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More intra-ASEAN tariff cuts create opportunities for Vietnam’s exporters
Nguyen Thi Bich, Director of the Finance Ministry’s International Cooperation Department, believes Vietnam is well prepared for the ASEAN group’s move toward zero internal tariffs.
The CEPT/AFTA (Common Effective Preferential Tariff for ASEAN Free Trade Area) scheme goes into full effect this year for Vietnam. Under the agreement, the original six members (Malaysia, Singapore, Brunei, Thailand, Philippines and Indonesia) have reduced the tariffs they levy on other ASEAN members’ goods to zero. Later-joining members (Vietnam, Laos, Myanmar and Cambodia) are given a few extra years to fully implement the reduced tariff rates.
Talking with a reporter from Dau tu, the Ministry of Planning and Investment’s newspaper, Bich said that the tariff cuts Vietnam must make this year under the CEPT/AFTA framework will not have a big impact on the production and business or on national budget receipts.
Dau tu: How has the tariff cutting process been going?
International Department Director Nguyen Thi Bich: Decision No.36 sets up a schedule for establishing preferential import tariffs for our ASEAN partners. In 2010, Vietnam will reduce the tariff to five percent or less on ASEAN goods in 99 tariff categories. Fifty-seven categories will go to zero.
This won’t be a big shock to our economy because since 2006, Vietnam has reduced our tariff on nearly all import categories. Most are already at five percent or below. We are only excluding certain ‘sensitive’ types of products, such as high cylinder capacity motorbikes and tobacco.
Dau tu: In other words, our 2010 round of tariff cuts to implement CEPT/AFTA will hardly be felt?
Nguyen Thi Bich: True. As soon as we joined ASEAN in 1995, Vietnam committed to begin cutting import tariffs on the goods sourced from ASEAN countries. We’re ahead of schedule. The Government, ministries, independent agencies and businesses have actively prepared for a situation in which there will be no boundary in taxation between domestically made products and the products made in ASEAN countries.
Dau tu: Tariff revenues will fall . . . .
Bich: Not so much. Any losses on intra-ASEAN tariff reduction will be offset by increases in tariff revenue on other trade. Our tariff receipts from intra-ASEAN trade have only been about 30 percent of total receipts.
Except for 2009, Vietnam’s trade has expanded by ten percent or more each year, and our tariff receipts have therefore risen as well, and also increases in collections of value added tax and luxury tax imposed on imports.
Dau tu: Will Vietnamese-made products find it difficult to compete with untaxed imports from other ASEAN countries?
Bich: Most of the ASEAN economies are at a level similar to ours. Singapore is the exception. Therefore, in our domestic market, the products made in our ASEAN neighbors ought not to be formidable rivals.
Dau tu: There seems to be an impact on foreign direct investment. After Vietnam cut the import tariffs on electronic goods, Sony quit assembling products in Vietnam. Some other foreign invested enterprises have left as well.
Bich: If you think that the tariff cuts will make many multinationals leave Vietnam for other countries, then how can you explain why a lot of other foreign groups, especially Japanese firms, have decided to expand business or make new investments in Vietnam?
I believe that the investors decide to relocate their investment and production bases as part of their global development strategies, not because we cut import tariffs.
Dau tu: This year the six original ASEAN countries must cut all the import tariffs on ASEAN sourced products to zero. Will this be a golden opportunity for Vietnam to boost exports to the countries?
Bich: In principle, this is a good opportunity for Vietnam to export products to ASEAN markets. However, our firms still have to do a lot of things to penetrate those markets.
First of all, our firms need to learn to understand the taste, manners and customs and the consumption habits of consumers in every country. Second, they need to learn to deal with technical barriers. Though our ASEAN partners will have zero tariffs, they will rely on technical requirements to protect their local production. Carefull market research is essential.
vietnamnet, Dau tu
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