Realising EVFTA Opportunities

22-Sep-2021 Intellasia | Vietnam Business Forum | 7:07 AM Print This Post

After one year of enforcement, the EU Vietnam Free Trade Agreement (EVFTA) has actively helped economic development between Vietnam and the European Union (EU) and supported Vietnam’s growth. However, to realise the EVFTA opportunities, Vietnamese and EU businesses still need to overcome many challenges.

A year of sweet fruit

The official enforcement of the EVFTA Agreement has enabled Vietnam to access a market of 500 million consumers of 27 EU countries, the second-largest global purchasing power, and the second or third largest buyer of Vietnam’s exports for many consecutive years. For its part, Vietnam with a market with 98 million consumers and an export-oriented economy, also has a very high demand for input sources for production as well as high-quality consumer products from the EU.

Former VCCI President Vu Tien Loc, said that the EVFTA, after one year of official entry into force on August 1, 2020, has positively helped bilateral economic development and Vietnam’s growth, evidencing positive progress in bilateral import-export relations.

Driven by the EVFTA, the EU’s imports from Vietnam rose by 3.8 percent while its global imports sank 20%. In the first half of 2021, Vietnam’s exports to the EU still steadily advanced 18.3 percent year-on-year, partly spurred by agricultural products. Vietnam’s imports from the EU increased 4.3 percent in 2020 but the growth soared to 19.8 percent in the first six months of 2021. The rate of exports enjoying preferential tariffs under the EVFTA for Vietnam is also highest in the first year among all free trade agreements (FTAs). This rate is 2 times higher than that in ATIGA (Asean Trade in Goods Agreement), 7 times higher than AIFTA (Asean India Free Trade Agreement), and 2 times higher than CPTPP (Comprehensive and Progressive Agreement for Trans-Pacific Partnership) in the first year.

On investment, Vietnam has received quality investment funds and advanced technology from the EU, creating value and benefits for businesses and investors of both sides. As of June 2021, investors from 26 out of 27 EU countries invested $22.21 billion in 2,221 valid projects in Vietnam, $449 million and 142 projects more than a year ago.

However, businesses of both sides are still facing certain limitations in EVFTA implementation, especially in a new and more difficult and challenging period under the unprecedented pressure of the epidemic.

Overcoming challenges together

Vu Ba Phu, director of the Vietnam Trade Promotion Agency (Vietrade) under the Ministry of Industry and Trade, said, although EVFTA has opened up great opportunities for Vietnamese businesses, they have seemingly not yet fully tapped EVFTA benefits. Besides, they are still facing numerous challenges, especially in the context of the Covid-19 outbreak. The EU has strict requirements on quality standards, food hygiene and safety, labour and environment. In order to capture tariff preferences according to EVFTA commitments, they must meet strict rules on the origin of inputs for processed and manufactured products such as apparel, footwear and wooden furniture, as well as sanitary and phytosanitary standards for agricultural products.

Opening the Vietnamese market to EU goods and services also means that Vietnamese companies will have to compete more in the domestic market. This is a huge challenge because EU businesses have inherent advantages of competitiveness, market experience as well as the ability to make the most of FTAs.

In the last months of 2021, the complicated Covid-19 epidemic outbreak across the country since early July 2021 has significantly affected manufacturing and export progress of domestic enterprises. On the EU side, although there have been some positive signals, the EU economy is still challenging as the Covid-19 epidemic is likely to recur. Meanwhile, its unemployment rate is still high albeit improved, the strong hike in energy prices has weighed up pressure on inflation. Additionally, the record highs of freight rates also disturb trading. This indirectly hurts the supply chain, especially the electronics, apparel and footwear industries where Vietnam has a strong advantage.

For European businesses, Jean-Jacques Bouflet, vice President of EuroCham, underlined the importance of the EVFTA in creating a level playing field for European companies in Vietnam.

In order to enhance the effect of the EVFTA Agreement for businesses of both sides, EuroCham President Alain Cany said that, to continue construction and development on a promising start and utilise the full potential of the historic agreement, the two sides must work together closely to overcome challenges.

“The EVFTA will not be successful without cooperative efforts of Vietnamese and European business communities. In other words, the entry into force of the agreement is just the beginning. We need the same effort in the next decade as we did in the last to continue our success. This is what the European Vietnam Business Council (EVBC) is designed to deliver. Utilising the EVFTA is now more important than ever and despite the significant short-term challenges of the pandemic, we must not lose focus on long-term opportunities that the EVFTA offers,” he emphasized.

https://vccinews.com/news/44872/realising-evfta-opportunities.html

 

Category: Economy, Vietnam

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