Impact of asean economic community on agriculture sector of Vietnam

Nội dung text: Impact of asean economic community on agriculture sector of Vietnam

1. IMPACT OF ASEAN ECONOMIC COMMUNITY ON AGRICULTURE SECTOR OF VIETNAM Assoc. Prof. Bui Huy Nhuong – Le Tuan Anh1 Abstract: Since the acceptance as an official member of ASEAN, Vietnam has achieved many steps in the process of international economic integration. The accession to ASEAN can be considered as the first step for a deeper integration of Vietnam and integration at the regional level can be seen as the firs step. When ASEAN member countries determined to implement ASEAN regional integration initiative, the formation of ASEAN Economic Community (AEC) has marked an important step for further ASEAN integration process. In this article, the author focuses on assessing the effects of AEC on agricultural sector of Vietnam, an important economic sector to the development of Vietnam. Key words: Asean Economic Community, Vietnam, agricultural sector. 1. OVERVIEW OF ASEAN ECONOMIC COMMUNITY In October 2003, the leaders of ASEAN countries signed Declaration of ASEAN Harmony II (also known as the Bali Declaration II), setting out the goal of forming ASEAN Community by 2020 with three main pillars: (i) Security Community (ASC), (ii) Economic Community (AEC) and (iii) Socio-Cultural Community (ASCC). At the same time, the ASEAN leaders affirmed that ASEAN will continue to promote and expand relations with many other partners, for the common goal is peace, stability and mutually beneficial cooperation in the region. In the implementation and continuation of the Hanoi Action Plan (HPA), ASEAN introduced the Vientiane Action Program (VAP) for 2004– 2010 and the Action Plan is based on three pillars: political-security, economic and socio-cultural community, including the key component of implementing the ASEAN Integration Initiative (IAI) to help narrow the development gap among ASEAN members. For a prompt response to rapid and complex changes of the international and regional context as well as the basis of the achievements of ASEAN over the past 40 years, especially the results of the implementation of Vientiane Action Program (VAP), in January, 2007, ASEAN leaders determined to accelerate the process of intra–regional integration which is based on ASEAN Charter and agreed on accelerating ASEAN Community by 2015 (instead of 2020 as initial plan). In alignment, ASEAN urgently promoted the development of Master Plan (Blueprint) to build a Political–Security Community (APSC), Economic Community (AEC) and Socio-Cultural Community (ASCC) which set out the goals and deadlines for each specific activity. At ASEAN–13 Summit (in November 2007), leaders of ASEAN countries signed the ASEAN Charter to create a legal basis and an institutional framework for increasing regional linkages, in the short term to support the goal forming the ASEAN Community in 2015. The Charter officially took effect on December 15, 2008. At ASEAN–14 Summit (February 2009), Roadmap for ASEAN Community was rectified, together with other 3 Master Plans for the construction of the three pillars of the ASEAN Community 1 National Economics University. 379
2. and the Work Plan on IAI Phase 2 (2008–2015), this is an important document as an overall action program that sets out a framework and specific implementation steps for ASEAN to continue to accelerate efforts to realize the goal of building an ASEAN Community by 2015. The overall objective of the AEC is to transform ASEAN into a broader and more binding intergovernmental cooperation organization on the legal basis of the ASEAN Charter; but AEC is not a supranational or non-closed organization but it still expands cooperation with the outside. ASEAN Community will be based on 3 pillars of Political-Security Community, Economic Community and Socio-Cultural Community. ASEAN external relations as well as the goal of narrowing the development gap in ASEAN (especially: Initiative of Asean Integration) are incorporated into the content of each ASEAN Community pillar. The ASEAN Political-Security Community (APSC) aims to create a peaceful and secure environment for development in Southeast Asia by bringing ASEAN political-security cooperation to new heights with the participation and constructive contributions of external partners; is not intended to create a common defense block. The Action Plan to build the APSC (adopted at the ASEAN–10 Summit, November 2004) reaffirmed the Association's basic objectives and principles and outlined six areas (elements) of cooperation. Main includes: (i) Political cooperation; (ii) Develop and share standards of conduct; (iii) Conflict prevention; (iv) Conflict resolution; (v) Create peace after conflict; and (vi) Implementation mechanism. Attached is a list of 75 specific activities to build the APSC. However, the APSC Action Plan as well as the Vientiane Action Plan (VAP) do not specify specific objectives and implementation roadmaps for the activities of the 6 above components. The APSC Master Plan that ASEAN is drafting will focus on this aspect, concretizing political-security cooperation activities. The implementation of the VAP and action plan on APSC has achieved positive progress. Most