Promoting investment and productivity through EVFTA
The EU is one of the closest economic partners of Vietnam, importing nearly 20 percent of Vietnam’s exports in recent years. Being not only the largest economy of the world, the EU is also the biggest investor and no.1 trade partner among 80 countries and territories. The EU is the first investor outside Asia in Vietnam.
The growth model of Vietnam may be limited by declining productivity in the future. The EU assessed that the EVFTA provides an alternative motivation for growth with potential to boost investment and productivity.
EVFTA will connect the open developing economy of Vietnam with the largest economy in the world. The important thing is that the EU is also the largest importer in the world. 50 percent of the EU imports originate from developing countries.
EVFTA will also attract foreign investment to Vietnam. It is time for Vietnam to strengthen its role as a centre of manufacturing in ASEAN. Facilitating the early implementation of EVFTA can help improve productivity and boost trade of Vietnam.
It requires adjusting laws from both sides in order to facilitate investment, and avoid bottlenecks during the implementation of EVFTA. One common route is being mapped out, which is expected to lay the foundation for a comprehensive and beneficial EVFTA.
Chapter 15 of EVFTA on Sustainable Development also requires urgent attention from both sides to demonstrate that economic growth is not detrimental to the environment and human development. Vietnam has shown a pioneering role after completing Vietnam-EU Voluntary Partnership Agreement on trading wood and organising an international conference on illegal wildlife trade in November 2016.
On right track
In the past 10 years, the value of trade in goods and services has nearly doubled. However, growth has been uneven, and sometimes reduced or slowed, such as in the current situation.
The EVFTA will be the 2nd FTA between one ASEAN member with EU, after Singapore.
EVFTA provides a stable legal framework to govern bilateral trade and investment relations. The overall objective is to create a more friendly business environment and increase transparency, because this is the means to promote trade and growth. Moreover, it is also consistent with the policies and ambitions of Vietnam, including the National Strategy for Green Growth.
The EU accounts for 20 percent of world trade. Half of all imported goods are from developing countries and this is a huge potential. Moreover, the EU is also the largest importer of agricultural products.
The EU is a very diverse market, providing opportunities for producers at all stages of the value chain (major products, raw materials, energy, capital, equipment, chemicals, various types of consumer goods).
The EU market has high competitiveness. So, when trade and investment relations are strengthened, companies have to increase their competitiveness. It will increase product quality and investment value.
The Free Trade Agreement offers great potential for both Vietnam and the EU. It also poses the challenge in understanding the potential and opportunities brought by EVFTA. It is very important to ensure that Vietnamese private enterprises can increase the market share of exports to Europe.
The implementation of FTA is expected to begin in 2018 because there is still some work to be accomplished (legal review, translation, formal approval and signing, and then ratification of the European Parliament). This process is on track. Clear time frames also allow all parties to prepare and be ready to perform right from the first day.