Poland’s accession to EU – experience and lessons learnt for vietnam joining AEC

POLAND’S ACCESSION TO EUROPEAN UNION IN 2004 – EXPERIENCES AND LESSONS LEARNED FOR VIETNAM JOINING AEC Dr Nguyen Hoang Tien, Economic Faculty of TDM University Abstract: The purpose of this paper is to point out the advantages of economic integration in case of Poland’s accession to EU in 2004 and how experiences and lessons learned by Poland could pave the way for Vietnam to achieve similar or even greater success in its way to being a part of ASEAN Economic Community Key words: EU, AEC, Poland, Vietnam, Accession Tóm tắt: Mục tiêu báo nhằm lợi có hội nhập kinh tế dựa trường hợp Ba Lan gia nhập liên minh EU năm 2004 kinh nghiệm học rút Ba Lan giúp cho Việt nam đạt thành tựu tương tự to lớn đường trở thành thành viên cộng đồng kinh tế ASEAN Từ khóa: EU, AEC, Ba Lan, Việt Nam, gia nhập Problem’s posing Integration and cooperation are unavoidable trends in the world economy in a bid to strengthen competitiveness and guarantee sustainable development for both state economies and single enterprises At the level of macroeconomy, countries are creating and joining different economic blocs in order to consolidate themselves and to counter-balance others Poland has joined the EU (European Union) since May 1st 2004 Vietnam will join AEC (ASEAN Economic Community) at the end of 2015 So, Vietnam could learn from experiences and lessons which Poland has been through in order to benefit the most from being a member of this organization Development Poland after EU 2004 accession After 1st May 2004 the EU was and still is the largest economic bloc in the world economy The EU enlargement was profitable for Polish companies and other operating in Polish market The entrance of Poland to the EU has eased the trade relations between EU member-states and international trade For example, services and goods produced in Poland were available in the EU market without tariff, chances of getting capital from business development supporting funds are widely opened and tariff for goods from outside EU is at the same rate for each EU member-states Benefits in the scale of national economy are: chance for faster GDP growth in comparison to the predicted level due to better economic cooperation between states of the enlarged EU, chance for taking down unemployment rate several percent points lower as a direct consequence of extra GDP growth in the perspective of next years Second reason being accounted for that is the economic emigration of Poles trying to find their dream jobs abroad or those with better qualification seeking better jobs leaving many vacancies in their homeland Chances are also available for rural areas’ improvement and agriculture’s modernization along with levelling the differences in regional development These strategic aspects along with tedious process of adaptation lasting more than one decade to reform country towards market economy as well as towards EU membership requirements have made Polish economy stronger, more resilient and more competitive than ever before Besides given development perspectives for Poland as well as for particular enterprise operating in Polish market Poland and Poles have to create themselves all necessary conditions to maximize benefits associated First of all, tax of income should be cut off, because it makes negative influence on average salary and it limits, to some extent, the ability of enterprises to hire more people Secondly, bureaucratic complexity of administrative procedures applied to enterprises, otherwise called “red tape”, should be diminished, for example in areas such as: firm’s establishment, business activity registration and starting, dealing with tax issues, and after all, it is better to create possibilities to arrange such stuffs through electronic means for all citizens Thirdly, a healthy, competitive environment with fair and clear rules, especially for small and medium enterprises, is necessary as that sector of the economy is a real driving force of the economic development In Poland, small and medium enterprises usually recruit more than half of domestic labor force, in EU this indicator is about 2/3 Fourthly, public finance reform should be undertaken through, for example, rational public expenditure policy Fifthly, government should create conditions and be ready ahead of schedule to accept single European currency, the Euro According to IMF (International Monetary Fund), in order to enter ECU (European Currency Union) or otherwise called Eurozone, Poland should accelerate the process of public finance repairment, in details, the level of public debt and budget deficit should be cut off Entrance to Eurozone without appropriate fiscal policy may lead to a catastrophe, such as inability to use fiscal instruments to stabilize the economy in extreme situations In order to secure against such circumstances, the level of public deficit should be no more than 1-2% GDP and public debt should be no more than 40-50% GDP These