Wednesday, 24 Jul 2019

Big gap between Vietnam’s trade competitiveness and openness level

Updated at Wednesday, 10 Jul 2019, 19:45
The Hanoitimes - Expert expressed concern over the lack of readiness from both government agencies and the business community as new trade deals become effective.
Vietnam’s trade openness is second only to Singapore in the region, but its competitiveness, a key indicator for efficient global integration, has left much to be desired, according to Vu Tien Loc, president of the Vietnam Chamber of Commerce and Industry (VCCI). 
Overview of the conference. Source: Ngoc Thuy.
Overview of the conference. Photo: Ngoc Thuy.
“Benefits from new trade agreements such as the Comprehensive Progressive Trans – Pacific Partnership (CPTPP) and the EU – Vietnam Free Trade Agreement (EVFTA) for Vietnam are clear, but the question remains whether the business community could grasp this opportunity,” Loc said at a conference held on July 10 discussing the opportunity of trade and investment from the EVFTA. 

Loc pointed to the fact that Vietnam was ranked 77th out of 140 countries in the Global Competitiveness Report of the World Economic Forum in 2018, down three places from the 74th a year earlier. Of the 12 pillars that made up its final score, Vietnam stood at 94th in terms of institutions and 101st in business dynamism. 

"In ASEAN, Vietnam's level of competitiveness is in seventh place, ahead of Laos, Cambodia and Myanmar, while its corporate governance capacity was ranked sixth," indicating a gap between the high level of economic openess and competitiveness of the country, "said Loc.

Loc expected the integration would facilitate faster economic reform, especially with the EVFTA coming into play. 

“Greater competitiveness consists of not only tariff reduction, but also meeting high standards on technical barriers, rules of origins, sustainable development and environmental protection,” Loc added. 

With regard to this issue, it is essential for local enterprises to improve their production capabilities and corporate governance, and in case of the EVFTA, to meet the EU’s high level of standards, he urged. 

Loc recommended Vietnamese enterprises put risk prevention measures in place, due to the current unpredictability of global trade. 

Ngo Chung Khanh, deputy head of Multilateral Trade Policy Department under the Ministry of Industry and Trade, expressed concern over the lack of preparation from both government agencies and the business community as new trade deals become effective. 

With EVFTA, Vietnam can gain advantages compared to its competitors such as China, Thailand, Myanmar, in accessing the EU market, Khanh said, adding this is only a matter time before these countries approach EU for a similar trade deal. 

Improving business environment a priority 

Staying on the issue, Vice Chairman of the European Chamber of Commerce in Vietnam (EuroCham) Nguyen Hai Minh said the EVFTA, once ratified and implemented, would trigger reduction and elimination of over 99% of customs duties on goods, “which help Vietnam join a selected group of countries with privileged, tariff-free access to Europe’s over 500-million strong consumer market.”

More importantly, this agreement brings an opportunity to promote EU – Vietnam value chain integration via the increase of the EU’s direct investment and the rise of trade in intermediate goods and services between the two parties, Minh said. 

“However, the question is whether Vietnamese enterprises could plug themselves into such value chains organized by EU companies,” Minh continued. 

Minh recommended the business community to review the agreement carefully especially on the rules of origin because it plays an important role in shaping the value chain activities in Vietnam. 

Additionally, Vietnam’s commitments in the EVFTA is not only about the elimination of customs duties, but also about commitment in elimination of non-tariff barriers, such as testing and certification procedures. 

“These barriers should be removed with the FTA in place, however, no need to wait until the commitment is triggered, Vietnam should consider now transposing the agreement’s terms into national laws to facilitate the business of importers,” Minh said. 

According to Minh, despite the existence of the EVFTA, EU companies or any companies from third countries only come to Vietnam if its business environment is appealing, expecting the government to continue to streamline its administrative procedures and reform its legislation to provide a more “predictable, stable and attractive environment for foreign investors.

The EU remains one of Vietnam’s largest trading partners, and the second largest export market of Vietnam. 

Exports from Vietnam to the EU has increased significantly from US$18 billion in 2012 to US$42.5 billion in 2018. The exports from the EU to Vietnam also enjoy a sharp increase from US$5.37 billion in 2012 to US$13.8 billion in 2018. 

The EU is also one of the biggest foreign investors in Vietnam with registered capital of US$23.9 billion in 2,133 projects as of 2018. 
Ngoc Thuy
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