Vietnam’s participation in negotiating and signing free trade agreements (FTAs) with partner countries all over the globe will create new progress in restructuring the economy and produce marked effects on many industries and fields. However, FTAs are considered a mixed blessing for the economy.
According to economic experts, when Vietnam participates in FTA negotiations, the key principles to be reckoned for Vietnam’s economy are how to attract technologies, open up services and improve the competitiveness of the nation’s enterprises to create products in global value chains. Another critically important principle is tariff and preference criteria. Among them, the main players in this game are businesses, who are performers on the one hand and beneficiaries on the other.
In reality, an FTA signed means a broader market established. And, it is repeatedly warned that if domestic companies lack thorough preparations to edge up competitiveness, they will lose ground on the home market. In addition, when Vietnam steps into this global playground, seeking partners is crucial. At present, Vietnam has established close relations with potential partners like the European Union, the United States, Japan and South Korea. ASEAN has become a top partner in the 15 years since Vietnam joined this regional bloc. Statistics show that Vietnam imported US$16.4 billion worth of goods from ASEAN in 2010, accounting for 19.3 percent of its total imports of US$84.8 billion, while its exports to this region valued at US$8.3 billion, 11.5 percent of its total exports of US$72.2 billion. In the current new context, the EU is becoming a high potential market.
However, according to Mr Vo Tri Thanh, Deputy Director of the Central Institute for Economic Management (CIEM), Vietnam’s involvement in negotiating and concluding FTAs is a mixed blessing. In particular, according to ASEAN FTA terms, to enjoy preferential tariffs, exports must have a localisation rate of 40 percent. This regulation may entail a collusive game joined by companies in the bloc. Meanwhile, it is very difficult for such companies to identify risks arising from that stipulation.
The Vietnam’s economy typically incurs a high trade deficit. Nonetheless, according to some experts, Vietnam can turn the trade deficit into an opportunity of accelerating economic development. Giving an example for this, Thanh said Samsung Electronics of South Korea, a leading producer in consumer electronics products in Vietnam, has annual export revenue amounting to billions of US dollars, but up to 90 percent of its costs are imported materials, mainly from China. Hence, it is clear that workers in Vietnam generate only about 10 percent of its value. So, the solution to the trade deficit with China is to boost Vietnam’s export of finished products to other markets.
Additionally, according to Mr Thanh, in FTA negotiations, the days of low-paid labour and abundant natural resources which are Vietnam’s strengths are over. In the future, market entry will no longer be an extreme challenge for Vietnamese goods, but it is the quality and competitiveness of Vietnamese goods that matter most.
Anh Phuong
Vietnamese
