A big chance
The World Bank (WB) has just estimated that taking advantage of tariff incentives implemented under the Vietnam – European Union Free Trade Agreement (EVFTA) could help Vietnam's GDP increase. 2.4% and exports increase by 12% by 2030, equivalent to an increase of approximately US $ 31 billion.
EVFTA will also help 100,000-800,000 Vietnamese people escape poverty by 2030. These benefits are needed to maintain positive economic performance while the country responds to the Covid-19 pandemic.
However, according to the World Bank, the benefits are much greater if Vietnam implements a comprehensive economic and institutional reform agenda to comply with non-tariff provisions in these agreements.
Accordingly, it is estimated that these reforms will create a “productivity push”, increasing GDP by 6.8% compared to the baseline scenario by 2030. The report shows that Vietnam needs to improve its real capacity. examining three main issues: rules of origin, sanitary and phytosanitary measures for plants and animals, and mechanisms for dispute resolution between the state and investors.
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Vietnam and the EU have great opportunities to develop economic cooperation. |
Earlier, according to a study by the Ministry of Planning and Investment, the EVFTA Agreement and the Investment Protection Agreement (EVIPA) are expected to help Vietnam's GDP increase by 4.6% by 2025. Vietnam's exports South to the EU will increase by about 20% by 2020; 42.7% in 2025 and 44.37% in 2030.
According to Phu Hung Securities Company (PHS), it is expected that EVFTA will help Vietnam's GDP increase by 2.18-3.25% in the period of 2019-2023.
In the opposite direction, the European Commission estimates that the EU's GDP will increase by US $ 29.5 billion and exports to Vietnam will increase by 29% by 2035.
The EVFTA was ratified by the European Parliament (EP) on February 12, 2020 after being signed by both sides on June 30, 2019 in Hanoi. EVFTA is expected to be approved by the National Assembly of Vietnam this May, at the 9th meeting of the 14th National Assembly on the morning of May 20. The agreement is expected to take effect from July 2020.
This is a new generation free trade agreement. Accordingly, the EU will eliminate tariffs as soon as the agreement comes into effect on Vietnamese goods belonging to 85.6% of tariff lines in the tariff schedule, equivalent to 70.3% of Vietnam's exports to the EU. . Within 7 years after EVFTA came into effect, the EU committed to eliminate 99.2% of tariff lines in the tariff schedule, equivalent to 99.7% of Vietnam's exports to the EU.
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It is likely that by July, EVFTA will take effect. |
Sharing on Europa, Mr. Phil Hogan, EU Commissioner for Trade, said that EVFTA offers a huge opportunity for both Vietnam and the EU, a victory for consumers, workers, farmers and other enterprise.
If the policy is reasonable, many industries will benefit
A recent report of Phu Hung Securities, some of the commodities that are expected to increase imports from the EU are agriculture, forestry and fishery products, etc. The EU is one of the key export markets of the fishery sector. Vietnamese products with an export value of about US $ 1.25 billion.
The EU is also the second largest export market of the textile and garment industry (after the US), accounting for 11.3% of textile export turnover. Textile and apparel export value to the EU grows continuously by 6.1% / year in the period of 2015-2019. In particular, Vietnam's textile and garment export turnover to the EU reached US $ 4.3 billion (up 10%) in 2019.
According to PHS, in order to promote the export of textiles and garments to the EU, according to EVFTA, the rules of origin stipulate that the fabric used and tailoring must be implemented in Vietnam or the EU. In addition, the EU also flexibly accepts this rule such as adding up the origin from South Korea or countries where Vietnam and the EU have FTAs (such as Japan and some ASEAN countries).
In the field of agriculture, forestry and fisheries, the regulations are even stricter. EVFTA has very strict requirements about ensuring rules of origin, compliance with intellectual property, labor and environmental regulations … Therefore, Vietnam needs to communicate so that businesses are fully aware and compliant. comply with these regulations.
For the banking sector, the regulation that allows EU credit institutions to own a 49% stake in two Vietnamese banks over the next five years will create motivation to increase the attraction of capital flows from the EU into this field. .
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Schedule of commitments to reduce taxes according to EVFTA. |
Mr. Ousmane Dione, Country Director of the World Bank in Vietnam, said that, if we act resolutely to close the gap in implementation capacity and legal compatibility, Vietnam can make the most of the this trade, with estimated direct benefits unprecedented in history.
According to Mr. Ousmane, the Covid-19 pandemic is a restart button and EVFTA is an acceleration button, this is the perfect time for Vietnam to pursue deeper domestic reforms.
The reform of production and business activities in many fields is needed for better integration. According to the World Bank, the requirement of rules of origin in the EVFTA Agreement is one of the main challenges that Vietnam has to overcome. Even if the product is manufactured in Vietnam, EU importers may not necessarily recognize that origin because Vietnamese products in general are highly dependent on imported raw materials.
Among key export-processing industries, most of the input is still imported from other countries (for example, 62% in electronics and 53% in cars). Therefore, Vietnam needs to make efforts to improve the link between domestic suppliers and foreign businesses that are leading companies in major value chains across the globe.
At the same time, Europe's strict food safety standards require Vietnam to improve sanitary and phytosanitary measures in a more transparent and consistent manner. According to a World Bank estimate, the cost of fully complying with the current non-tariff measures in Vietnam has an equivalent tax rate of 16.6% (higher than the regional average of 5.4. %).
With EVFTA approved, Vietnam will be the destination for many investors from Europe and around the world. As the flow of FDI inflows, the number of trade complaints will follow. The report recommends speeding up the establishment of a system for dealing with investment complaints systematically to resolve disputes between the state and investors.
The World Bank also recommends that in order to maximize the benefits of EVFTA, the policies to support economic recovery after Covid-19 should prioritize key industries that account for the majority of Vietnam's exports to the European market.
