A number of Vietnamese businesses are struggling to compete against imported products from ASEAN countries and China under the regional free trade agreement, which an economist said is necessary to challenge their competitiveness.

While the ASEAN + 1 (Southeast Asian countries and China) will only take effect in 2015, imported products have already penetrated Vietnam en masse thanks to gradual cuts in import taxes.

Local manufacturers are thus concerned that the tough spot in which Vietnamese businesses find themselves will be exacerbated if no trade remedies are applied until the agreement becomes officially applicable.

However, Dr. Vo Tri Thanh, deputy director of the Central Institute for Economic Management, said local businesses should directly address the issue.

“I believe all of the manufacturers have acknowledged that fierce competition is inevitable when Vietnam integrates with the world,” he told Tuoi Tre.

“We should look at the problem head-on to analyze how good our real competitiveness is, and how long it will take to strengthen it for the long battle that will come in 2015,” he said.

Thanh said the government can set up technical barriers or take remedial actions to protect its domestic manufacturers, as per international law.

“But we should head for a further objective, which is to reduce the negative impacts on society and the economy,” he pressed.

Businesses thus have to increase their competitiveness on their own, for the consumers’ sake, he added.

“Consumers need to have products of adequate quality and reasonable prices,” he elaborated.

Foreign competitors

With import duties gradually cut under the FTA ASEAN+1 roadmap, Chinese fabric has flooded local markets. Chinese fabric currently accounts for 43.24 percent of the total fabric import turnovers.

Similarly, Vietnam imported $58 million worth of ceramic tiles in 2012, $47 million of which were Chinese products, according to the Vietnam Building Ceramic Association.

Meanwhile, Vietnamese steel makers are suffering poor domestic demand and several anti-dumping lawsuits in Indonesia, Thailand, and Brazil, and they are also under pressure from cheap Chinese imported products.

Chinese steel products accounted for nearly $2.5 billion out of the $7.5 billion worth of import turnover in 2012, according to the Vietnam Steel Association.

These products were taxed 15 to 20 percent, but local importers still enjoyed profits, VSA Deputy Chairman Nguyen Tien Nghi said.

Consequently, when the import taxes are cut to zero after the FTA ASEAN+1 takes effect in 2015, the import volumes of steel and commodities will continue to soar, industry insiders predicted.