Scrutinising the implications of new deals on Vietnam’s economy

The newly-ratified EU-Vietnam Free Trade Agreement (EVFTA) and the Investment Protection Agreement (IPA) will help to usher in a new economic era with the correct preparation. 

Minister of Industry and Trade Tran Tuan Anh talked about the significance of the agreements and their implications on key sectors across the country.

How important are the EVFTA and IPA to Vietnam’s development?

scrutinising the implications of new deals on vietnams economy

Minister of Industry and Trade Tran Tuan Anh

In the face of the current complex global situation, the EVFTA attests to both sides’ strong commitment to promoting bilateral ties, from there deepening the relationships between Vietnam and the EU.

The signing and approval of EVFTA aligns with Vietnam’s external policies for multilateralisation and diversification, striving to strengthen the relationships with big trading partners, including the EU, contributing to maintaining peace, enhancing Vietnam’s status in the international arena, and availing of EU’s support to ensure effective implementation of socio-economic, political, multifaceted external development targets.

With Vietnam’s position of the ASEAN chair in 2020, the EVFTA will help bolster the country’s position and status in the relationships between EU and the ASEAN, as well as shape a model for future ASEAN-EU FTA.

Amid current fast-changing and increasingly complex political-security situation regionally and globally, the EVFTA can help the country to foster inner strength as well as consolidate our status internationally to exercise the external policies for independence, self-reliance, multilateralisation and diversification, going in parallel to consolidating and strengthening national defence and security.

In the economic development aspect, the EU is currently one of Vietnam’s largest export markets with an export value to this zone touching $41.5 billion and an import value reaching $14.9 billion last year. Thereby, when the EVFTA and IPA come into force, the two-way trade and investment flow from EU to Vietnam is forecast to rise robustly, making active contributions to Vietnam’s economic growth, facilitating export, pushing up market’s diversification, procuring higher added values through newly established supply chains, and creating more jobs.

Enforcement will also entail improvements in the local business environment as well as the country’s regulatory system with more transparency in compliance with international practice.

What has the Ministry of Industry and Trade (MoIT) prepared to maximise the benefits of official approval?

As a central agency for FTAs’ implementation, the MoIT has made careful preparations to be able to maximise the advantages the EVFTA could bring.

Similar to what we were doing with the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, the MoIT has drafted an action plan for the implementation of the EVFTA which has set forth clear tasks and objectives. The main tasks are divided into the five following core groups: diffusion about the deal and EU markets; regulatory work; boosting competitiveness and human resource development; guidelines and policies towards trade unions and other organisations caring for the labourers at enterprises; and policies on social well-being, environmental protection, and sustainable development.

To improve awareness about the EVFTA, particularly corporate entities and state management personnel at the central and local levels, we have established a website at evfta.moit.gov.vn, to elaborate on the deal, as well as to connect with people and businesses. In addition, the MoIT has also pushed up diffusion about the EVFTA through hosting workshops and training courses across the country, focusing on localities with big industrial zones and a large number of businesses.

 

Furthermore, market surveys have also received priority to help businesses become well-prepared to take advantages of tariff incentives when the agreement comes into force. We have also scaled up efforts for branding and image promotion of Vietnamese products in the markets of EU member countries.

What are the opportunities and challenges the EVFTA brings to Vietnam’s economy after the deal comes into force?

Regarded as a fulcrum for development, the EVFTA opens enormous opportunities for local businesses to enter a promising market with more than 508 million people and about $18 trillion GDP value. The EU is one of Vietnam’s most important trading partners with a total import-export value touching $56.39 billion in 2019. The import-export structure between Vietnam and the EU is mutually supplemental, not competing directly with each other.

According to the Ministry of Planning and Investment, the EVFTA would help Vietnam’s export value to the EU rise by about 42.7 per cent in 2025, and increasing to 44.37 per cent by 2030. Simultaneously, the import value from the EU to Vietnam will also pick up speed, growing by about 33.06 per cent in 2025 and 36.7 per cent by 2030. On a macro level, the EVFTA would contribute to an average 2.18-3.25 per cent in Vietnam’s GDP growth during 2019-2023, increasing to 4.57-5.30 per cent during 2024-2028, and 7.07-7.72 per cent high during 2029-2033.

