Supporting SMEs to take advantage of opportunities,effectively implement EVFTA

Minister of Industry and Trade Tran Tuan Anh chairs a conference on supporting SMEs in taking advantage of opportunities to effectively implement the EVFTA (Photo: Vietnam+)

Minister of Industry and Trade Tran Tuan Anh made a statement in Ha Noi on June 5 at a conference to support SMEs in taking advantage of opportunities in order to effectively implement the EVFTA.

Anh said there were many issues the SME community should consider during the implementation of free trade agreements (FTAs). For example, the ability to access and understand legal information, commitments in agreements as well as the implementation process.

According to the minister, the EVFTA is a new generation of FTAs that are committed to the EU and Vietnam opening their markets and reforming their administrative procedures, institutions and policies. As soon as the agreement takes effect, the EU will commit to removing 85.6 per cent of tariffs, equal to 70.3 per cent of the country’s total export turnover to the EU.

Seven years after the EVFTA takes effect, the EU will remove 99.2 per cent of import taxes, or 99.7 per cent of export turnover from Vietnam to the EU.

The remaining products will enjoy zero taxes.

That means that nearly 100 per cent of Vietnamese goods exported to the EU will see import taxes abolished after seven years.

This creates big opportunities for local firms to expand their export markets to the EU and the same opportunities for European businesses.

Economists say the EVFTA has been expected to increase Vietnam's exports by 2.18 to 3.25 per cent in the 2019-23 period and 4.75 to 5.3 in the 2024-33 period.

However, the EVFTA will also bring challenges for SMEs, which account for 97 per cent of total businesses in the country. With 27 countries and a population of more than 450 million people, as well as per capita income of about US$36,000, the EU is also a demanding market, requiring high product quality. This is the biggest challenge for SMEs.

Nguyen Van Than, chairman of the Vietnam Association of Small and Medium Enterprises said the opportunity provided by the EVFTA would be huge, but there would be considerable challenges for Vietnamese businesses to join this agreement.

“The biggest challenge for SMEs is the technical barriers. Vietnamese companies would have to face requirements of food hygiene and safety, epidemiological hygiene, codes of conduct, regulations on environmental protection, and the origin of goods imported into the EU. The regulations on localisation rates will also cause many difficulties for businesses,” Than said.

He continued to explain that competition with EU goods would also be a challenge for SMEs.

"When opening Vietnam’s market for EU goods, Vietnamese enterprises will have to accept fair competition with EU businesses. These are capitalised businesses with high-quality goods, beautiful designs, and are highly competitive thanks to the benefits of EVFTA tax exemption," he said. Therefore, Vietnamese businesses would be under sereous competitive pressure at home.

“In addition, in terms of trade remedies, when tariff barriers are no longer an effective tool to protect businesses, import markets tend to apply anti-dumping and anti-subsidy or safeguarding measures to protect domestic production,” he said.

At the same time, when the economy is open under EVFTA commitments, production transition processes start to form. There will be a wave of investors from the EU flooding into the country, creating competition for labour resources in industries. Some industries, therefore, will lack workers.

The chairman said Vietnamese SMEs would also face difficulties in information shortage of the EU market as well as regulations on imported goods. Vietnamese enterprises had not yet been prepared with adequate knowledge and skills on exporting goods to the EU as well as a lack of capital for production and business.

He proposed that the Government accelerate administrative reforms while completing policies and institution to submit to the National Assembly for approval. These include important laws such as the Enterprise Law, Environment Protection Law and Labour Law, which are required to suit the EVFTA’s regulations. This would be a legal foundation for firms to effectively implement the EVFTA.

The Government should also organise training courses on the EVFTA to improve businesses’ awareness of the agreement.

The EVFTA is expected to be approved by the National Assembly on June 8. The agreement would take effect from July 2020./.