UKVFTA to accelerate Viet Nam’s institutional reform
UKVFTA to accelerate Viet Nam’s institutional reform
To provide a more favourable playground for enterprises to strengthen and access international markets, Viet Nam is on a path to boost institutional improvement. And it is believed that the United Kingdom-Vietnam Free Trade Agreement (UKVFTA) is accelerating the process, said experts.
As Viet Nam has signed many new free trade agreements (FTAs) with countries or regions that require more stringent standards not only on quality but also on production processes, it is crucial for local enterprises to quickly adapt to new rules.
Therefore, the Government has to make changes to relevant policies to support them.
The reform is building a favourable business environment, reducing transaction expenses for enterprises, especially small and medium enterprises, and attracting quality foreign direct investment (FDI).
And “that is what we have been doing,” economist Vo Tri Thanh said at a webinar on “Promoting the strengths of businesses - Utilising opportunities from the UKVFTA” launched by Vietnam Economic News.
He also said that high-standard FTAs, including the UKVFTA, were signed at a time when the country was making a strong transition to institutional reform, and the participation in these FTAs would be a catalyst to accelerate the institutional reform process.
"We know that while these high-quality trade contracts relate to standards and fast, strong, and deep market opening, they also have a lot to do with policies, or known as behind-border competition, state-owned enterprises, and intellectual property issues," Thanh added.
"In short, it is institutional reform."
Ngo Chung Khanh, deputy head of the Multilateral Trade Policy Department, under the Ministry of Industry and Trade (MoIT), said that the traditional FTAs had never been submitted to the National Assembly.
But when it comes to the new FTAs, it was a different story because these FTAs focus on many other matters besides just trade activities, such as labour problems (like allowing workers to establish their own union at a grassroots level), environmental issues, government procurement, and intellectual property. Particularly, in these markets, as consumers are more demanding, enterprises need to follow consumer protection regulations.
“Previously, we had never had to amend any document because we hadn't committed yet. But when entering the new FTAs, we have to submit to the National Assembly to amend the laws, and then the Government must review and amend some decrees,” Khanh said.
“First was the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), then the EU-Vietnam Free Trade Agreement (EUVFTA), and now the UKVFTA. These new generation FTAs create modifications. Combined with what we already have, our policies are more comprehensive.
“As a result, local businesses enjoy more favourable environments, with more transparent and explicit regulations.”
Filling the gaps, seizing opportunities
Along with the improvements made by the Government, domestic companies also have to put more efforts in to meet more rigorous requirements and not waste any advantage from the FTAs.
Following Brexit, the UK is seeking new partners through various trade deals. Therefore, if enterprises are unable to seize opportunities, Viet Nam’s current benefits from the FTA may soon come to an end once the UK inks agreements with other nations that provide similar commodities and products as Viet Nam.
"The results after the UKVFTA came into effect are outstanding, but there is still more room for our businesses to exploit," said Khanh.
"For example, under the FTA, we have a quota of exporting 13,000 tonnes of rice, including fragrant rice and normal rice, but so far we have only exported 5,000 tonnes, and about 8,000 tonnes have not been fulfilled.
"This means that enterprises' interest in the UKVFTA is insufficient in comparison to its potential."
"Businesses must be proactive because opportunities are many, but time is limited. As I said, the advantages are merely temporary. If the UK successfully negotiates FTAs with Thailand, the Philippines, and Indonesia, the advantages we are enjoying will no longer exist."
Khanh emphasised the crucial role of local governments in providing information about the agreements, guiding, supporting and promoting firms to access the high-standard market.
"Ministries are a third party in the implementation and coordination of the agreement. But local governments are closest to their local businesses," said Khanh.
"Even with the CPTPP and EVFTA, we have not met our expectations. Our orientation now is how to increase the efficiency of the localities’ enforcement."
It is also necessary to innovate promotion activities.
“Instead of holding conferences and seminars, we will create videos that last about 3-5 minutes on each topic and opportunity, according to the opinions of many agencies. If enterprises are interested in any topic, just click to watch,” Khanh said, adding that methods should be varied to attract companies' attention.
