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Opportunity for Vietnam’s enterprises

On February 12th, 2020 the European Parliament ratified the Europe-Vietnam Free Trade Agreement (EVFTA) with massive votes for of 66.33%. EVFTA is considered as a lever for Vietnam’s economic developments. It is expected to bring great opportunities in trade and opportunities to enter the market of USD 18,000bn. EVFTA is expected to come into effect in July 2020.

EVFTA is the highest commitments in free trade agreements Vietnam has signed. And the commitments in the Agreement are especially important when EU is the Vietnam’s second largest export market. According to research from the Ministry of Planning and Investment, EVFTA, when comes into effect, will help Vietnam’s export turnover to EU increase around 20% in 2020; 42.7% in 2025 and 44.3% in 2030.

Opportunity for enterprises to make breakthroughs

Although the EU is one of Vietnam’s largest export market, Vietnam’s market share in the region is modest due to limited competition ability of Vietnam’s goods (especially in prices). Therefore, if 99% of tariff is eliminated in accordance to EVFTA, enterprises will have more opportunities to compete on price when their goods are imported to the important market. Sectors expected to have benefits are Vietnam’s key export sectors as textile, footwear and agricultural products- those that the EU has still imposed high tariffs on.

In import, Vietnam’s enterprises also have benefits from sources of goods and materials with stable and high quality imported from the EU with reasonable prices. Especially, enterprises will have opportunities to approach sources of machines, devices and high technologies from the EU countries, so that they can increase their capacity and improve their product quality. At the same time, goods and services from the EU imported to Vietnam will surely cause competition pressure, which requires Vietnam’s enterprises to change themselves to improve their own competition abilities.

More open favorable investment environment and better import prospect will attract more FDI from the EU to Vietnam.

Implementing EVFTA commitments on matters of mechanism, legal policies, business environment, and Vietnam’s law should have

With the EU Parliament ratification, the relationship between Vietnam and EU has become more comprehensive with the emphasis on the future with multilateral relationship. The EU has appreciated Vietnam partner as a trusted one in the Southeast Asia and in the world.

The Minister of the Ministry of Trade Industry - Tran Tuan Anh

changes in directions of being more transparent and more suitable to international regulations.

Enterprises have to change themselves

In 2017, all Vietnam’s aqua products were imposed ‘yellow card’ when exported to the EU, that was 100% check although they were previously checked by probability, which caused difficulties for exporters for it took much time and administrative procedures to prove legal origin of aqua products. Therefore, the EU’s market is a hard-to-please one: customers have high requirements on products quality and other requirements on food safety, labeling, and environment are not easy to fulfill. Although there are advantages from tariffs, Vietnam’s enterprises should improve themselves a lot to overcome these barriers, especially with large export sectors as agriculture or aqua products…

Normally, goods that have tariff incentives in FTA should have a certain proportion in regional value content (material originated from the EU and or from Vietnam). This is a big challenges to Vietnam’s enterprises for their material sources mainly come from China or the ASEAN countries.

Opening Vietnam’s market for goods and services from the EU means Vietnam’s enterprises should have more competitions in their local market. This is a real challenge for enterprises from the EU have more advantages than those in Vietnam in terms of competition abilities, market experience and abilities of making good use of FTAs. However, Vietnam has door-opening roadmap, especially on sensitive products. Therefore EVFTA is an opportunity, a reasonable pressure for Vietnam’s enterprises to adjust themselves with better business methods and competition abilities.

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