Capitalising on EVFTA sure to be a challenge

The EU-Vietnam Free Trade Agreement (EVFTA) is expected to provide a host of opportunities to Vietnamese enterprises to bolster their exports, but they must also meet strict requirements in order to fully capitalise on the deal, insiders have said.
Capitalising on EVFTA sure to be a challenge ảnh 1A garment factory in My Hao district of Hung Yen province (Photo: VNA)

Hanoi (VNA) - The EU-Vietnam Free TradeAgreement (EVFTA) is expected to provide a host of opportunities to Vietnamese enterprisesto bolster their exports, but they must also meet strict requirements in orderto fully capitalise on the deal, insiders have said.

Vu Duc Giang, Chairman of the Vietnam Textileand Apparel Association (VITAS), said the National Assembly’s ratification ofthe EVFTA on June 8 is “good news” for the sector, which has suffered from COVID-19in recent times, as businesses will have opportunities when the agreement takeseffect.

The EU is currently the world’s largest importerof textiles and garments, with 34 percent of the global total each year worth morethan 250 billion USD in value. Vietnamese products account for just 2.7 percentof the EU’s imports.

Giang said companies in the sector believe inthe prospect of exports to the EU rising after the EVFTA comes into effect, astariffs will be slashed to zero percent.

Textile and garment shipments to the market areforecast to increase sharply from now to 2025, by about 67 percent compared to anon-EVFTA scenario.

However, the VITAS chairman noted, businessesneed to be thoroughly prepared to make use of the opportunities and have a solidgrasp of the regulations within the agreement, because the EU is a demandingmarket with strict requirements on product quality and design.

Just one simple fault may damage all exportactivities, he said, explaining that a batch of goods with unclear origin or indeterminatequality may expose similar batches to stricter inspections or even an import ban.

Phi Viet Trinh, General Director of the Ho GuomGarment JSC, said that in order to benefit from the preferential tariffs underthe EVFTA, products must have a certain proportion of materials hailing fromthe EU or Vietnam. This is a major challenge because most input materials inVietnam are currently imported from China or other ASEAN countries.

Therefore, management agencies and businesses alikemust take certain action to maximise the opportunities, he stressed.

The official added that it is necessary to promulgatepolicies to attract domestic and foreign investment in material production. Mechanismsin particular are needed to promote links between material suppliers andmanufacturers of finished products to meet rules of origin requirements.

Of a similar mind, General Director of theGarment 10 Corporation Than Duc Viet said the EVFTA will open up numerousopportunities but Vietnam must work hard to fully benefit.

The EU is ready to import Vietnamese goods but suchproducts must comply with rules of origin, he noted, voicing a hope that thetextile and garment industry can grasp the available opportunities.

Nguyen Quoc Tuan from Vinh Thong Co. Ltd, afootwear exporter to Europe, said the company’s operation has been hindered by COVID-19since the beginning of the year but now he expects the EVFTA will boost exportsover the remainder of 2020.

Nevertheless, he also acknowledged that the companywill encounter a range of difficulties in adhering to the agreement’s rules oforigin, as while 60 percent of its input materials come from domestic suppliersthe remainder come from elsewhere, primarily China. Updating technology andexpanding production scale are also problematic given that the company’sinternal resources remain modest.

Nguyen Van Khanh, Vice Chairman and SecretaryGeneral of the Shoe and Leather Association of HCM City, said local leather andfootwear enterprises should try and immediately put the EVFTA into full use despiteup to 85 percent of them lacking capital, technology, and materials.

It is also not easy to meet rules of origin requirementswhen 60 percent of materials are from China and other suppliers, he added.

Experts predict that in the short term, theEVFTA may not give a strong boost to the textile - garment and leather - footwearindustries in Vietnam, but will certainly bring about long-term benefits forthem in expanding their market share in the EU.

A number of enterprises have also voiced a hopethat when foreign investors realise that Vietnam now has even greater potential,technology transfer and investment in material production will grow./.
VNA

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