Creating new growth engines for the economy
During its ongoing ninth session, the 14th National Assembly (NA) will press the button to ratify the EVFTA, creating new momentum for comprehensive and sustainable development and an expectation to facilitate the country’s deeper integration into the world economy via appropriate solutions.
A report on how the deal will affect Vietnam, presented by a Government representative at the NA, showed that in terms of growth, the EVFTA is expected to increase the country’s GDP by an annual average of 2.18-3.25% (in the first five years of implementation), 4.57-5.30% (in the next five years) and 7.07-7.72% (in the five years after that). Regarding exports, the EU is now one of the major trading partners of Vietnam, with the economic structure between the two being complementary rather than directly competitive. Given that fact, the EVFTA will surely see a big push on exports after coming into force. The commitment to reduce or eliminate tariff barriers for goods into the EU is a great advantage for Vietnamese businesses to tap into this US$18 trillion market. As calculated, the agreement will help Vietnam’s export turnover to the EU expand by 42.7% by 2025 and 44.37% by 2030 compared to a no-deal scenario.
During the first-phase sittings of the ninth session, NA deputies profoundly analysed the significance, impacts and contributions of the EVFTA to Vietnam’s sustainable development across an array of immediate, middle-term and long-term aspects. They also commented on a number of issues in building and perfecting legal institutions, identifying new motivations associated with renewing the growth model, improving the investment and business environment to attract foreign investment, promoting the business community’s linkages to create a closed supply chain and together improve competitiveness. The EVFTA not only brings opportunities and challenges regarding economic terms, but also features pressure across the spheres of politics, culture, social security and external relations, including the risk of falling behind and a middle income trap.
To prepare for such a large playground, the Government has drafted an action plan so that after the NA’s EVFTA approval, ministries and sectors will get down to carrying out their assigned tasks. The EVFTA features strict regulations and rules on investment procedures, customs, trade facilitation, technical standards, quarantine measures, intellectual property, and sustainable development. The full observance of these provisions requires reforms of the legal system. However, in fact, a series of international institutions to which Vietnam is a signatory have unveiled limitations in turning opportunities into reality, which mainly stems from delays at the stage of finalising legal institutions. As noted by a NA deputy, nearly two years ago, the NA approved the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) with the expectation that Vietnamese goods would flow steadily into the CPTPP member nations. However, Vietnam’s exports to the market has have increased by only 7.2% thus far, which means that the country has not yet benefited much from the CPTPP.
The EVFTA facilitates Vietnamese goods’ entry into the EU market, but it also sets many higher standards than those committed in the CPTPP. Deputies Hoang Van Cuong (Hanoi) and Vu Tien Loc (Thai Binh) suggested that, in the immediate future, the Government should identify the strongest products to be exported to the EU market, thence assessing their ability to meet the EU’s requirements and technical standards, as well as implementing measures to help those goods satisfy EU standards. In the long term, the Government needs to drastically reform economic institutions, while strengthening the publicity, transparency and validity of policy and law systems to fully implement international commitments and create a healthy business environment with fair competition. Administrative reforms should be accelerated in all fields, especially those directly related to EVFTA commitments on investment, construction, land, tax and customs. Moreover, attention should be paid to completing economic restructuring associated with renewing the growth model towards improving quality and efficiency, in addition to effectively exploiting complementary and mutually supporting factors in terms of the labour force, capital, natural resources and science and technology.
Internalisation of technology, technology transfer and high-quality industrial human resources must be Vietnam’s labour advantages in the future. However, at present, the majority of small and medium-sized enterprises (SMEs) in Vietnam (accounting for nearly 98% of the total number of businesses) have low competitiveness with limited financial resources, technological capabilities and labour productivity. To support enterprises, many NA deputies recommended that the Government should synchronously develop all types of markets and strongly develop export markets; perfect the management mechanism and implement new import and export management tools in line with requirements; and continue to bolster communication to raise firms’ awareness of the regulations and commitments in the EVFTA. Ministries and sectors should proactively study and apply appropriate measures to support and protect the legitimate interests of domestic manufacturing industries above competition from foreign goods, otherwise, most Vietnamese businesses will face great challenges in participating in and taking advantage of the opportunities presented by the EVFTA.
