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.