- TABLE OF CONTENTS -  

  SECTION P A G E  

Table of Contents 1

  L i s t o f T a b l e s  2

List of Figure 2

1.  Introduction  3

2.  Vietnam s position in ASEAN  4

3.  Vietnam s Trade Liberalisation Schedule under CEPT  5

4.  AFTA s impact on ASEAN Economies  9

5.  AFTA s impact on Vietnam  10

5.1  Impacts of AFTA on Vietnam s Trade  11

5.1.1  Direction of Trade  11

5.1.2  The Composition of Trade: ASEAN vs Non-ASEAN  14

5.2  AFTA s impact on Vietnams Trade  16

6.  Effects of AFTA on the Foreign Direct Investment (FDI) in Vietnam  21

7.  Impact on government revenues  29

8.  Conclusion  30

  i ) A P P E N D I C E S 3  3

  i i ) R E F E R E N C E S 3  4

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  - LIST OF TABLES -  

  P A G E  

Table 1  Key Economic Indicators of ASEAN 10 countries  5

Table 2  CEPT Road Map: Average tariff rate 1996 to 2006  5

Table 3  Progress of Vietnam s CEPT in 1996-1999  7

Table 4  Newer ASEAN members 2000 CEPT packages  8

Table 5  Vietnam s Imports and Exports from and to ASEAN 1994-1996  14

Table 6  Vietnam ASEAN trading relations (million USD)  17

Table 7  Flow of foreign direct investment in Vietnam 1988-2001  23

Table 8  FDI commitments by source province of destination and sector 2001  25

Table 9  FDI flow in Asian countries (US million)  26

  - LIST OF FIGURE -  

  Figure 1: The Sources of Vietnam s Imports in 1996  12

  Figure 2: The Destination of Vietnam s Exports in 1996  13

  Figure 3: Vietnam s Imports ASEAN vs Non-ASEAN  15

  Figure 4: Vietnam s Exports ASEAN vs non-ASEAN  15

  Figure 5 Foreign Direct Investment in Vietnam  24

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1. Introduction This project analyses and evaluates the question, in how far the creation of the Asian Free Trade Area (AFTA) brought economic benefits to the ASEAN country Vietnam. To evaluate this question the impacts of AFTA on Vietnam’s trade and their foreign direct investment are evaluated and in a further step the question ananlysed in how far

AFTA can affect the government income revenues of Vietnam.

For the analysis of AFTA’s impact on Vietnams’ trade, the trade structure of Vietnam will be analysed.

In general it can be said that for Vietnam the accession to AFTA is a very important step in their transition process to a more market economy. Furthermore it is a major step in Vietnams’ integration in the world economy.

Especially the access of Vietnamese firms to a huge market such as ASEAN seems to be very advantageous.

In the case of foreign direct investments, the question is if AFTA is seen by foreign firms and investors as a positive factor which would lead to investments in Vietnam or if it does not change the situation or if it has even a negative impact on the FDI due to the reason that the industries are not protected anymore by the tariffs and quotas.

A further question to analyse is the origin of the FDI, this means if the major part

comes from the ASEAN countries or if it has also any effects on other countries.

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2. Vietnam’s position in ASEAN According to Trung (2002) ASEAN is a diverse group with a combined GDP of $4,589 billion and about 502.4 million people.

After Indonesia, Vietnam is with its 77 million people, the second most populous

ASEAN country member (Fukase and Martin 2001).

However, Trung (2002) points out that Vietnam accounts with its low-income level per capita, its shares of GDP and trade only for 5.9 percent and 3.4 percent in ASEAN respectively.

Nevertheless according to Trung (2002) Vietnam was one of the fastest growing economies during the period 1990 to 1998, registering an annual average growth rate of 8.6 percent.

In 1998, imports plus exports relative to GDP reached 74.82 percent of GDP, which is a relatively high number for a country of the size of Vietnam. (Trung 2002)

Table 1 presents some key economic indicators for the ASEAN countries.

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Table 1: Key Economic Indicators of ASEAN 10 countries

Source: Centre for ASEAN Studies, Trung (2002)

3. Vietnam’s Trade Liberalisation Schedule under CEPT

According to the Common Effective Preferential Tariff (CEPT), ASEAN members give each other preferential tariff rates of 0-5 percent. (Loc 2001) Trung (2002) points out that Vietnam as a late joining member (see Appendix 1), has been granted slightly different treatment under the CEPT agreement than the other members. Examples are for example that Vietnam is allowed to phase down tariffs on

ASEAN imports over a longer period, and is only required to eliminate quantitative

restrictions on receipt of concessions applicable to each product. Table 2 summarizes the planned tariff reduction for the classes of goods for the years 1996 to 2006.

Table 2: CEPT Road Map: Average tariff rate 1996 to 2006

Source: Centre for ASEAN Studies, Trung (2002)

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According to Trung (2002) Vietnam’s General Exclusion List appears not to fulfil the principle of CEPT, which specified that such a list should only have products that comply with Article XX of the GATT. This states that measures are allowed to protect national security, public morals, human, animal or plant life and health, and the protection of articles of artistic, historic and archaeological value. Vietnam’s List, however, includes items such as: fuels, vehicles with less than 16 seats, scraps and used consumer goods, where they have strong protection and revenue objectives (MOT 2000).

Table 3 shows the change of Vietnams’ tariffs under the CEPT agreement from 1996- 1999.

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Table 3 Progress of Vietnam’s CEPT in 1996-1999

Source: Centre for ASEAN Studies, Trung (2002)

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