Any Delays Will Hinder Development

11:19:53 AM | 12/7/2019

The EU - Vietnam Free Trade Agreement (EVFTA) is one of the largest new generation trade agreements that Vietnam has ever signed and when it comes into force, it will bring great opportunities for Vietnamese businesses. But, to be successful, businesses need to capture information and develop appropriate business strategies.

Institutional reform and regulatory internalization

At the workshop on “Recognizing business opportunities amid early adoption of EU - Vietnam Free Trade Agreement (EVFTA)” held by the Vietnam Chamber of Commerce and Industry (VCCI) in Hanoi, Dr. Vu Tien Loc, President of VCCI, said, according to experts, Vietnam is a highly open economy but its integration capacity is very low. In fact, integration capacity is also economic competitiveness. According to the World Economic Forum (WEF), Vietnam ranks 77th out of 140 economies. Notably, institutional competitiveness is lower, ranking 94th out of 140 economies, below the overall average. Business motivation was even lower, staying at No. 101 out of 140 economies.

“However, in ASEAN, Vietnam’s economic openness is among the top, only second to Singapore, but its competitiveness ranks 7th, just ahead of Laos, Cambodia and Myanmar. This shows that the gap of economic openness and competitiveness is quite huge,” he said.

He said, as for EVFTA, Europe is a highly developed economy and it is little competitive to Vietnam. Therefore, Vietnam has advantages. But to realize these pluses, Vietnam must meet many requirements of origin of goods, environment, labor relations and sustainable development and it is not simple and easy to do so.

In the past years, integration process has enabled Vietnam to attain many important achievements, but its economy is heavily dependent on exports. EVFTA is an opportunity to promote import and export for production and business and boosting cooperation with Europe is a way for Vietnam to look up.

However, with EVFTA, Vietnam also faces many challenges such as tariffs and origin requirements.

To resolve these challenges and utilize EVFTA opportunities, there is a need for efforts from the Government and businesses. According to Dr. Loc, the first issues are institutional reform, business environment improvement and EVFTA regulatory internalization. This is really an easy task. With the process of legalizing EVFTA commitments, Vietnam must skillfully utilize policy spaces to revise its legal system to match the new context. And above all, businesses also expect the Government to further improve institutional reforms, better the business environment and support the economy and the business community.

For their parts, businesses must have a more comprehensive and proactive vision towards approaching new market information. In this context, VCCI will be an important support channel for them and open up opportunities for free trade agreements.

Slowness from both authorities and businesses

Mr. Ngo Chung Khanh, Deputy Director of the Multilateral Department under the Ministry of Industry and Trade, said, Vietnam will try to complete and submit EVFTA to the National Assembly for approval in October 2019, while the European Union (EU) will also try to submit it to the European Parliament in a similar time so as to bring the pact to force in 2020. However, in fact, enterprises and authorities, both at central and local levels, are still not active on this.

“For example, when the Prime Minister issued a decision to enforce the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and asked central and local authorities to formulate integrated plans, very few agencies responded appropriately. Up to now, we have not received full action plans from ministries, branches and localities. If EVFTA is also so slow, all opportunities are in theory, not in practice,” he said.

Business interests are also quite limited. After the information about EVFTA Agreement is released, the Ministry of Industry and Trade has received only two questions from Vietnamese enterprises, mainly on HS code and rules of origin. Meanwhile, there are no questions for a lot of other issues such as technical barriers, food safety standards, procedures, transshipment and European consumers. In addition, foreign direct investment (FDI) enterprises are more active than domestic ones to access EVFTA knowledge.

Thus, they must make immediate preparations to take advantage of EVFTA opportunities, Mr. Khanh added. This agreement has a very short schedule for tariff reduction, many Vietnamese products have the opportunity to enter the EU with a tax rate of 0%. Currently, Vietnam's regional rivals such as China, Thailand, Myanmar and Malaysia do not have FTAs with the EU, but this status is not forever because they will also seek FTAs with this market. Therefore, Vietnamese enterprises must quickly take advantage and keep it as soon as possible. “Being active will bring success to businesses,” he concluded.

Anh Mai