The EVFTA is expected to open the door wider to the US$18 trillion economy for Vietnamese enterprises. The National Assembly of Vietnam formally ratified the EU-Vietnam Free Trade Agreement (EVFTA) and the EU-Vietnam Investment Protection Agreement (EVIPA) on June 8.
The EVIPA is expected to boost EU investment in Vietnam and increase Vietnam’s access to the EU’s clean and advanced technologies, especially as the number of EU projects in Vietnam currently stands at only 2,500, with total capital of US$27.5 billion.
In the meantime, the EVFTA is expected to open the door wider to the US$18 trillion economy for Vietnamese enterprises. But it should be noted that Vietnam will also open its market of goods and services to the EU, meaning greater pressure on Vietnamese enterprises, which presents a huge challenge as EU enterprises far outstrip Vietnamese counterparts in terms of competitiveness, experience and ability to capitalise on free trade agreements.
But Vietnam’s commitment to open its market is a phased procedure, especially for sensitive goods, so the EVFTA is an opportunity and appropriate pressure for Vietnamese enterprises to reinvent their business methods and enhance their competitiveness.
It is also no easy task to take advantage of the EVFTA because enterprises have to meet the rules of origin, meaning a certain degree of the materials used for the final goods must be sourced from Vietnam or the EU in order for such goods to enjoy tariff preferences. Meanwhile, the majority of materials used for Vietnamese exports are secured from regional countries. In addition, the EU is a demanding market with stringent standards on food safety and environmental protection. Therefore, the quality of Vietnamese goods must be improved considerably to access this market.
In order to deal with the abovementioned challenges, Vietnamese enterprises should, first of all, proactively obtain information about the trade pact by taking part in conferences, workshops and training courses on the EVFTA, and continually update themselves with information about the EVFTA and contact the relevant agencies directly if they have any queries during its implementation.
Secondly, enterprises need to enhance their competitiveness and production capacity by formulating long-term strategies, applying science and technology to their business, and learning from successful models so that they are well-prepared in the face of competition.
In order to take advantage of the EVFTA effectively, enterprises need to carefully study the rules of origin and proactively adjust their production procedures and sources of materials. Furthermore, it is necessary for them to pay attention to social responsibility, particularly with regards to labour and environmental protection regulations.
Vietnamese enterprises, especially small and medium-sized ones, should consider the EVFTA as the beginning of a new business stage predicated on competition pressure in order to innovate and grow further. The EVFTA also opens the possibility of attracting strong flows of foreign direct investment, which is a great opportunity for Vietnamese enterprises to participate even deeper in regional and global supply chains.