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REPORT IMPORT EXPORT BUSINESS MANAGEMENT AEC AND VIETNAM’S SUGAR INDUSTRY AEC is one of the three pillars of the ASEAN Community which was established in December 2015 – the other two pillars are: ASEAN PoliticalSecurity Community (APSC), the ASEAN SocioCultural Community (ASCC). 2. Target AEC aims at increasing economic cooperation and development among ASEAN countries, specifically: • A single market and production base • A highly competitive economic region • A region of equitable economic development • A region fully integrated into the global economy. 3. Nature: • The AEC is a regional economic integration process, not an Agreement or an Agreement with substantive binding commitments. Participating in the goals of the AEC are a series of Agreements, Agreements, Programs, Initiatives, Declarations... among ASEAN countries related to these goals. • The AEC does not have a strict organizational structure and its charters and regulations are not highly binding and clear. Therefore, the AEC cannot actually be considered as a cohesive economic community like the European Community (EC).
DA NANG UNIVERSITY OF ECONOMICS INTERNATIONAL BUSINESS FALCULTY REPORT IMPORT-EXPORT BUSINESS MANAGEMENT AEC AND VIETNAM’S SUGAR INDUSTRY Lecturer: Dương Hạnh Tiên Class: 46K01.1 Group 1: Nguyễn Vũ Bảo Hân Nguyễn Mai Diễm Quỳnh Tô Thị Yến Nga Nguyễn Thị Kim Tuyết Lê Thị Hồng Vân Lưu Thị Yến Da Nang, 9th September, 2022 Contents I Overview of AEC .3 Brief introduction Target .3 Major agreements The importance of ATIGA II Overview of Vietnam Sugar Industry .7 Brief introduction Vietnam imports of sugars from 2012 to 2021 Major market of import .8 Opportunities and Challenges 12 Recommendations .15 I Overview of AEC Brief introduction AEC is one of the three pillars of the ASEAN Community which was established in December 2015 – the other two pillars are: ASEAN Political-Security Community (APSC), the ASEAN Socio-Cultural Community (ASCC) Target AEC aims at increasing economic cooperation and development among ASEAN countries, specifically: A single market and production base A highly competitive economic region A region of equitable economic development A region fully integrated into the global economy Nature: The AEC is a regional economic integration process, not an Agreement or an Agreement with substantive binding commitments Participating in the goals of the AEC are a series of Agreements, Agreements, Programs, Initiatives, Declarations among ASEAN countries related to these goals The AEC does not have a strict organizational structure and its charters and regulations are not highly binding and clear Therefore, the AEC cannot actually be considered as a cohesive economic community like the European Community (EC) The AEC is essentially the goal of the ASEAN country through the gradual realization of the above four goals (of which only goal is relatively comprehensively and fully implemented through agreements and agreements signed commitments, the remaining goals are only the formulation of roadmaps and frameworks, the implementation of a number of regional programs and initiatives) Major agreements ASEAN has signed several agreements to support AEC realization: The building blocks are the ASEAN Trade in Goods Agreement (ATIGA), which replaces the Common Effective Preferential Tariff (CEPT) Scheme; The ASEAN Framework Agreement on Services (AFAS); The ASEAN Comprehensive Investment Agreement (ACIA), which replaces the ASEAN Investment Agreement (AIA) In support of the above are facilitation measures which include the ASEAN Agreement on Movement of Natural Persons (AAMNP) and Mutual Recognition Arrangements on Services (MRAs) These agreements aim to: Facilitate the movement of goods, services, investments, capital, and skills Increase trade (goods and services) and investment among Member States Promote and expand regional production sharing and network Promote higher level of transparency and predictability The importance of ATIGA The ATIGA Agreement is a free trade agreement (FTA) signed by 10 ASEAN countries at the 14th ASEAN Summit in February 2009 and entered into force on May 17, 2010 The forerunner of the Agreement This agreement is the Agreement on Commonly Effective Preferential Tariffs (CEPT) signed in 1992 with the goal of eliminating tariffs and building a legal framework to minimize trade barriers and create favorable conditions for goods free movement in the ASEAN region ASEAN Trade in Goods Agreement (ATIGA) aims to achieve free flow of goods in the region resulting in less trade barriers and deeper economic linkages among Member States, lower business costs, increased trade, and a larger market and economies of scale for businesses ATIGA consolidates and streamlines all the provisions in the CEPT-AFTA and formalizes several ministerial decisions As a result, the ATIGA has become a