Free Trade Agreements (FTAs) have increased in recent years, posingnumerous opportunities and challenges for Vietnamese enterprises sincetariffs are no longer a barrier. However, the liberalisation of servicesand investment is much harder to achieve.
After a decade ofbeing a member of the World Trade Organisation (WTO) - a milestone thatmarks the first investment wave in Vietnam - the country is nownegotiating a range of new free trade agreements (new generation FTAs),such as the Trans-Pacific Partnership (TPP) agreement and theVietnam-European Free Trade Agreement (Vietnam-EU FTA), which areexpected to bring the second wave of investments.
According tostatistics published by the Vietnam Chamber of Commerce and Industry(VCCI), Vietnam is expected to remain at the forefront of this trendamong the 12 countries joining TPP negotiations. The nation’s grossdomestic product (GDP) is forecasted to increase by 23.5 billion USD by2020 and export value is expected to increase to 68 billion USD by 2025.
However,VCCI Chairman Vu Tien Loc said the promising figures can only beachieved in an “ideal” situation - if Vietnam meets internationalstandards and makes use of opportunities, particularly with big andimportant partners like the European Union and the US.
Newgeneration FTAs create great opportunities for Vietnam to increase itsprice competitiveness compared to the WTO (members states only commit toreducing but not eliminating tariffs for “some” but not “most”tariffs). FTAs, therefore, include hugely beneficial preferentialconditions, particularly tariff incentives.
On the other hand,tariff preferences also pose a number of challenges as tariff exemptionsare applied only to export products that have a clear origin. InVietnam, most raw materials have poor quality, which can hinderVietnamese products from entering FTA markets.
Meanwhile, sinceFTAs are reciprocal agreements, Vietnam will no longer enjoy its “homeground” advantages. Local enterprises will have to keep prices low butprovide high quality products and services to TPP member countries.
Furthermore,free trade is not based on utility, but on the legal framework. Newlaws and policies for production will have to be devised, especially foragricultural production.
When tariff barriers are removed, relative advantages and the distribution of labour between economies become clearer.
Vietnamenjoys a stable political and economic climate, and has abundantnatural resources and manpower. Its strengths lie in apparel, footwear,electricity, consumer goods, and high-tech agriculture sectors, whichare expected to create opportunities for capital investment andmanagement cooperation.
In terms of the business climate andcorresponding policies, the new generation FTAs could initiate a wave ofinstitutional and administrative reforms, making Vietnam a moreeffective and market-oriented economy.-VNA
After a decade ofbeing a member of the World Trade Organisation (WTO) - a milestone thatmarks the first investment wave in Vietnam - the country is nownegotiating a range of new free trade agreements (new generation FTAs),such as the Trans-Pacific Partnership (TPP) agreement and theVietnam-European Free Trade Agreement (Vietnam-EU FTA), which areexpected to bring the second wave of investments.
According tostatistics published by the Vietnam Chamber of Commerce and Industry(VCCI), Vietnam is expected to remain at the forefront of this trendamong the 12 countries joining TPP negotiations. The nation’s grossdomestic product (GDP) is forecasted to increase by 23.5 billion USD by2020 and export value is expected to increase to 68 billion USD by 2025.
However,VCCI Chairman Vu Tien Loc said the promising figures can only beachieved in an “ideal” situation - if Vietnam meets internationalstandards and makes use of opportunities, particularly with big andimportant partners like the European Union and the US.
Newgeneration FTAs create great opportunities for Vietnam to increase itsprice competitiveness compared to the WTO (members states only commit toreducing but not eliminating tariffs for “some” but not “most”tariffs). FTAs, therefore, include hugely beneficial preferentialconditions, particularly tariff incentives.
On the other hand,tariff preferences also pose a number of challenges as tariff exemptionsare applied only to export products that have a clear origin. InVietnam, most raw materials have poor quality, which can hinderVietnamese products from entering FTA markets.
Meanwhile, sinceFTAs are reciprocal agreements, Vietnam will no longer enjoy its “homeground” advantages. Local enterprises will have to keep prices low butprovide high quality products and services to TPP member countries.
Furthermore,free trade is not based on utility, but on the legal framework. Newlaws and policies for production will have to be devised, especially foragricultural production.
When tariff barriers are removed, relative advantages and the distribution of labour between economies become clearer.
Vietnamenjoys a stable political and economic climate, and has abundantnatural resources and manpower. Its strengths lie in apparel, footwear,electricity, consumer goods, and high-tech agriculture sectors, whichare expected to create opportunities for capital investment andmanagement cooperation.
In terms of the business climate andcorresponding policies, the new generation FTAs could initiate a wave ofinstitutional and administrative reforms, making Vietnam a moreeffective and market-oriented economy.-VNA
