According to the Ministry of Planning and Investment before the COVID-19 outbreak, the EVFTA will boost Vietnam’s economy 2.18 to 3.25% in the first five years after the deal takes effect in August 1, or about 0.5% of GDP growth per year. This would be more than any previous FTA Vietnam has signed.
In addition, 99% of tariff lines will be gradually eliminated to increase trade between Vietnam and the EU. The World Bank also predicted that 800,000 Vietnamese will escape poverty more quickly thanks to the EVFTA.
The EVFTA will require state agencies and businesses to reform drastically to optimize the benefits of the agreement. The government will need to accelerate administrative reforms and fine-tune policies and institutions.
Chairman of the Vietnam Chamber of Commerce and Industry Vu Tien Loc said institutional reform will make EVFTA implementation more effective.
“I think institutional reform will play a decisive role in implementing the EVFTA," Loc stressed. "Stronger institutional reform will improve global competitiveness. Without institutional reform, we will depend on imported materials and added value will not be high,”
Dr. Dang Kim Son, former Director of the Institute of Agriculture Institutions and Markets, said regulations are needed to establish standard production-to-market chains that will maintain Vietnamese goods’ share of the domestic market.
“It’s time to revise the list of Vietnam’s strategic items and billion-dollars earners and establish value chains," he suggested. "Institutions will decide our success. We also need to strengthen our business associations, cooperation, and value chains to take advantage of the trade deal.”
Businesses need to be proactive
Vietnamese businesses need to consider the EVFTA a starting point of a new business path where stronger competition will motivate them to reform and develop. At the same time, increased international cooperation will be needed to attract more direct investment into Vietnam to capitalize resource and technology transfer.
Economist Le Duy Binh, Director of private sector consulting firm Economica Vietnam, said the deal has stricter regulations than other FTAs Vietnam has signed in terms of standards, quality, origins, labelling, and the environment.
Therefore, stakeholders in the Vietnamese economy need to be aware of these regulations as Vietnamese goods will likely be subject to anti-dumping lawsuits and trade disputes, Binh noted.
“It’s now time for associations to work closely with banks and businesses to increase added values of Vietnamese enterprises," said economist Le Dang Doanh.
With a small-scale economy, Vietnam needs to optimize all regional and global trade and investment opportunities while tapping its inner strength to boost growth. By accelerating institutional reform, creating an international standard business environment, and promoting innovation, Vietnam hopes to optimize all the benefits of the EVFTA.
More businesses have had to suspend their operations or shut down, bringing about a high unemployment rate.