The 11th AEC Dialogue on June 4, 2024 in Jakarta, Indonesia aims to develop unified AI regulations and standards across the region, facilitating cross-border cooperation. (Source: ASEAN Secretariat)

On December 31, 2015, at the 27th ASEAN Summit in Kuala Lumpur (Malaysia), the ASEAN Community (AC) was officially established with three pillars: the ASEAN Political-Security Community (APSC), the ASEAN Economic Community (AEC) and the ASEAN Socio-Cultural Community (ASCC). The AEC not only creates a synergistic strength for the regional economy but also responds to and overcomes regional and global economic crises.

Gearing up for a proactively adaptive ASEAN

After nearly 10 years of implementing AEC 2025, the ASEAN region has achieved many impressive achievements. With a population of nearly 700 million people and a GDP of nearly 4,000 billion USD, ASEAN is a large, dynamic and promising economic space. Over the past decade, intra-ASEAN trade has reached about 750 billion USD.

Foreign direct investment (FDI) flows into ASEAN increased to US$236 billion in 2023, up 24% from the annual average of US$190 billion in 2020-2022.

Intra-ASEAN investment increased for the third consecutive year to a record $28 billion in 2022, becoming the second-largest source of investment after the United States. ASEAN's share of global FDI also increased to 17% from 15% in 2021.

ASEAN has become a single production base and market on the basis of an economic community. The AEC is expanding, attracting increasing attention from trade partners. As evidence, ASEAN has signed many bilateral free trade agreements (FTAs) with a series of partners such as Japan, Korea, China, Australia, New Zealand, India...; has the Regional Comprehensive Economic Partnership (RCEP) with China, Japan, Korea, Australia and New Zealand; is negotiating an FTA with Canada and discussing the possibility of signing an FTA with other trade areas such as the European Union (EU) to bring more benefits from free trade to citizens in the bloc.

2022 marks a turning point for the regional economy as countries reopen, gradually recover and improve their self-reliance, with great contributions from manufacturing, transportation and tourism, and regional growth is basically stable.

Faced with the impact of geopolitical fluctuations, along with many challenges and potential risks, ASEAN has shifted its strategy, taking advantage of new driving forces, through many new initiatives such as: Circular Economic Framework, Carbon Neutrality Strategy, ASEAN Digital Economic Framework Agreement, ASEAN One Health Initiative, Blue Economy Framework... This is the luggage for an ASEAN to proactively adapt to opportunities and challenges towards the goal of sustainable, inclusive development and enhancing self-reliance for the region.

Dr. Denis Hew, Senior Fellow at the Center for Asia and Globalization, Lee Kuan Yew School of Public Policy (Singapore), said that since the establishment of the AEC, there has been an increase in intra-regional trade in industrial goods, parts and components. As a result, many ASEAN economies have promoted industrialization and become part of a larger global value chain, not only within the region but also including China and major economies in the world.

“It can be seen through the strong FDI inflows into ASEAN and the increasing diversity. If you go to Singapore or Malaysia, you will see many large companies such as Intel building semiconductor factories. As for Thailand – the center of the regional automobile industry, very large multinational companies such as Honda and Toyota are building production networks here to export to the world. Income growth and GDP per capita in many ASEAN countries have increased significantly in recent times,” Dr. Denis Hew cited.

The report “Building the ASEAN Economic Community after 2025” by the Center for Asia and Globalization, Lee Kuan Yew School of Public Policy recently stated that the AEC is in the final stage of implementing the Second Plan - the AEC Blueprint 2025, in the context of the rules-based multilateralism that lays the foundation for ASEAN economic integration being threatened by geostrategic competition and rising protectionism.

“The process of developing the ASEAN Post-2025 Vision is ongoing. A two-decade vision document has been drafted for adoption in 2025. Further progress on plans to build the ASEAN Community, including the AEC, is underway.

For the AEC, the next strategic plan will have a shorter time horizon of five years, aiming for more flexibility in responding to rapidly changing contexts,” the Report stressed.

Joining the AEC helps Vietnam increase its attractiveness in the eyes of foreign investors (Source: VnEconomy)

Increasing the attractiveness of Vietnam

As one of the active and dynamic members since joining ASEAN, Vietnam has always played a leading role in the bloc's activities, building the AC in general and the AEC in particular. Vietnam has a large market for exports to ASEAN member countries and opportunities to access a wider market.

Joining the AEC supports Vietnam in implementing extensive and comprehensive economic cooperation with countries in the region and the world. Vietnam has implemented AEC commitments, signed FTAs ​​with the EU, South Korea, the Eurasian Economic Union (EAEU); participated in new generation FTAs ​​such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and RCEP.

In addition, Vietnam also has the opportunity to access scientific and technological support sources, learn advanced management experiences, contribute to improving the qualifications and capacity of its staff and training high-quality human resources. At the same time, it can take advantage of practical benefits from cooperation programs to narrow the development gap.

The positive impact of the AEC also contributes to changes in the development and improvement of domestic policies, laws and procedures, promoting Vietnam to reform economic institutions and improve shortcomings to ensure better compliance with international integration requirements.

AEC integration also forces Vietnam to improve its legal framework to build trust with investors and increase competitiveness. Deeper participation in ASEAN economic integration helps increase Vietnam’s attractiveness to foreign investment and business, attracting more FDI capital flows outside the Association, especially from multinational companies, while expanding the market for Vietnamese goods and services.

In the context of the world's total FDI capital continuing to decline, Vietnam is one of the countries in the AEC that has "kept the pace" of attracting FDI quite well. According to the Foreign Investment Agency (Ministry of Planning and Investment), in the first 7 months of 2024, the total registered FDI capital in Vietnam reached more than 18 billion USD, an increase of 10.9% over the same period in 2023. Meanwhile, disbursed capital reached more than 12.55 billion USD, an increase of 8.4% over the previous year.

Explaining the reason why Vietnam is still an attractive and long-term destination for FDI investors, Director of the Foreign Investment Agency Do Nhat Hoang affirmed that Vietnam's strength is its human resources with high labor productivity compared to labor costs. Vietnam is also building training programs to improve the technical skills and labor productivity of human resources; in particular, it will switch to training based on the actual needs of businesses, training with high applicability instead of the previous training model.

Along with that, with efforts to actively improve the investment environment, as well as improve infrastructure conditions, appropriate policies, etc., foreign investors are confident in Vietnam's investment environment.