The EU-Vietnam Free Trade Agreement (EVFTA), which came into force on August 1, is hoped to create a driving force to help Vietnam reap further achievements in poverty reduction and economic growth.
A World Bank study said the EVFTA will help an additional 0.1 – 0.8 million people escape poverty by 2030, equivalent to a reduction of 0.7 percent in poverty rate compared to a no-EVFTA scenario.
The gender-based income gap will be narrowed by an additional 0.15 percent, with the group of 40 percent of families with lowest income benefiting the most.
The EVFTA would bring this through creating more jobs, reducing redundant labourers and unemployment, and raise workers’ income.
With the deal, the door to a 508-million strong market worth 18 trillion USD has opened wider than ever for Vietnamese goods.
According to the Ministry of Planning and Investment, in the short term the EVFTA will help Vietnam’s GDP increase by 2.18 – 3.25 percent. In the context of the COVID-19 pandemic affecting the global economy, Vietnam would be among the few countries with positive growth rate in all scenarios of development thanks to the deal, the WB said.
Vietnam’s exports to the EU are forecast to rise by 42.7 percent in the first five years after the deal took effect, with big increases expected for industries of Vietnam’s strength such as farm produce (particularly rice), manufacturing-processing (textile-garment, leather-footwear) and services (maritime and aviation transport). As a result, more jobs will become available in Vietnam.
It is noteworthy that intensive commitments in the field of investment under the EVFTA will drive the perfection of institutions and improvement of investment and business environment in Vietnam, thus attract more EU investors to the country who will create more jobs for domestic workers. It is estimated that the deal will help create 146,000 more jobs a year.
In the medium and long-term, the EVFTA will contribute to raising domestic revenues thanks to economic growth, at an estimated 7 trillion VND 10 years after the deal took effect, which compensates for the drop in import-export duties, projected at 2.53 trillion VND after 10 years implementing the deal.
As the result, the State will have more resources for poverty reduction policies.
Besides the number of jobs, the EVFTA is also expected to help improve incomes of labourers through more effective operation of the market and the effects from salary paid by FDI enterprises.
Research has proved that income inequality and the rich-poor gap is inversely proportional to average per capita income, Sate budget collection and the ratio of exports to GDP.
The Ministry of Industry and Trade said what makes the EVFTA different from other FTAs is Vietnam’s commitments to sustainable development, comprising not only economic commitments but also those related to gender equality, the environment and social development, which are important conditions for the country to reduce poverty in a more sustainable manner./.VNA
Experts have raised concerns that Vietnamese businesses are slow in preparing conditions to enjoy preferential tariffs in the Viet Nam-EU Free Trade Agreement (EVFTA).
Vietnam will continue to fulfill its international commitments so that it can take full advantage of the EU-Vietnam Free Trade Agreement (EVFTA) and recover its economy amid a resurgence of COVID-19 pandemic.