criteria are even more strict than criteria applied for Eurozone members with the limits of 3% GDP for public deficit and 60% GDP for public debt The differences between these values constitute buffers securing threats as well as are the requisites to gain all benefits due to acceptance single European currency later on Those benefits are:  Dozens percent points of trade exchange growth with current countries from Euroland interpreted as 1% extra growth in GDP anually during 10 consecutive years after joining the Eurozone  Currency risks in all business activities in Euroland markets are reduced to minimum and interest rate risk is the same, much lower level On the second hand, threats and challenges due to the Euro acceptance are as following:  Fluctuation of input and output of domestic and foreign investments may cause violent shock in the economy  Increasing credit actions makes demand surge leading to the appearance of inflationary menace Vietnam’s economy so far Despite three decades have passed through since the “doi moi” (renewal) economic policy was being introduced, despite many positive changes taking place in the economy, and one time called "Asia's Next Dragon", Vietnam's position in global rankings has not improved greatly After the mentioned period of transformation, Vietnam had made many positive, remarkable changes, in terms of economic growth, including high growth for several consecutive years, pulling millions of people out of poverty, many improvements have been seen in the field of economic restructuring, integration and opening up to global world Vietnam had joint the group of middle income countries with GDP per capita in 2013, stood at $1,910, an increase of nearly ten-fold compared with 1986 the moment when “doi moi” economic policy started, and it has reached now the level above $2,200 per capita Vietnam is a signatory to many FTA (Free Trade Agreements) of large scale and has attracted increasing amounts of foreign direct investment (FDI) The FDI sector has grown strongly and contributes for nearly 70 per cent of Viet Nam's exports The downsides is that Vietnam is still yet to escape from its low level of development expressed in outdated technology, backward thinking widely spread in market economic institutions, and the country's heavy dependence on the Chinese economy Here are several challenges as well as barriers hampering Vietnam’s economic development:  Low quality of economic growth,  Slow economic restructuring causing low level of competitiveness,  Unsustainable private sector’s development,  Low labor productivity (and productivity of other resources) and its growth rate Those factors must certainly lead to widen the gap between Vietnam and other regional countries Vietnam’s economic growth was still mainly based on the exploitation of natural resources, cheap labour cost and foreign investment attraction In terms of technology development and industrialization, Vietnam still depends largely on foreign capital and technology while domestic enterprises barely invested in innovative technologies For example, their expense on technology renovation was estimated at about 0.2 per cent to 0.3 per cent of their revenues, meanwhile Indian enterprises spent about per cent for technology renovation and South Korea 10 per cent More importantly, the attitude of Vietnamese enterprises is causing much concerns, the entrepreneurs are quite satisfied with status quo and they see no need to change it Vietnam's economy, in reality, was not only lagging behind other countries in the region but also behind its own development targets In terms of agriculture development, Vietnam has to cope with backwardness in all aspects Commonly known that it is dangerous to eat unsafe farm products made in Vietnam If Vietnam could not address this issue properly, domestic agricultural economy would lose ground with traditional advantages fading away and competitiveness decreasing while more Vietnamese will turn away from such products as they have better choice offered by countries in the region and in the world as a result of strengthening global and regional economic integration Experiences and lessons learned for Vietnam joining AEC Vietnam now is in the same phase of development, where Poland has been through twelve years ago (2004) Given the facts that Poland has joined a group of wealthy European countries with strong and resilient economies and Vietnam will join a group of very diverse countries in terms of size, population, cultural diversity, geographical positions, and most importantly with different level of economic developmment Looking from the perspective of development of Poland since then, here are some advices which Vietnam might benefit from:  In the aspect of human resource development – in order to progress toward knowledge based economy and to advance further toward higher level of technology innovation in order to increase labor productivity and to boost the competitiveness of the economy, Vietnam simply need a well