completed and ongoing measures/activities are in the first 3 areas (Political cooperation; Formation and sharing of standards and Conflict Prevention), of which new progress is noteworthy. The intention is to complete the formulation of the ASEAN Charter, form the ASEAN Defense Ministers Meeting, sign the ASEAN Convention on Counter–Terrorism, However, for the other two areas (Conflict Settlement and Creating peace after the conflict) almost no activities have been implemented, mainly because countries are hesitant, because these are new and somewhat complex and sensitive fields. On the basis of the continuation of the APSC Action Plan and the Vientiane Action Plan (ASC component) and its determination to shorten ASEAN Community building, ASEAN has adopted the APSC Master Plan in the roadmap for building an ASEAN Community in 2015 adopted at the ASEAN–14 Summit (February 2009). The cooperation aspects in the Master Plan are basically based on those outlined in the ASC Action Plan, adding an external collaboration item and being rearranged, towards building a Political Community-Security has three main features: a rules-driven Community with common values and standards; A cohesive, peaceful and resilient Region with shared responsibility for comprehensive security; and a dynamic, open Area to the outside in an increasingly interconnected and interdependent world. 2. IMPACTS OF THE ASEAN ECONOMIC COMMUNITY ON VIETNAM AGRICULTURAL SECTOR Although ASEAN is ranked as the fourth largest export market region of Vietnam, right behind the 380
3. European Union (EU), United States and China, according to the General Department of Customs, in 2016 – the first year the AEC officially took effect – the export turnover of agricultural and fishery products to ASEAN countries only reached over US $1.6 billion, down 20.3% compared to 2015. The items with the strongest decline are all key products: Rubber (decreased by 40.7%), rice (decreased by 48.8%), pepper (decreased by 25.5%) For rice, by the end of 2016, three key markets in ASEAN experienced a significant decrease in output compared to 2015, they are: Philippines (declined by 65%), Malaysia (declined by 48.1%), Singapore (declined by 30.7%). The reason for the decline was partly due to the decrease in output, in addition to the sharp drop in prices of agricultural products such as coffee, rubber and cassava. Specifically, in 2016, the price of coffee decreased by 21.2%, rubber by 12.5%, and cassava by 14.4%. Particularly, the fall in the price of coffee has made the export turnover fall by nearly $59 million. In 2016, out of 100% of Vietnam's exports, only 9.8% went to ASEAN, much lower than the regional average of 24%. Similarly, the share of Vietnam's imports from ASEAN is about 13.7%, while the regional average is 22%. Chart 1. Total export – import turnover of agricultural products between Vietnam and ASEAN during 2015 – 2018 Unit: billion USD Xuất khẩu Nhập khẩu Tăng kim ngạch Source: General Department of Customs Exporting enterprises face many difficulties certain when joining the AEC market. The root cause is that agricultural production activities in recent years have mainly relied on exploitation of natural resources, not by effective renovation and regeneration. This increases pollution and weakens natural resources. Meanwhile, pollution of waste water and exhaust gas in industrial zones and craft villages is directly degrading the environment, endangering people's sustainable livelihoods and depleting aquatic resources. When the natural advantage fades, the output and quality of Vietnam's agricultural products will decrease, and competitiveness in the international market will also weaken. In addition, climate change has been taking place, greatly affecting Vietnam's agriculture. According to the climate change scenarios of Vietnam, by the end of the 21st century, there will be about 40% of the Mekong Delta, 11% of the Red River Delta and 3% of the area in other regions will be flooded. On the other hand, the number of storms, the devastation of each storm, and cold and hot weather were unusual. It is 381
4. forecasted that the Central Highlands and Central provinces will be more drought; the number of cold and damaging air waves will appear more in the northern and northern central provinces. One of the limitations of Vietnam's agriculture sector is that limitation of research capacity. Many fields such as biotechnology, lack highly qualified human resources, so it has been slowly deployed. The material and technical conditions of research and training institutions are outdated, asynchronous, leading to a reduction in training of scientific and technological human resources for agricultural and rural development, which have been lack of in-depth studies for creating new product. As technology has not been properly invested, there has not created a breakthrough for production activities. The level of social investment in agriculture is low, although some large firms have begun to turn to agriculture, but generally still very little, only a few percent; Foreign investment in agriculture is negligible. The construction of a high-tech agriculture is slow to change, has not created a breakthrough to increase added value and create a solid