; concurrently changing to new products with higher added value, improving food safety, keeping pace with rapid changes in the world’s market, and creating key products.
Second, to take better advantage of opportunities from the free trade agreements for penetration and exploitation of overseas markets. Actively and carefully research Vietnam’s integration commitments and Vietnam's commitments when joining the ASEAN Community, and partners’ trade policies and practices... in order to perform production and business operations effectively, to comply with international trade regulations and practices, to best seize business opportunities with partners. At the same time, it is noted that agricultural enterprises in Quang Tri province should take new requirements into account, for example, more environment-friendliness, resource savings, transparency, social benefit assurance, etc.
          Third, to focus on training and raising the human resource levels compatible with new requirements; to implement the retraining of labor force while innovating the production and business model; to create a good working environment for workers.
          Fourth, to actively participate in domestic and international trade fairs or the province’s trade promotion groups for product and business expansion in terms of business areas and partners.
           Fifth, to well inform Quang Tri Department of Industry and Trade as well as relevant departments and local authorities of trading issues related to foreign partners and enterprises in order to coordinate and give direction in a timely manner with respect to best treatments to help reduce losses for local businesses.
            Finally, to regularly have close contact with Vietnamese representative bodies abroad to search for market information, verifying partners and protecting corporate interests arising when there are difficult business constraints for investment in such countries. /.

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