Besides these advantages, the deal also brings certain challenges. Vietnam’s commitment to opening local markets to products and services from the EU will pose pressure to the local economy and businesses, as well as our products and services. This pressure, however, is positive and follows a suitable roadmap. More importantly, as the EU-Vietnam economic structure is highly supplemental, the competitive pressure would not be significant.

In addition, as the EVFTA encompasses close regulations and principles regarding investment and customs procedures, trade facilitation, technical barriers, quarantine measures and many more, full implementation of these regulations requires our country to embrace comprehensive institutional reforms. This, by essence, aligns with Vietnam’s commitment to accelerating administrative reforms, thereby enhancing the efficiency of public procurement and reforming growth model.

Which export sectors will benefit from the EVFTA and which sectors will suffer negative impacts?

With the EVFTA, almost all Vietnam’s export items to the EU would be exempted from import duties right after the deal takes effect or after just a short time. This is the highest benefit from an FTA that Vietnam has signed with the international community. The most beneficial sectors will be footwear, textiles and garments, agriculture, and seafood. The sectors bearing the brunt would be chemicals, transport means and equipment, processed food, and basic metal items.

The sectors intended to reap maximal benefits, however, might also face certain challenges. EU countries apply strict technical barriers to import items. For instance, Vietnam’s export agricultural items to the EU, albeit enjoying incentives, often lack uniformity in each shipment while post-harvest preservation is not good, resulting in unstable quality.

In addition, regulations on product origin also present challenges to textile and garments in taking advantage of tariff incentives under the EVFTA as the material for their production comes mainly from China or the ASEAN. 

Phuong Thu (VIR)

EVFTA means much more than tax holiday

EVFTA means much more than tax holiday

The following are some key points for those who do business with the EU to adopt a comprehensive view on the EU-Vietnam Free Trade Agreement (EVFTA) and the EU-Vietnam Investment Protection Agreement (EVIPA).

Rules of origin trip up garment and textile opportunities from EVFTA

Rules of origin trip up garment and textile opportunities from EVFTA

Garment and textile firms are aware of the opportunities to expand their export markets arising from the EU-Vietnam Free Trade Agreement (EVFTA) but are facing difficulties in complying with the rules of origin.

 
 

Other News

.
Chubb Life Vietnam honored “Best Companies to Work for in Asia 2020”
Chubb Life Vietnam honored “Best Companies to Work for in Asia 2020”
BUSINESSicon  03/07/2020 

Chubb Life Vietnam has been recognized as one of the “Best Companies to Work for in Asia 2020” by HR Asia, the continent’s leading publication for Human Resources professionals.

Predatory debt collectors hustling on borrowed time
Predatory debt collectors hustling on borrowed time
BUSINESSicon  02/07/2020 

Debt-collecting businesses are to be banned in Vietnam as part of local government action to protect customers’ rights, with the upsurge of predatory lending services triggering heated debate and eroding public trust.

RCEP benefits on horizon for ASEAN
RCEP benefits on horizon for ASEAN
FEATUREicon  02/07/2020 

With the Regional Comprehensive Economic Partnership scheduled to be signed this November, doors will soon open to attract more investment and swell Vietnam’s trade with international partners.

An abundance of advantages to diversify ops into Vietnam
An abundance of advantages to diversify ops into Vietnam
BUSINESSicon  02/07/2020 

Amidst the new wave of foreign investment and relocation after the pandemic, director general of the Foreign Investment Agency Do Nhat Hoang explained Vietnam’s outstanding advantages and how it can seize arising opportunities.

Vietnam closes in on tech app tax avoiders
Vietnam closes in on tech app tax avoiders
BUSINESSicon  02/07/2020 

Apple and Google are once again under fire over tax avoidance in Vietnam, with none of their revenues from their app markets being retained in the country. However, a new law could soon enable local authorities to take their cut.

Drugmakers fight to attain approval
Drugmakers fight to attain approval
BUSINESSicon  02/07/2020 

Switzerland’s drug maker Novartis Pharma Services AG has announced a GMP qualification for Lek Pharmaceuticals d.d. within the scope of certification for medicines in Vietnam,

PouYuen lays off thousands  due to Covid-19 difficulties
PouYuen lays off thousands due to Covid-19 difficulties
BUSINESSicon  02/07/2020 

More than 6,000 workers of the Taiwanese company, PouYuen, in HCM City have been laid off due to the company's business difficulties during the Covid-19 pandemic.

