Businesses Need to Stand Proactive to Benefit from EVFTA

1:45:12 PM | 7/10/2020

The EU - Vietnam Free Trade Agreement (EVFTA), once in effect, will further motivate Vietnamese companies to revive and develop their business operations, especially when they are facing more difficulty caused by the Covid-19 pandemic.

Deeply involved in global supply chains

Mr. Tran Quoc Khanh, Deputy Minister of Industry and Trade, said that the EVFTA is expected to promote Vietnam - EU bilateral trade and investment relations in particular and foster Vietnam’s international economic integration in general, thus giving a helping hand to the country's renewal and modernization process.

The Covid-19 pandemic has adversely affected trade and the broader economy. In April 2020, exports slumped 27.1% and imports declined 16.4% from the previous month. By the end of May, the country's total commodity import and export value sank 2.8%, with exports edging down 0.9% and imports contracting 4.6%.

With EVFTA, Vietnamese companies will have the opportunity to access a market of nearly 460 million people with per capita GDP of more than US$35,000 and enjoy a tariff rate of 0% on over 85% of tariff lines right from the moment the agreement comes into effect, he added.

The most important benefit for businesses is joining new supply chains to replace existing ones that have been disrupted or stalled by the Covid-19 pandemic, while expanding and diversifying import and export markets and reducing dependence on certain markets.

Steadfast to EVFTA enforcement plan

To realize EVFTA opportunities, the Government and businesses still need to make a lot of preparations, said Deputy Minister Khanh. For their parts, authorities should quickly complete the enforcement plan and issue necessary regulatory documents while enhancing dialogues and exchanges with the business community in order to remove their business obstacles and difficulties. Meanwhile, businesses need to proactively study the content of the pact and fully prepare necessary conditions to meet its requirements as well as EU demands.

Mr. Ngo Chung Khanh, Deputy Director of the Multilateral Trade Policy Department (under the Ministry of Industry and Trade-MoIT), said, the EVFTA action plan has more new points than the CPTPP action plan. The plan to carry out the EVFTA is prepared early to make sure that it works immediately after the agreement comes into effect. Its contents are also more creative, more diverse and uniquely specific to EVFTA, such as establishing an independent DAG consultancy group. Besides, the coordination between provinces/cities and industries/branches is much closer and more rhythmic.

He recommended that businesses should not be overly optimistic, leading to subjectivity in taking advantage of EVFTA opportunities. They should also change their management and business thinking, coordinate and connect closely with key agencies to actively penetrate the EU market.

Remarking on new policies, Mr. Pham Tuan Anh, Deputy Director of the International Cooperation Department (under the Ministry of Finance), said that the ministry’s focus on the EVFTA is based on the pillars: Communications on the EVFTA and the EU market information; making laws, institutions and regulatory framework. Specifically, when reviewing the legality of the agreement, the Ministry of Finance has developed a list of commitments and an action roadmap that need to be codified, legislated and institutionalized, including two laws and two decrees. The Decree on Special Preferential Import and Export Tariffs for enactment of the EVFTA in 2020-2022 will be issued, expected to be effective from August 1, 2020.

Citing hardships faced by businesses in obtaining the certificate of origin (C/O), Mr. Nguyen Tuong, Deputy General Secretary of the Vietnam Logistics Business Association, hopes that the C/O procedure and process will be fast, otherwise textile, garment and furniture companies will confront difficulty.

Mr. Mai Xuan Thanh, Deputy Director of the General Department of Customs, said 99.99% of customs procedures are currently handled electronically. The Ministry of Industry and Trade wants to discuss with the General Department of Customs to consider granting electronic C/O for shipments to the EU. The customs sector will also work with relevant agencies to share data and experience, especially business credibility and rankings, for VCCI to reduce the C/O granting time.

Ms. Nguyen Cam Trang, Deputy Director of the Import and Export Department, said, the Ministry of Industry and Trade recently promulgated Circular 11/2020/TT-BCT on rules of origin of goods in the EVFTA. This circular is applied to C/O issuers and traders. Once the EVFTA takes effect and comes into force, Vietnamese goods exported to the EU will be granted C/O in accordance with this circular. The issuance of C/O of goods exported to the EU according to the EVFTA is done by preferential C/O agencies and organizations authorized by the Ministry of Industry and Trade.

