EVFTA new milestone for Vietnam's economy


The EU-Vietnam Free Trade Agreement (EVFTA) is expected to be cleared at the next session of Parliament. This will pave the way for promotion of high standard of goods and a strong integration of Vietnam’s economy.

Illustrative photo.

Illustrative photo.

Autonomy not dependence

The EU-Vietnam Free Trade Agreement will be approved by the National Assembly in the forthcoming meeting, which will be a new milestone towards reform and integration of Vietnam's economy. With the ratification of this agreement, the EU, which is a fastidious market that demands the highest standards in the world, will officially recognize the efforts of Vietnam in rebuilding reforms and its market economy and sustainable development measures, while also strengthening cooperation with Vietnam.

As a new generation FTA, EVFTA is like a vital "highway" that will connect Vietnam to a larger and more lucrative world market for products, finance and technology. Benefits will be seen, weighed, measured and be countable as a result. The European Union will remove 85.6% off tariffs, and help increase competitiveness by 70.3% for Vietnamese exports in this particular market. Vietnam will be able to reduce input costs on manufacturing, reduce price of goods and services, and open new avenues of trade with the EU market, a market with the second largest purchasing power in the world, only after the United States.

EVFTA will enable access to high-quality goods and services at lower prices for both Vietnamese and European people. French and Italian wines will become more familiar to Vietnamese people, while Vietnamese shrimps will become part of an EU family meal.

Trade flow, investment flow and technology transfer will contribute to upgrading "Made in Vietnam" products for the global value chain that Vietnam is trying to join in. With participation of European partners, we expect technological support in manufacturing in Vietnam to increase.

In addition, efforts to reach international standards on national governance and corporate governance, labor, and environment will also create new energy sources for Vietnam's sustainable development strategy. "Sustainable development" is a key phrase, a platform to interact through economies and businesses under the framework of new generation FTAs, such as EVFTA.

Expectations from enterprises

First of all, businesses must make a deep and concerted effort to understand punctuality and commitment, as well as challenges and opportunities related to their industry and field so as to reposition themselves and take immediate and prompt action. They must restructure to face market requirement, customer demand, check supply availability and take full advantage of the opportunities that are set to open.

In addition, businesses must accelerate efforts, upgrade their own competitiveness of their business model, strategy, management style, human resource, and quality of goods and services, to meet the tough European standards. Without consistent and sustainable competitiveness, enterprises will not be successful in this market.

However, even during the process to excel and succeed in a world market, businesses must stay grounded on their own soil and local Vietnamese market. The domestic market with nearly one hundred million people must remain the platform and fulcrum for Vietnamese enterprises to reach out to lucrative world markets.

As the world market opens, great opportunities will also open, but competition will be fierce. In theory, in areas where there will be a direct confrontation between Vietnamese enterprises and EU businesses, competition in EVFTA will become more complicated. However, in general, the economic structure of Vietnam and EU countries is complementary and mutually supportive, so there will be less direct competition.

Intense competition will only be in some areas where Vietnam is still weak while the EU is very strong, such as logistics and animal husbandry. However, even within these sectors, we do not have to worry too much, because of our commitments. Markets that are opening in EVFTA will be moderate, with a long term roadmap that will allow the rise of domestic enterprises.

The problem is that efforts to rise to face competition must be the focus for integrating businesses, and not continue to rely on protectionism. The practice of our highly competitive industries and fields are now those that have said no to protectionism, committed to competition, and are bravely opening into new avenues and integrating simultaneously.

State will pave way and lead

Enterprises need to work closely with Government agencies in their effort to implement EVFTA. In order to improve the institutional capacity to prepare for integration, reforms must not only ensure compliance with commitments, but also best use of opportunities. Deeper and broader institutional reforms mean committing to opening development space for the Vietnamese economy.

If EVFTA is seen as a highway, the domestic institutions will act as inner roads and inner cities will serve as feeder roadways. These roads must follow clear and disciplined guidelines to accelerate Vietnam to a stronger economy. Attempts at integrating institutional reforms must continue to strengthen transparent and fair competitive platforms; sustainable development; ensure harmonization of economic, social and environmental objectives; support micro, small and medium enterprises; promote business ties; develop supporting industries; and create a symbiotic ecosystem of mutual benefit between foreign and domestic enterprises.

The key to EVFTA integration in particular, or international economic integration in general, must ultimately stem from State institutional reform efforts, by upgrading governance and improving competitiveness in businesses. These are extreme future challenges for the Vietnamese economy to meet and face and overcome if it wants to succeed.

Translated by Mathew Hùng

Vu Tien Loc, Chairman of VCCI

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