How ASEAN's newest member is coping

How ASEAN's newest member is coping

Not all has been smooth sailing for Vietnam in its first year in ASEAN. Pham Cao Phong explains why.

Vietnam became the seventh member of ASEAN in July 1995. This marked a new development in the country's integration within the region. It was the first time in the 50 years of its existence that the Socialist Republic of Vietnam enjoyed good relations with all South-east Asian countries. Furthermore, it became a member of a regional organization and comprehensively participated in its activities politically, economically and culturally.

In order to play a meaningful role in the regional grouping, Vietnam established an ASEAN Department in the Ministry of Foreign Affairs and a National ASEAN Committee. Headed by a Deputy Prime Minister, the committee -- a unique institution among ASEAN countries -- has the responsibility of co-ordinating the activities of all national institutions in their participation in ASEAN and helping other institutions enrich their knowledge of the organization.

With this mechanism, Vietnam has not only gradually integrated into the association but has also actively participated in ASEAN activities such as the fifth ASEAN Summit and the first Asia- Europe Meeting.

The most important task Vietnam successfully undertook in its first year in ASEAN was to work out an import tax reduction program in order to meet its responsibilities as an AFTA member. On Dec. 10 last year, the country said it would reduce import duties on 1,622 products in the 1996-2006 period so as to adhere to the CEPT agreement.

The program has had no negative effects on tax collection as Vietnam has made adjustments to its tax collection policy. Besides import duties, Vietnam now also levies indirect taxes which have helped to increase the volume of tax collected.

Moreover, with lower import duties on certain products, mainly consumer goods, the smuggling of such products has been reduced, and the government has been able to collect a number of taxes which it had not managed to in the past.

Along with the increase in export turnover, the above- mentioned measures will ensure the usual revenue from tax collection. It is estimated that in the first six months of this year, the import tax collection from ASEAN countries was around US$5 million, the same figure as last year's.

The fact that 50 percent of imports from ASEAN countries already enjoy import duties of or below 5 percent indicates that in a few years' time, the reduction of import duties on more products will have little or no impact on industrialization in Vietnam. Vietnam will reduce import duties on products which may affect industrialization in its end stage. Furthermore, the flow of ASEAN products can be viewed positively as a means of helping Vietnam counter the dumping of Chinese goods, creating a balanced market and enabling some industries to develop.

Vietnam is enjoying the benefits of its integration into ASEAN. This at a time when there is a worldwide trend towards regionalism and globalism. Vietnam has been successfully pursuing an open-door policy externally and carrying out market-oriented economic reforms internally. It has diplomatic relations with all countries of the world and is gradually entering the world economic system. Trade with other ASEAN countries is 32.4 percent of its total trade (1995 figure).

Moreover, relations between Vietnam and other ASEAN countries have greatly improved since 1992 when Vietnam and the ASEAN countries exchanged a number of visits by high ranking officials.

Nonetheless, joining ASEAN is not without problems. Vietnam's understanding of ASEAN as an organization is still poor. As Vietnam lacks the necessary information regarding ASEAN's co-operative programs, it cannot participate fully in ASEAN activities. More importantly, despite announcing its commitment to the Treaty of Amity and Cooperation, signed in Bali in 1976, Hanoi is not so certain whether it accepts the rules of the game, all the written and unwritten norms of ASEAN.

Secondly, the wide gap in economic development between Vietnam and most of the other ASEAN countries presents some difficulties for Vietnam. Even though it is on the way to being a market- oriented economy, the effects of a subsidized economy are still deep and cannot be erased overnight. Red tape is still rampant. Besides, Vietnam's low GDP per capita, only one-third of Indonesia's and one-seventieth of Singapore's, prevents Vietnam from actively and positively participating in all ASEAN economic co-operation programs.

Thirdly, there is a lack of qualified people within the Vietnamese bureaucracy who have a good knowledge of ASEAN and can speak English fluently. Most Vietnamese were trained Soviet- style. The market-oriented economy requires them to be retrained and equipped with a knowledge of marketing, auditing, world politics, and even English -- the working language of ASEAN.

Vietnam's quick integration into ASEAN is generally appreciated. However, it will have to make great efforts to integrate more fully in the coming years if it is to benefit much more from its membership.

Pham Cao Phong is a Research Fellow at the Institute of International Relations, Hanoi, Vietnam.