single legal instrument for government officials who implement and enforce the Agreement, as well as for the private sectors who are the beneficiaries ATIGA comprises several new elements to ensure the realization of free flow of goods within ASEAN, including the following: tariff liberalization, removal of non-tariff barriers, rules of origin, trade facilitation, customs, standards and conformance, and sanitary and phytosanitary measures Roadmap for duty reduction1 a Reduction or Elimination of Import Duties: According to the Agreement, the countries of Brunei, Indonesia, Malaysia, Thailand, the Philippines, and Singapore (ASEAN-6) must be eliminated tariffs on all goods imported from other ASEAN countries by 2010; Cambodia, Laos, Myanmar and Vietnam (CLMV) must fulfill this obligation by 2015 with flexibility until 2018 for no more than 7% of tariff lines, except for goods has the following commitment roadmap: Roadmap D (unprocessed sensitive agricultural products): reduce tariffs to 05% from 2010 for ASEAN-6 countries; 2010 (for sugar) and 2013 (for other commodities) for Vietnam; 2015 for Laos and Myanmar; and 2017 for Cambodia Roadmap E (unprocessed highly sensitive agricultural products): reduce tariffs on rice to 25% by 2010 for Malaysia; with rice down to 25% and sugar to 5-10% in 2015 for Indonesia; with rice down to 35% by 2015 for the Philippines Roadmap F: reduction according to the schedule for out-of-quota tax rates of items allowed to apply tariff quotas of Thailand and Vietnam Thailand applies tariff quotas for the following commodities: potato, coffee, tea, pepper, corn, rice, soybean and soybean oil, copra, onion seeds, coconut APPENDIX I: Introduction to ATIGA and information related to ATIGA agreement upgrade https://trungtamwto.vn/file/21597/phu-luc-i.pdf oil, palm oil, sugar, leaves tobacco, dairy drinks, raw silk Vietnam applies customs clearance for items: salt, raw tobacco, sugar, poultry eggs Roadmap G (petroleum products of Vietnam and Cambodia): eliminating tariffs by 2024 with Vietnam and 2025 with Cambodia Route H: includes items that are not subject to tax cuts, applicable to all countries With Vietnam, we are maintaining about 1.8% of tariff lines, including 111 items on the Exclusion List that are highly sensitive to national defense, security, society, etc and 55 sensitive agricultural products with tax rates above 0% So far, ASEAN countries have eliminated an average of 98.64% of import tax lines, of which Vietnam has eliminated about 98% b Elimination of Tariff Rate Quotas: Unless otherwise provided in this Agreement, each Member State undertakes not to introduce Tariff Rate Quotas (TRQs) on the importation of any goods originating in other Member States or on the exportation of any goods destined for the territory of the other Member States Viet Nam and Thailand shall eliminate the existing TRQs as follows: Thailand shall eliminate in three (3) tranches by January 2008, 2009 and 2010; Viet Nam shall eliminate in three (3) tranches by January 2013, 2014 and 2015, with flexibility up to 2018 c Items are prioritized for tax deductions Rules of origin: The ATIGA Agreement stipulates that goods need to reach ASEAN origin to enjoy preferential tariffs under the Agreement Specifically, they need to meet one of the following criteria: i) The goods are of pure origin or are produced entirely; ministries in the ASEAN region; ii) Goods that meet the item-specific rule requirements of the ATIGA Agreement: Goods must have at least 40% internal material content (RVC), and/or Goods undergo a change in tariff classification at four-digit level of the Harmonized System, and/or Goods must go through a certain production process iii) Goods meet the requirements of cumulative rules of origin (according to the principle of partial accumulation) of the Agreement In the case of goods with an RVC of only 20% - 39%, this actual value may be added to the next stage of production to determine the origin of the goods; If the RVC is less than 20%, it is not cumulative In addition, to prove that the good has originated under ATIGA, the exporter must present a certificate of origin under the ATIGA Agreement (C/O form D) or, if certain specific conditions are met, can be self-certified of origin through the ASEAN SelfCertification of Origin mechanism II Overview of Vietnam’s Sugar Industry Brief introduction The sugar industry is one of the oldest agricultural processing industries in the world with more than 100 countries and territories participating in the value chain Global sugar production is about 174.8 million tons in 2018 and reaches an average growth of about 2% a year (VSSA, 2018) Sugar can be produced from two main materials: sugar (75-80% of global supply) and sugar beets (25-30% of global supply) The sugar industry has been developing since the 1990s in Vietnam In the ASEAN region, Vietnam is close to the world's