Hanoi (VNS/VNA) - As2018 brings newer and bigger free trade agreements (FTAs), Vietnameseenterprises are faced with tough choices. They can either adapt and move up theglobal supply chain, or stand by while imported goods flood the country’smarket. Tran Thanh Hai, Deputy Director of the Ministry of Industry andTrade’s (MoIT) Import-Export Department, told Vietnam News Agency (VNA) thatfrom 2018 onward, 85 percent of Vietnamese exports will be subject to significantlylowered tariff levels of zero to 5 percent. As part of the Government’s policy to increase economicself-reliance and promote sustainable imports and exports, exports ofVietnamese goods to FTA markets grew strongly in 2017, contributing 213.8 billionUSD to the year’s turnover of 408 billion USD, per the MoIT’s data. Hai was optimistic that Vietnamese businesses will benefit morefrom bilateral and multilateral FTAs with partners such as China’s Hong Kong,Japan and the Republic of Korea (RoK). Nonetheless, Hai admitted that the process of raising Vietnameseexports’ value might not be as easy as expected. Since each FTA istailor-made to suit member countries’ needs, they have different levels ofcommitments and standards. For example, he was greatly concerned by the fact that aVietnamese automobile company would only be able to enjoy a zero percent taxrate when exporting to ASEAN countries if their products have at least 40percent of components originating in Vietnam.  Therefore, Hai suggested domestic enterprises focus on meetingstandards set by the Vietnam-Korea FTA (VKFTA) and the ASEAN-Japan Comprehensive Economic Partnership Agreement (AJCEP), since they offer morespecial tariff treatments at fewer standard requirements than others. The origin rules would encourage the country to produce locally,rather than importing materials and parts. But this could prove a long anddifficult process for Vietnamese firms, he added.

Buy less, sell more?

Le Tien Truong, Vice Chairman of the Vietnam Textile and ApparelAssociation (Vitas), told VNA that textiles and garments exports growth rate toEuropean market may not get an immediate boost from the Vietnam-EU Free TradeAgreement (EVFTA), due to preferential rules of origin. Currently, the Vietnamese textile and apparel industry has toimport 70 percent of its raw materials, 42 percent of which come from China and therest from ASEAN and the RoK.   On the other hand, starting in 2018, many preferential importtariffs to Vietnam will be progressively eliminated to zero percent, providedthe imported goods meet the MoIT’s provisions on origin of goods andCertificate of Origin (CO) and be listed in the 17 FTAs of which Vietnam is amember. Pham Tuan Anh, Deputy Head of the International RelationsDepartment under the Ministry of Finance, told the Ministry of Planning andInvestment’s online portal last week, that import tariffs reduction andelimination must be carefully carried out, lest it harm the State budget anddomestic production activities. Imports eligible for zero tariffs mainly come from ASEAN-relatedtrade agreements, though pacts signed with Japan,China,RoK and the Eurasian Economic Union also boast a significant amount,according to 2017 year-end reports from the General Department of VietnamCustoms (GDVC). For example, the VKFTA requires Vietnam eliminate 704 importtariffs lines in 2018, while the AKFTA demands 477 tariff lines eliminated and588 for the ASEAN-China Bilateral Trade Agreement (ACFTA). Similarly, the Vietnam’sSpecial Preferential Tariff Schedule for the Implementation of the ASEAN GoodsTrade Agreement between 2018 and 2022 indicates a drop of 0.9 percent inaverage tariff levels across all imports from 2017’s number, as calculated bythe GDVC. Since these reductions were made public once the FTAs weresigned, the MoF and the Vietnamese business community had ample time toprepare, said Tuan Anh. Despite fears that cutting import taxes will lead to a drop inState budget revenue, the GDVC reported overall income of 293 trillion VND (13billion USD) from import tax in 2017 alone, with a 2018 target of 295 trillionVND (13.1 billion USD), he added. Though Vietnamhad a trade deficit with China,ASEAN and the RoK, the country’s annual export turnover to these markets wasgrowing strongly, up 60.6 percent, 24.5 percent and 31 percent respectively in2017, Tuan Anh said. Therefore, Vietnam’sFTAs would help promote economic growth, attract foreign investment, increaseState budget revenue, create jobs and solve social security issues, instead ofharming import-export balance, he said.

A helping hand

Surrounded by immense opportunities and challenges requiringinitiative and flexibility, domestic enterprises should improve productquality, increase competitiveness and develop business plans to meet theseFTAs’ requirements. Bui Kim Thuy, Deputy Head of Origin of goods Division, MoIT’sImport-Export Department, said in recent time, the ministry had made efforts tocut administrative procedures to help domestic enterprises take advantage oftariff preferences and rules of origin. She listed a significant improvement in administrative proceduresfor issuing certificates of origin, which helps enterprises spend less time andcosts via online registration. Still, Thuy admitted that Vietnamese enterprises had not shown adesirable level of interest in the issue, due to lack of awareness.  She hoped that if domestic businesses understand and follow theseFTAs’ rules of origin, they will be able to take advantage of upcomingopportunities to enhance added value and ensure sustainable growth.-VNA