A recent survey has shown that despite the risks to domestic market share, the majority of enterprises in Vietnam find the free trade agreements the country has inked with its partners to be hugely beneficial.
Vietnam businesses have reaped the many advantages of free trade agreements, Photo: Le Toan
The HSBC-sponsored survey on free trade agreements (FTA) conducted by the Economist Intelligence Unit reviewed the opinions of 800 senior executives from companies in Australia, China, Hong Kong, India, Indonesia, Malaysia, Singapore and Vietnam – 100 from each country.
Results showed that Vietnam was ranked among the top three countries in the region for FTA usage. On average, each FTA signed by the country is used by 37 per cent of its exporters. Sixty five per cent of respondents said they were benefiting from the FTA with Australia and 14 per cent from New Zealand. In terms of exports, 87 per cent reported an increase in exports thanks to the usage of FTAs, with 34 per cent reporting a “significant increase” and 53 per cent reporting a “moderate increase“. Only 12 per cent reported that their exports had “remained the same“.
They also specified other direct benefits that the FTAs have provided for their companies (see box).
According to a report by the EU-funded Multilateral Trade Assistance Project (Mutrap) released in March on the sustainable impact assessment of the Vietnam-EU FTA expected to be inked by late 2014, tariffs on footwear, for instance, will be reduced to 0 per cent by 2020, down from the existing 12.4 per cent.
However, the Mutrap report also warned that reducing tariffs will have a massive impact on the volume and prices of electronic products imported from Europe. The FTA will grant a business advantage to European exporters compared to their Asian competitors.
Regarding the automation sector, Vietnam can benefit from the increase in foreign direct investment from European manufacturers, while the high-quality products from Europe can obtain a significant market share in Vietnam as well as in neighbouring countries like Laos and Cambodia.
According to Mutrap, the EU FTA would enable Vietnam to have annual gains in welfare of about $1.5 billion in 2020 when most of the tariff reduction will have been implemented. The estimated bump in gross domestic product is about 2-2.5 per cent and real wages are estimated to improve by around 5 per cent.
Locally-owned Hung Yen Garment Joint Stock Company enjoyed an export turnover from EU trade of $21 million last year, and expects even greater benefits once the EU FTA is passed.
“If the average export tariff is slashed to 0 per cent thanks to this FTA, this figure will be far higher,” said the company’s general director Nguyen Xuan Duong.
According to the Vietnam Timber and Forest Product Association, who saw an export turnover of $756 million last year from EU trade, Vietnam’s timber industry will boom once the trade tariffs averaging 20-25 per cent are done away with.
By Nguyen Thanh
Đăng ký: VietNam News