Source: Socialist Republic of Vietnam
Taking advantage of opportunities and dominating market share
EVFTA is opening up a great opportunity for Vietnamese enterprises to enter a potential market of 508 million people and a gross domestic product of US$18 trillion. Many products that Vietnam has already exported to this market including garments and textiles, coffee, and footwear still have huge room to expand to this market.
Executive Director of Vietnam Textile and Garment Group (Vinatex) Cao Huu Hieu said that Vietnam’s textile and garment export turnover to the EU market reached about US$4.5 billion in 2019, up 2.23% compared to 2018. The EU is spending approximately US$280 billion annually on importing textiles and garments from suppliers across the world while Vietnam’s market share occupies less than 2% of EU’s total textile and garment imports. Thus, there is still lots of room for Vietnam’s garment and textile sector to grow.
Notably, when EVFTA comes into effect, 42.5% of tariff lines imposed on Vietnam’s textiles and garments will be abolished and the rest will be eliminated after three to seven years, which will almost certainly create a push for businesses to promote exports.
Seeing those opportunities, many textile and garment enterprises have made careful preparations to be able to benefit from the agreement. Chairman of the Board of Directors of TNG Investment and Trading JSC Nguyen Van Thoi said that enterprises who have the ability to use materials from fabric onward to meet the rules of origin of EVFTA will have great advantages to enjoy tax incentives and boost exports. He noted that TNG exports more than US$100 million worth of garments to the EU market each year and the company will continue to expand its exports to this potential market.
Regarding footwear, Director of Tuan Viet Shoes Co., Ltd, Tran Van Tac, said that the approval of EVFTA will offer a great benefit to enterprises as the tax on canvas shoes will immediately be cut to 0% while the tax on several types of shoes will be eliminated as scheduled. He said that the agreement will bring about huge opportunities for his company as it exports 70% of canvas shoes to the EU.
Vietnam’s timber sector is also expected to benefit from EVFTA which is estimated to reach an export revenue of US$1 billion after the deal comes into force (Vietnam’s current timber export revenue to the EU is about US$700 – US$750 million per year).
It can be affirmed that Vietnamese goods will enjoy big incentives from EVFTA, especially garments and textiles, footwear, electronics, and wood products. However, the agreement also sets very high requirements relating to origin, certification of origin, food safety, information transparency, production environment and others.
Therefore, if businesses lack thorough preparations and long-term strategies, they will face difficulties to take advantage of the opportunities provided by the agreement while facing fierce competition from goods imported from the EU.
Vice Chairman of the Vietnam Textile and Apparel Association (Vitas) Truong Van Cam said that the EU is a potential market for Vietnamese textile and garment enterprises with a demand of about US$250 billion per year, doubling the US market. In order to expand exports to this market and benefit from EVFTA, Vietnam must build a complete supply chain and self-control its input materials to meet the rules of origin of fabrics onwards. Although Vietnam can produce yarns, it has yet to meet the requirements set in new generation FTAs.
The Ministry of Industry and Trade said that mechanisms and policies on the development of supporting industries will continue to be reviewed in accordance with the contents of EVFTA to facilitate sectors that will benefit the most from the agreement such as garment and textile, footwear, automotive industry, electronics, mechanical and processing industries.
Director of the Research Institute for Brand Strategy and Competition, Vo Tri Thanh said that the ratification of EVFTA is good news for Vietnam because of its positive prospects.
Impacts of the acute respiratory infections – Covid-19 epidemic are gradually disclosing our limitations and shortcomings in market development and competitiveness. In this context, EVFTA is forecast to create a big push for Vietnam’s exports, especially when Vietnam’s exports the Chinese market are facing many difficulties. The agreement is the “key” to help open the door for Vietnamese businesses to penetrate into the potential market with a gross domestic product up to US$18 trillion.
With high quality and high scientific and technical content, EU goods imported to Vietnam will certainly be an important supply to meet Vietnam’s social and economic development demand. Vietnam needs to continue promoting the restructuring and facilitating businesses to help them compete more effectively and taking advantage of more opportunities from EVFTA.