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Certain gains

Released at: 23:50, 05/02/2015 2015 - Year Of FTAs

Certain gains

Deputy Director General of the Multilateral Trade Policy Department under the Ministry of Industry and Trade, Mr. Le Trieu Dung, spoke with VET's Nguyen Quynh about the upcoming EU-Vietnam Free Trade Agreement.

by Nguyen Quynh

In 2015 Vietnam will continue to boost its participation in free trade agreements (FTAs), in which the FTA with the EU is a top priority. What does Vietnam expect from this FTA?

Mr. Le Trieu Dung
Deputy Director General of the Multilateral Trade Policy Department under the Ministry of Industry and Trade

The EU-Vietnam Free Trade Agreement (EVFTA) has been under negotiation since June 2012. There have been ten official negotiation sessions and a mid-term meeting. Both Vietnam and the EU have carefully prepared for these negotiations. This is an important factor that has boosted negotiations to the final stage after only two years of discussions. After it is signed the EVFTA will be a comprehensive agreement that will bring benefits to both sides. 

In the context of the EU being a leading economic and trade partner, the EVFTA will bring a lot of economic benefits to Vietnam. Firstly, it will boost bilateral relations between Vietnam and the EU and expand markets for exported products, especially textiles, footwear, farm produce and aquatic products, which are Vietnam’s strengths. Vietnam’s current exports account for just 1 per cent of total import turnover in the EU. Secondly, the EVFTA will contribute to stabilizing and diversifying imported commodities, such as machinery, accessories, pharmaceutical products, and vehicles, where Vietnam is weak in production. 

In addition, the EVFTA is a great opportunity for Vietnam to attract more high-quality investment from the EU, becoming a transfer station connecting investment and trade activities between the EU and ASEAN. This will be particularly important when the ASEAN Economic Community comes into being. Finally, Vietnam wants the EU to quickly recognize it as being a market economy, preferably no later than the signing of the EVFTA, in order to help Vietnam improve its economy and be treated fairly in the process of regional economic integration and globalization.

Of course, the FTA will also mean that Vietnam should commit to opening up its markets to goods and services and implementing the agreement’s provisions and EU rules, which requires improvements to its legal framework and political institutions. Competition is not expected to be greater due to the economic structure of the EU and Vietnam being highly complementary to each other. The regulations and rules of the FTA are broadly in line with policy and administrative reform and the renewal of Vietnam’s growth model.

What impact will the EVFTA have on attracting investment and what sectors will have the greatest potential?

As I said above, the EVFTA will create many opportunities for Vietnam to attract investment from the EU. It will bring a lot of clear benefits that were predicted when Vietnam and the EU began negotiations. Although the EVFTA is not yet signed, 25 of the 28 countries in the EU have already invested in Vietnam, with total investment capital of $36.1 billion and registered capital of $13.75 billion. When the agreement is signed Vietnam’s investment environment will become more open and its legal framework and policies more stable and clear. Investment from the EU is therefore expected to quickly increase. 

As a whole, European enterprises have a dominant position in the global technology market and this will be a sector of potential in Vietnam. EU investors have already contributed to creating many new technology sectors in Vietnam. Investors will also favor the service sector, such as posts and telecommunications, finance, office space for lease, and retail.

What should Vietnamese enterprises do to prepare to seize the opportunities when the EVFTA is signed? 

The EVFTA will open up new opportunities for enterprises from both sides. In the negotiation process, most Vietnam business associations, especially the Vietnam Textile & Apparel Association and the Vietnam Association of Seafood Exporters and Producers, attached great importance to the agreement. However, preparations are different between enterprises. Large enterprises have prepared better than small and medium-sized enterprises (SMEs), while exporting enterprises without major competition in Europe are better placed.

In order to seize the opportunities from and reap the benefits of the EVFTA, Vietnamese enterprises, especially SMEs, should carefully research the EVFTA to fully prepare. In particular, enterprises need to clearly understand the opportunities as well as the challenges presented by the EU market, and find solutions to improve product quality and packaging to better compete. The Multilateral Trade Policy Department will continue to cooperate with the Vietnam Chamber of Commerce and Industry (VCCI) to provide information on the EVFTA to business associations.

What advantages in the EVFTA does Vietnam need to utilize to boost economic growth in 2015 and beyond?

Vietnam has signed eight FTAs relating to trade, commodities, and services, including five it signed in concert with ASEAN with China, South Korea, Japan, India, Australia and Chile, and two bilateral FTAs with Japan and Chile. In some countries the tax rate for Vietnamese exports is zero. The EVFTA, along with the Trans-Pacific Partnership (TPP) and the Regional Comprehensive Economic Partnership (RCEP), which are expected to be signed shortly, will create many favorable conditions for Vietnam’s economic growth.

The agreements will contribute to assisting Vietnam in diversifying its economic and trade relations, especially import and export markets, and promoting its process of economic restructuring and innovating its growth model. Furthermore, the FTAs will create a chain in which Vietnam can connect with other enterprises in ASEAN, the EU and the US, to exchange commodities and services as well as production experience, which will support Vietnam enterprises to develop and meet consumer demands for goods and services in the region as well as in larger markets such as the EU, the US, Japan, and South Korea. Finally, the success of the EVFTA negotiations and other FTAs with major partners will help Vietnam to improve its profile around the world, for long-term economic development. 

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