second-largest sugar exporter, Thailand, and copes with 300-500 thousand tons of smuggled sugar from the southwest border with cheaper production costs Vietnam is also located near the world's largest sugar importers such as Indonesia (about 7% of global import turnover) and China (about 5.3% of global import turnover) Vietnam also participates in different trade agreements which brings more export markets for the sugar industry as well as opportunities to improve product quality and diversify products Vietnam imports of sugars from 2012 to 2021 From 2012 to 2019, sugar import value fluctuated around USD 300,000 million In 2021, Vietnam spent a record amount of around USD 917,846 million to import sugar, higher than in 2020 in terms of sugar import value USD 911,317 million) Remarkably, sugar imports from Thailand decreased, but sugar imports from five ASEAN countries (Cambodia, Indonesia, Laos, Malaysia, Myanmar) increased fourfold compared to 2020 Figure 1: Vietnam imports of sugars from 2012 to 2021 Source: Researcher's calculation based on ITC trade map Major sugar import markets of Vietnam Figure 2: Supplying markets for sugar imported by Vietnam from 2019 to 2021 https://www.trademap.org/Product_SelCountry_TS.aspx?nvpm=1%7c704%7c%7c%7c%7c17%7c%7c %7c4%7c1%7c1%7c1%7c2%7c1%7c1%7c1%7c1%7c1 Source: Researcher's calculation based on ITC trade map In the last years from 2019 to 2021, ASEAN is the main market of the Vietnam’s sugar industry Specifically, in 2020 and 2021, it was approximately 80% imported value from ASEAN countries (Thailand, Cambodia, Laos, Malaysia, Myanmar and Indonesia) compared to the value of imports from other regions in the world In 2020, the total value of Vietnam's sugar imports increased dramatically, reaching USD 822,785 thousand, nearly times higher than in 2019 (USD 413,227 thousand) The sudden increase in import value is because 2020 is the first year that Vietnam removed import quotas and reduced taxes to 5% for sugar products originating from countries joining ASEAN Trade in Goods Agreement (ATIGA) Notably, in 2020, Thailand was the leading country in exporting sugar to Vietnam (USD 430,693 thousand), but this number has decreased significantly afterwards In 2021, the value of sugar imports from ASEAN countries (Cambodia, Indonesia, Laos, Malaysia, Myanmar) increased by times compared to 2020 In particular, Indonesia was Vietnam's largest sugar exporter with a total value of USD 233,229 thousand https://www.trademap.org/Country_SelProductCountry_TS_Graph.aspx?nvpm=1%7c704%7c%7c%7c %7c17%7c%7c%7c2%7c1%7c2%7c1%7c2%7c1%7c2%7c1%7c1%7c2 10 Opportunities and Challenges 3.1 Opportunities Vietnam could access to a broader market Vietnamese enterprises got access to a larger market once Vietnam joined in AEC The community facilitates the free flow of goods and services across the border between Vietnam and AEC members If Vietnamese enterprises can invest to expand their business, have autonomy in sugar production and improve capacity to compete with Thai sugar, it is absolutely a lucrative opportunity for local enterprises to seize and to expand the market Government's trade defense policy support the sugar industry According to the General Department of Vietnam Customs, sugar imports from ASEAN countries stood at 865,000 tons (up 280% over the same period), while sugar exports from Thailand to Vietnam decreased to 370,000 tons in 2021, down 70% over the same period last year SSI Research expects that the latest measures of the Ministry of Industry and Trade will increase the competitiveness of sugar products as well as domestic sugar production in the long term, due to Thailand's sugar import restrictions and the lack of sugar supply shortage in Vietnam 3.2 Challenges Serious shortage of raw materials According to Vietcombank Securities Company (VCBS), the raw sugarcane area has decreased significantly, the amount of sugar produced has only met about one-third of the domestic demand from 2019 to now, the rest has to be imported This is due to many recent factors such as the effectiveness of ASEAN Trade in Good Agreement (ATIGA) and the influence of the COVID-19 pandemic, the number of sugar mills dropped This is a result of the reorganization of the operating factories and temporary closures of inefficient sugar mills Besides, Vietnam's sugar production is currently still dispersed, backward in production and has small scale The level of mechanization 11 in Vietnam has only reached 10-20% This leads to the fact that Vietnam's productivity is much lower than other neighboring countries Unsustainable supply chain in sugarcane industry The decline in the size of the industry is due to the unsustainable supply chain Sugarcane growers, mainly households, play a leading role at the top of the supply chain, supplying the majority of sugarcane raw materials for processing plants However, the role and the benefits of