A recent survey has shown that despite the risks to domestic market share, the majority of enterprises in Vietnam found that free trade agreements the country has inked with its partners to be hugely beneficial, the Vietnam Investment Review (VIR) reported on August 12.

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 locality.

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 percent of its exporters. Sixty five percent of respondents said they were benefiting from the FTA with Australia and 14 percent from New Zealand. In terms of exports, 87 percent reported an increase in exports thanks to the usage of FTAs, with 34 percent reporting a “significant increase” and 53 percent reporting a “moderate increase”. Only 12 percent reported that their exports had “remained the same”.

They also specified other direct benefits that the FTAs have provided for their companies.

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 zero percent by 2020, down from the existing 12.4 percent.

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 USD in 2020 when most of the tariff reduction will have been implemented. The estimated bump in gross domestic product is about 2-2.5 percent and real wages are estimated to improve by around 5 percent.

Locally-owned Hung Yen Garment Joint Stock Company enjoyed an export turnover from EU trade of 21 million USD last year, and expects even greater benefits once the EU FTA is signed.

“If the average export tariff is slashed to zero percent thanks to this FTA, this figure will be far higher,” the company’s General Director Nguyen Xuan Duong was quoted by VIR as saying.

According to the Vietnam Timber and Forest Product Association, who saw an export turnover of 756 million USD last year from EU trade, Vietnam’s timber industry will boom once the trade tariffs averaging 20-25 percent are removed.-VNA