When joining Free Trade Agreements (FTA), Vietnam has many opportunities to promote structural reform, policies, business environment, economic growth; create more jobs and attract more FDI; increase production capacity and competitiveness. However, Vietnam has not taken the advantage of many opportunities from FTAs, according to professionals’ remarks made in recent events on this topic.
Exports and trade deficit both increase
Increased exports is the most important and visible efficiency of the Vietnam economy when joining the FTAs. Along with the level of deeper integration, Vietnam has participated in 6 FTAs (AFTA, ACFTA, AKFTA, AJFTA, AANZFTA, AIFTA ), 2 bilateral FTAs (VJEPA with Japan and Vietnam - Chile FTA). As of late 2013, two -way trade between Vietnam and other FTA partners accounted for almost 60 percent of the total import-export turnover of Vietnam. In particular, exports accounted for 50 percent of the total and imports accounted for 70 percent. In 2011, the export turnover of Vietnam to ASEAN increased by 30.7 percent, in 2012, it grew up by 27 percent. In specific markets, the export turnover of Vietnam to Japan accounted for 39.5 percent of the total in 2011 and 25 percent in 2012, to China respectively 52 percent and 17 percent, to South Korea is 52.5 percent and 18 percent.
Along with growth in exports, Vietnam is also facing pressure to become a potential export market for other countries participating in the FTA. For example, Vietnam was the largest importer of goods from China, the ASEAN countries and South Korea for years.
While in 2001, the trade deficit with China reached US$ 210 million, it rose to US$ 16 billion in 2012. Explaining the fast growth rate of imports, Asia-Pacific Market Department (Ministry of Industry and Trade) commented that there is one more cause, which is by implementing market-opening commitments under WTO commitments, a number of FDI businesses have to move to import, due to losing protections.
Not yet taking advantage of all opportunities
Although exports increased, Vietnam has not taken advantage of the FTA commitments, experts asserted. In the survey results on the competitiveness of ASEAN members in 2013 by the ASEAN Business Advisory Council (ASEAN BAC) announced on December 9th, approximately 33 percent of enterprises surveyed utilized at least one preferential trade agreement such as: AFTA, AANZFTA, ACFTA, AIFTA, AJCEP, AKFTA.
Vietnamese businesses have not taken advantage of all the preferential tariffs, Andrew Holt, First Secretary and Head of Wealth group, the British Foreign Office said, “It is a fact that many of Vietnam’s main exports goods which used to enjoy low tax rates or 0 percent for raw materials, agricultural products and items of machinery, equipment, electronics and objects, now accounts for a low proportion of Vietnam’s exports.”
On the other hand, most businesses are not updated or do not understand the tariff elimination schedule in the FTAs. A number of manufacturers, exporters are not clear about criteria for commodity code conversion or processing steps. They only know about the specific criteria of traditional value-added content. Besides, the costs and administrative procedures for the issuance of C/O are complex and time consuming.
How to benefit from FTAs?
Also still in reports published by the ASEAN BAC, 21 percent of surveyed companies are taking advantage of incentives from AFTA, 15 percent from ACFTA, 12 percent from AJCEP, 10 percent from AIFTA, 10 percent from AKFTA and 7 percent from AANZFTA. More than 30 percent of respondents said they are planning to take advantage of incentives from FTAs that ASEAN taking part in.
Currently, Vietnam has signed 8 FTAs with ASEAN countries and is negotiating 7 FTAs. Experts emphasized that to maximize the incentives from FTAs, Vietnam’s enterprises should actively update information about market opportunities that FTAs bring. Especially, information about tax incentives related to increased levels of domestic value of the goods, services and other technical barriers has to be updated to improve efficiency and competitiveness. In addition, businesses need to innovate technological equipment and improve product quality to strengthen its position at home and take advantage of the opportunity to reach out to the region and the world.
Nguyen Thanh
Vietnamese