foundation for the transformation of the structure of agricultural production towards sustainable efficiency. Equipment and technology for post–harvest processing are outdated, the infrastructure for storage and processing is underdeveloped, small in scale, and high loss and loss rates. Vietnam has not really made good use of tariff preferences when exporting to the regional market recently. Furthermore, the understanding of domestic exporters of AEC is quite limited. Most of enterprises have general information about AEC commitment but very small portion have proper understanding of economic and trade commitments. And very small percentage of companies actively seek information about AEC. According to statistics of the Vietnam Chamber of Commerce and Industry (VCCI), there are only 31.8% of companies taking advantage of the preferential rates of the ASEAN Trade in Goods Agreement (ATIGA) in 2016. Joining the AEC has brought a great opportunity for ASEAN member states and enterprises to participate in the supply chain of agricultural products, and at the same time increasing the attraction of investment in the agricultural sector, especially high-tech agriculture, supporting industries in the agricultural sector-fields that are currently left open due to lack of resources. In addition, joining AEC is also a driving force for domestic institutional reform and business environment. These changes create an equal business environment on the one hand, and on the other hand require businesses to innovate themselves in order to improve their competitiveness. In 2017, exporting and importing agricultural products of Vietnam to the ASEAN market gained achievement. According to the General Department of Customs, the turnover of goods between Vietnam and ASEAN countries in 2017 reached 49.53 billion USD, up 19.6% compared to 2016 and accounting for 11.7% of the total export turnover – import of Vietnam. In which, the total export – import turnover of agricultural and aquatic products reached 2.12 billion USD, accounting for 4.5% of the total turnover of goods exchanged between Vietnam and ASEAN. Particularly, the total export turnover of agricultural and fishery products reached 1.71 billion USD, an increase of 0.06 billion USD compared to 2016, equivalent to 3.5%. Meanwhile, the total import turnover of agricultural and aquatic products increased by 0.01 billion USD. The three main agricultural and fishery export markets in the ASEAN region of Vietnam are Malaysia, the Philippines and Thailand with total turnover reaching 0.50 billion USD, respectively; $ 0.49 billion and $ 0.43 billion USD. In 2018, Vietnam's agricultural exports achieved important achievements. According to data from the General Statistics Office, the agriculture, forestry and fishery sector achieved the highest growth 382
5. rate in the period 2012–2018 at 3.76%. The total export turnover of agriculture, forestry and fishery products in 2018 reached 40.5 billion USD, up 9.6% compared to 2017. The export market shares have been maintained, the top 5 export markets of Vietnam for main agricultural, forestry and fishery products are China, the United States, Japan, ASEAN and South Korea. The top four importer of Vietnam agricultural and fishery products are the Philippines, Indonesia, Malaysia and Thailand. Among agricultural products, aquatic products make a large contribution to export turnover. According to the Vietnam Association of Seafood Exporters and Producers (VASEP), by the end of December 2018, the total value of Vietnam's pangasius exports to the ASEAN market reached USD 206.2 million (up 41.5%), compared to the same period in 2017. In which, exports to the three largest markets, Thailand, Singapore and the Philippines increased by 48.8%; 20.7% and 32.1% respectively, compared to 2017. In 2019, ASEAN remained at 4th position among the top importer of agri-forestry-fishery products, accounting for 9.8%. 3. SOLUTIONS TO PROMOTE THE ADVANTAGES OF JOINING AEC IN FUTURE To take advantage of the advantages and opportunities from joining the AEC, as well as enhance the necessary competitiveness for Vietnamese enterprises when participating more deeply in the international playing field, it is necessary to have synchronous solutions from the Government and relevant agencies, in which a number of solutions are focused on: Firstly, Vietnam government should have policies to support the improvement of infrastructure for the agricultural sector in the direction of clearly planning production areas, creating regional linkages to expand production and manufacturing scale. turn products towards semi-industrial and industrial, reduce the situation of fragmentation in production; focus on policies to encourage investment in science and technology and improve the quality of labor. Localities need to strengthen disease prevention and epidemiological control for agricultural production areas, at the same time pay attention to environmental sanitation in agricultural production areas, especially for with the livestock industry; build and strengthen the network of veterinary organizations from the province to the grassroots, well implement the provisions of the law, ensure safety for production. In addition, the agricultural sector