Fitch Solutions revises up Viet Nam’s 2020 GDP growth
Fitch Solutions revises up Viet Nam’s 2020 GDP growth
BUSINESSicon  02/07/2020 

Fitch Solutions have revised up its 2020 real GDP growth forecast for Viet Nam slightly to 3.0 per cent, from 2.8 per cent previously.

Zalo Bank not licensed by SBV and MoIT
Zalo Bank not licensed by SBV and MoIT
BUSINESSicon  02/07/2020 

The State Bank of Vietnam (SBV) and the Ministry of Industry and Trade have affirmed that they have not licensed Zalo Bank to provide online built-in financial services.

EVFTA to come into effect in a month
EVFTA to come into effect in a month
BUSINESSicon  02/07/2020 

The EVFTA will abolish 65 per cent of the duties on EU exports to its developing partner, with the remainder phased out over a 10-year period.

Footwear sector to improve supply chain to take advantage of EVFTA
Footwear sector to improve supply chain to take advantage of EVFTA
BUSINESSicon  02/07/2020 

Vietnam’s leather and footwear industry should improve its supply chain performance to take advantage of the milestone trade deal that Vietnam has signed with the EU and to recover from the effects of the COVID-19 crisis, 

World Bank Vietnam has new head
World Bank Vietnam has new head
BUSINESSicon  02/07/2020 

From July 1, Ms. Carolyn Turk will work at the World Bank (WB) Hanoi office as its country director in Vietnam, according to the office.

China maintains position as Vietnam's largest import market
China maintains position as Vietnam's largest import market
VIDEOicon  02/07/2020 

Despite the first half of the year seeing Vietnamese export turnover to China only reaching a mere US$34.8 billion, China retained its place as the country’s largest import market, according to the General Statistics Office.

VN's rice exports bounce back after one-month interruption
VN's rice exports bounce back after one-month interruption
BUSINESSicon  03/07/2020 

While exports of many products have plunged because of Covid-19, rice exports are growing, with prices of some products reaching an 8-year high.

Will demand for corporate bonds become weaker because of a new law?
Will demand for corporate bonds become weaker because of a new law?
BUSINESSicon  02/07/2020 

Under the amended Enterprise Law ratified by the National Assembly on June 17, nonprofessional investors are prohibited from trading corporate bonds issued in private offerings from January 1, 2021.

Retail industry to face being "swallowed" once EVFTA comes into force
Retail industry to face being "swallowed" once EVFTA comes into force
BUSINESSicon  02/07/2020 

With the implementation of the EU-Vietnam Free Trade Agreement looming, besides providing opportunities, the Vietnamese retail market is anticipated to face numerous challenges, 

Vietnam sees greater budget transparency
Vietnam sees greater budget transparency
BUSINESSicon  01/07/2020 

Vietnam’s Open Budget Index (OBI) increased rapidly in 2019 compared to 2018, according to a survey released on July 1.

Vietnam to create “Miracle on the Red River” with implementation of Doi Moi 4.0
Vietnam to create “Miracle on the Red River” with implementation of Doi Moi 4.0
BUSINESSicon  01/07/2020 

The Vietnamese Government has made bold and reasonable decisions to fight against the COVID-19 pandemic and be proactive with comprehensive initiatives for economic recovery.

Administrative reforms would help unlock EVFTA's potential: EuroCham
Administrative reforms would help unlock EVFTA's potential: EuroCham
BUSINESSicon  01/07/2020 

 Administrative procedure reform is the key to unlocking the full potential of the Europe-Viet Nam Free Trade Agreement (EVFTA), said participants at a conference on Tuesday.

Nation’s economic forecast leads way
Nation’s economic forecast leads way
BUSINESSicon  01/07/2020 

With its success in fighting COVID-19, Vietnam has continued to be the best performer in Southeast Asia, laying a firm foundation for the country to attract more investment and spur on production.

 
 
 
Leave your comment on an article

OR QUICK LOGIN