Mr. Vu Ba Phu - Director of the Vietnam Trade Promotion Agency (MoiT)

Not only in Vietnam but in other countries, trade promotion is mainly designed for small and medium-sized enterprises (SMEs) because they lack resources to access information about the market, importers and exporters; lack financial resources to join or organize trade promotion events abroad. Therefore, SMEs really need governmental support.

We realized that a number of industries in Vietnam have great advantages, including textile - garment, leather - footwear, and agriculture - fisheries. We will provide better information through the electricity trading system, thus reducing the costs of trade promotion for SMEs.

Recently, due to the effect of the Covid-19 pandemic, direct trade promotion cannot be performed. Therefore, the Vietnam Trade Promotion Agency (Vietrade) and the Ministry of Industry and Trade has hosted hundreds of online trade exchanges. Needless to say, Vietnam is one of the first countries in the world to organize online trade conferences to match business needs of both buyers and sellers. Data from Vietrade show the success rate of trade exchanges is over 50%.

After the Covid-19 pandemic outbreak, markets, especially the EU, will change significantly. On a larger scale, supply chains and value chains will be changed or redirected. These changes, plus the opportunity from the EVFTA, require timely adapted trade promotion to support businesses to capture the EVFTA opportunity.

Knowing this, we have given priority to sustainable export for the 2021-2025 period with main goals and orientations: Establishing an in-depth market research and information system for some key industries; maintain market diversity and gradually increasing shipment share to high-end markets; building the capacity for trade associations and trade promotion agencies; integrating trade promotion forms to ensure effective use of trade promotion resources and create ripple effects on export activities.

Ms. Phan Thi Thanh Xuan, Vice Chairwoman and General Secretary of the Vietnam Leather, Footwear and Handbag Association (Lefaso)

When the EVFTA officially comes into effect, companies in general and leather and footwear firms in particular have the opportunity to import high-class inputs and access advanced technologies to develop premium products for consumers. Besides, they will have the chance to promote foreign investment to the market, especially those active in the footwear industry. Their weak stages such as design, product development, market development, and service quality will be addressed in the coming period.

To grasp the opportunity from the EVFTA, they must prepare well internal resources, meet new requirements and regulations placed in the new playground to achieve success. Many businesses currently see a wide gap between their own capacity with external requirements. So, they need to capture clear and complete information, have good preparation and must boldly approach the market.

With three such stages, each enterprise needs to develop a strategy from the short term to the long term. Without preparation, they cannot take advantage of EVFTA opportunities, and may even be eliminated because the open market has tariffs completely lifted. Only companies with prestige, product quality and competitiveness can stay firm on the market.

Mr. Nguyen Kim Hung, President of Kim Nam Group

In order to get EVFTA advantages, SMEs need to carefully study information, especially requirements to have tariff reduction.

The first thing is enterprises must have transparent operations, prove the origin and traceability, and digitize operations to quickly and smoothly establish deals with partners.

Besides, they must be very committed because European partners require very high transparency. They have company data portals to track other companies. If Vietnamese failed to perform well, they would not have credibility.

The last thing that SMEs need to do is to be innovative and apply Platform 4.0 to their operations to stay active and open to shake hands with European associations and enterprises.

Mr. Tran Viet Cuong - General Director of Dong Nai Cocoa Company

The official EVFTA will help businesses quickly access large markets such as Europe. All stages, from production, procurement, processing and storage to consumers will be synchronized and professional.

Like many other manufacturers, our current difficulty is proving the origin of products and the working capacity of enterprises, resulting in loss of advantages relative to Indonesia and the Philippines. I suggest that the government should apply stamping forms and measures and barcode technology to make clear the origin and traceability of products, and grant electronic C/O to reduce the time of getting this certificate to quickly capture EVFTA opportunities.

Source: Vietnam Business Forum