qualified human resource There are two ways to deal with this issue In short term perspective, Vietnam should mobilize and attract scholars, scientist, engineers and knowledge workers – the Vietnamese overseas, to return to the country to serve its development It is urgent for Vietnam, not Poland, because there is almost no gap between level of technology advancement and no disparity between Polish and European and the world’s education system, in some areas Poland even exceeds other European countries such as Greece, Portugal and Spain In the long run, Vietnam should open up their education system to the world (in other words, let the world participate in Vietnamese education system and education market) and bravely invest more in Research & Development, treat is as of highest priority, internationalize in terms of exchange and transfer technology, putting more commercial accent on this process  In the aspect of legal and administrative systems – both Poland and Vietnam have belonged in the past to the socialist bloc with centrally planned economic system and there are still many legacies remained in terms of legal and administrative systems and procedures leading to many mismanagement in the public secotrs and in the government itself (both central and local level) A total and profound restructuring should be taken place to cut out read tape to make administrative apparatus more efficient and more friendly for people Poland did it successfully while preparing to EU accession during more than one decade to fit into European legal and administrative systems as EU’s requirements in this area are very strict, that’s why the process of joining EU took so much time and there is still a long for Poland way to go (joining Eurozone) This is not the case when it comes to ASEAN, the divergence (in terms of incompatibity) in legal systems of member-states will badly impact the ongoing process of economic integration of so-called ASEAN Economic Community  Support and create healthy, competitive business environment for small and medium enterprises to develop and compete with their counterparts from other countries in the region This is a priority of Poland and Vietnam in the way to open their market to enterprises of neighboring countries as Poland, then, was nearly the less developed country in the EU, and Vietnam, now, is also nearly the less developed country in ASEAN Given this similarity, the need to protect some underdeveloped sectors and groups of vulnerable enterprises (especially SMEs sector) is urgent and the most justified Vietnamese government should more as Vietnamese SMEs, unlike Polish SMEs, could not find any help, support, financial or nonfinancial, from, for instance, ASEAN restructuring funds vreated and designated to level up differences and disparities in terms of stage of development between enterprises of member-states  Refine public finance and fiscal policy as well as the whole financial system – the ultimate goal of Poland in European Union is to join the Eurozone, which does not exist in the ASEAN as single currency is still a dream for all member-states So, Poland should keep its public finance in good shape and sound fiscal policy not only for one moment in time, but for many consecutive years, till the moment of Eurozone accession Vietnam does not have this supergoal, but healthy public finance and sound fiscal policy are important to stabilize the economy and to keep the economic growth sustainable Conclusion Poland and its integration track with EU so far could serve as role model for Vietnam on how to integrate itself into a present economic bloc (community), how to adapt to it and how make the most benefits of it, especially on how to raise the position of a country that was lagging behind its neighbors (such as Germany, Austria, North Europe), undergoing at the same time a process of transformation from a socialist, backward state into a modern one, with strong voice and influence, in the global and European economic, social and political scence References 1) www.vietnamnews.vn 2) Nguyen Hoang Tien (2004): EU enlargement – opportunities and threats for Poland, Poles and businesses operating in Polish market “Vietnamese in Europe” No 3) Nguyen Hoang Tien (2004): Strategy of E-government for the EU of 25 countries “Vietnamese in Europe” No Nguyen Hoang Tien, Dr, Economic Faculty of TDM University, vietnameu@gmail.com 01208741048 ... integration Experiences and lessons learned for Vietnam joining AEC Vietnam now is in the same phase of development, where Poland has been through twelve years ago (2004) Given the facts that Poland... fit into European legal and administrative systems as EU? ??s requirements in this area are very strict, that’s why the process of joining EU took so much time and there is still a long for Poland... Conclusion Poland and its integration track with EU so far could serve as role model for Vietnam on how to integrate itself into a present economic bloc (community), how to adapt to it and how make