households from participating in the value chain are the smallest compared to other groups participating in the chain The stage of purchasing raw sugar cane is having unfair competition between factories, often in collusion with sugarcane traders As a result, the linkage contracts between households and factories are broken, the source of input materials for factories is not guaranteed, creating distrust among the participating parties If stakeholders such as the local authority, Vietnam Sugar Association and Vietnam Farmers' Union not address the above problems, these internal factors also have a direct negative impact on the efficiency of sugarcane production and the competitiveness of sugarcane Fierce competition from other nations in region It is clear that the competition between local and oversea enterprises' products is getting fiercer With provisions removing tariff and non-tariff barriers, the quantity of imported sugar flood into Vietnam have been increasing, thus, leaving pressure on both government and corporations From the perspective of government, this event could put it in the less advantageous place that the country is likely exposed to negative net export Likewise, from the perspective of firms, they would face a reduction in revenue due to the shift of consumer demand from some local products to foreign counterparts Both create such a dilemma for the economy In effect, this severe competition from imported goods and services does narrow the domestic production in sugar industry Fluctuations of market and global economy Current world instability is driving up sugar prices The fact that fuel prices have continuously reached their highest levels in decades in recent years has boosted the 12 production of bio-alcohol (ethanol) from sugarcane Rising energy prices lead to increased demand for sugar-based ethanol (mainly in Brazil) resulting in less Brazil's sugar exports The fact that many sugarcane powerhouses such as Brazil and India have increased directly to regulate output and indirectly control sugar prices through ethanol production is gradually changing the cyclicality of the world sugar industry Recommendations The government should issue specific policies on chain linkage in the sugarcane industry This policy should ensure that sugarcane growers are given the highest priority, with benefits shared fairly among all parties involved Effective mechanisms are needed to minimize unfair competition between factories and in the current system of traders It is necessary to focus on new planting techniques with correct techniques and mechanization in sugarcane cultivation to reduce costs and improve the efficiency of sugarcane cultivation Building a comprehensive distribution channel from production to consumption and retail to reduce intermediaries and costs for sugarcane growers and businesses At the same time, explore the potential opportunities of the export market, such as exporting organic sugar, rock sugar and so on Sugarcane production capacity in Vietnam also needs to be further improved at all stages, especially sugar processing and sugar cane production management to reduce costs, lower costs, and improve competitiveness 13 [ CITATION Tra15 \l 1033 ][ CITATION Bub21 \l 1033 ] [ CITATION Int22 \l 1033 ][ CITATION Tru22 \l 1033 ] [ CITATION Hươ21 \l 1033 ] [ CITATION Khô22 \l 1033 ][ CITATION Sơn21 \l 1033 ][ CITATION Hạn21 \l 1033 ][ CITATION Ngọ20 \l 1033 ] [ CITATION Min21 \l 1033 ] Bibliography Anon., n.d International Available Trade Center at: [Online] https://www.trademap.org/ [Accessed 14 2022] Anon., n.d Trung Available tâm WTO at: [Online] https://www.trademap.org/ [Accessed 14 2022] Anon., n.d Vietnam National Available Trade Repository at: [Online] https://vntr.moit.gov.vn/vi/fta/3/2 [Accessed 14 2022] Buban, S., Shrestha, R & Putra, R C., 2021 Impact of the ASEAN Trade in Goods Agreement (ATIGA) on Intra-ASEAN Trade, Jakarta: Economic Research Institute Hạnh, H., 2021 Bộ Công thương Việt Nam [Online] Available at: https://moit.gov.vn/tin-tuc/thi-truong-trong-nuoc/thuc-trang-nganh-mia-duong-vietnam-sau-khi-ap-dung-bien-phap-phong-ve-thuong-mai.html [Accessed 13 2022] Hương, D & Nguyên, T., 2021 Custmsnews specialized page of customs e-magazine [Online] Available at: 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USD 917,846 million to import sugar, higher than in 2020 in terms of sugar import value USD 911,317 million) Remarkably, sugar imports from Thailand decreased, but sugar imports from five ASEAN... of Industry and Trade will increase the competitiveness of sugar products as well as domestic sugar production in the long term, due to Thailand''s sugar import restrictions and the lack of sugar. .. the export market, such as exporting organic sugar, rock sugar and so on Sugarcane production capacity in Vietnam also needs to be further improved at all stages, especially sugar processing and