also needs to strengthen training and transfer of science, technology and technology to the staff as well as agricultural production – business enterprises, especially export enterprises. Second, agricultural restructuring associated with growth model innovation should continue to be implemented in the direction of increasing added value, planning open-market agriculture and conserving agricultural land. Restructuring public investment and public services in agriculture should be promoted, creating a favorable, efficient and sustainable environment for the value chain of agricultural products based on comparative advantages of each region, each locality; focus on developing products with comparative advantages, competitiveness and consumption markets; diversify markets, both domestic and export; investment in human resource development in agriculture. Agricultural development planning must be implemented both in the medium and long term in order to have an effective strategy for conservation and use of agricultural resources. For the type of agricultural land, it is necessary to create conditions for land users to decide on the appropriate method of using each type of land according to market signals rather than a fixed mode of use for each type of land. Farmers can switch to growing flowers, ornamental plants, vegetables, and other more valuable crops according to market signals. 383
6. Third, proactive measures to respond to climate change should be implemented in a timely and effective manner. In the coming time, the State needs to focus on improving the capacity to manage and respond to weather-related risks and mitigate the impacts of climate change, as well as market risks; improve the forecasting and early warning system and link it to the agricultural consulting service; change farming methods and selection of varieties to suit land with different climatic changes; enhancing research and development capacities to be able to address the emerging challenges of climate change and sea level rise; promote the development of the agricultural insurance market, increase the farmers' ability to respond to risks, and ensure that agriculture has less negative impacts of climate change. Fourthly, the agricultural sector needs to strengthen production linkages, whereby horizontal linkage in the industry to create large enterprises, key enterprises, to attract satellites that are breeders, small farmers or small business, planning to become raw material areas for animal feed and cultivation; industrial clusters supporting services for husbandry and cultivation. Vertical integration promotes close production linkages. A large firm that manages the entire supply chain from input, production, processing, packaging, distribution and retail, at each link will decide to be self-sufficient or outsource based on its competitiveness. price competition. Such linkage helps to reduce intermediate costs, stabilize input and output, not only take advantage of the economic benefits of scale but also help reduce environmental pollution due to the concentrated waste being processed through the factory. or recycled for food, fertilizer, electricity generation. Fifth, businesses need to make efforts to improve their competitiveness, be proactive, creative, constantly innovate themselves, and build specific business strategies to penetrate the market. Accordingly, in order for Vietnamese goods and products to be exported to markets, enterprises need to have a business strategy, closely follow the consumption trends of the people of each ASEAN country, and link with reputable domestic distributors, capable This is an important job because each country's products, each business is in the value chain of the region or the global value chain. REFERENCES 1. Tu Thuy Anh and Dao Nguyen Thang (2008), Factors influencing Vietnam's trade concentration with ASEAN+3, Research Center Research Paper NC–05/2008 Economics and Policy, University of Economics, Hanoi National University. 2. Nguyen Anh Thu, Vu Thanh Huong, Vu Van Trung and Le Thi Thanh Xuan (2015), The Impact of the ASEAN Economic Community on Vietnam's Trade, VNU Journal of Science: Economics and Business, Volume 31, Number 4 (2015) 39–50. 3. Dinh Thi Thanh Binh, Nguyen Viet Duong, Hoang Manh Cuong (2011), Applying gravity model to analyze trade activities of Vietnam, available at: 4. Nguyen Duc Thanh and Nguyen Thi Thu Hang (2015), The impact of AEC on the Vietnamese economy: Macro and case aspects of the livestock industry, World Publishing House. 5. Huynh Thi Dieu Linh and Hoang Thanh Hien (2019), The impact of the Free Trade Agreement on Vietnam's import and export: applying the gravity model with fixed factors, Development Economics Journal, No. 267, September 2019. 384
7. 6. Nguyen Tien Dung (2011), The impact of the ASEAN–Korea free trade area on Vietnam's trade, Journal of Economics and Business, 27 (2011), 219–231. 7. WTO, Trade Agreements Portal 8. UN (2019), Launch of World's Largest Free–Trade Area Will Drive Continent's Growth, Transform Economies, Says Deputy Secretary–General, at Key African Union Event, available at: 9. NAFTA – North American Free Trade Agreement, available at: 10. OECD, Glossary of statistical terms, available at ? ID = 3127. 385