VIETNAM AMD AFTA : TRADE TRENDS AND IMPLICATIONS

Abstract

The ultimate objective of AFTA is to increase the competitive edge of ASEAN as a production base for the world market. Vietnam's entry into ASEAN and its participation in AFTA considerably enlarges the size of the region's internal market and thus the scope for economies of scale. For instance, Vietnam comprises 17.7% of total population of ASEAN (including Vietnam), and 3.2% of total GNP measured on a purchasing power basis. As such, Vietnam's entry can potentially increase the competitive efficiency of ASEAN. This thesis sets out to investigate the scope of this potential in the light of present trade trends and their implications. It demonstrates that while the volume of trade with Vietnam is still relatively insignificant, there exist several interesting complementarities. AFTA could provide the framework through which these complementarities can be fully exploited. Potential gains can be realised from the expansion of trade at existing investment levels as well as through the increased investments attracted by the potentials of a larger integrated market.