With a high level of commitment, the "highway" that connects Vietnam and European Union (EU) market is open but at the same time contain plenty of challenges. Enterprises are also working hard to remove barriers, successfully advance towards.
Manufacture of Long Hao Company (Dat Cuoc industrial park, North Tan Uyen district).
To solve the problem of origin
From 1st Aug, Vietnam-European Free Trade Agreement (EVFTA) and EU-Vietnam Investment Protection Agreement (EVIPA) officially come into effect. This is believed to be a big chance for enterprises to reach further. EVFTA will remove nearly 99% of customs duties between Vietnam and EU for 10 years. According to Vietnam's official estimate, EVFTA would stimulate export growth to EU by 44.37% in 2030, compared to the estimate without FTA.
Compared to other industries, EVFTA would be in favor of Vietnamese textile, and help this industry gain the advantage and make breakthrough in export. In particular, tax rate would be decreased by 0% within 7 years; and a market with the annual import revenue of $250 billion is assessed to be an opportunity for Vietnamese textile. After the Covid-19 pandemic, textile industry expects more opportunities from EVFTA. Phan Le Diem Trang, Vice Chairwoman of Provincial Textile Association, said that EVFTA was an opportunity for textile enterprises and clearly showed Vietnam's position in the international arena, including textile industry. After the world economy recovers, this opportunity is expected to be greater based on Vietnam's macroeconomic stability, efforts of Vietnamese enterprises.
However, the Origin rule is the most difficult issue to textile enterprises in taking advantage of EVFTA. In the long term, enterprises could enjoy the incentives only after finding the solution for this "problem". The textile industry has not been proactive in their qualified source of fabrics for export to EU. Although EVFTA allows Vietnamese enterprises to use fabrics from Korea or a third country that signed FTAs with the two parties, such as Japan and ASEAN, the high price and the scarce of materials are also problems to enterprises. The purchase of domestic fabrics with an additional amount of 10% VAT tax is more expensive than imported fabrics. Therefore, benefits of customs duty cuts are not enough to offset, reduce selling price and compete with other countries. Additionally, the increasing logistics cost has heightened selling price and reduced the competitiveness of enterprises...
Another example is timber industry, which uses many wood sources in the country and imported from European countries, thus does not have to bear large pressure for the origin of raw materials, but the domestic supporting industry has not met requirements in terms of quality and price for timber industry to export. In the long term, experts believed that Vietnam needs to develop the supporting industry to ensure the requirements of origin. The State needs to identify a spearheaded export sector and the development planning of auxiliary industries. With limited resources, Vietnam cannot disperse the labor force but must concentrate on developing the most likely spearhead auxiliary industry.
Regarding the issue of origin and pressure of Vietnamese enterprises, Phan Van Chinh, Director of Import and Export Bureau (Ministry of Industry and Trade), said Ministry of Industry and Trade would cooperate with associations and related units to soon complete a development strategy. The ministry will build a separate system of self-certification of goods, communicate and select some enterprises for this system, connect to the EU to strengthen the reputation of Vietnam.
It's time to connect
Nguyen Van Than, Chairman of Vietnam SMEs' Association, assessed that EU, even with benefits of EVFTA, is not an easy market, as capital, production technology, competitiveness, capability to meet standards and regulations of Vietnamese SMEs are very limited. Insufficient capital, limited international trade experience, unprotected product and brand name etc. are difficulties of enterprises when performing trade promotion activities.
According to Provincial Textile Association, Binh Duong industry and trade branch has provided many supports for companies participating in trade promotion fairs, but the sufficient condition is the effort from enterprises. The support will not be practical when enterprises do not have enough resources. Enterprises need to actively utilize the support to participate in trade promotion activities, market expansion; actively unite together to overcome the limitations and develop modern supply chains, be tied to industry and support services with high added value. However, this issue is not only a transient problem, but requires the determination, durability and long-term vision of enterprises.
According to assessments, EVFTA is a "bright door" for the timber industry with many comprehensive commitments and a reliable market. EVFTA will also enhance SME support on the basis of a combination of specialization and high gray content, accelerate the restructuring process of market, customers and core competencies of enterprises. This is vital for sectors that use many unskilled workers, such as wood processing industry of Vietnam. Without EVFTA, with current GDP growth, Vietnam's timber industry is weaker in competition, due to no longer being entitled to popular tax incentives GSP, such as Malaysia, China.
In order to maintain the momentum of forest export growth, Dien Quang Hiep, Chairman of Binh Duong Furniture Association, contended that regarding internal force, the problem of alliance would be critical, but mechanism is another matter. For example, Binh Duong accounts for 50% export turnover of the whole country, but alliances and links are very weak. Therefore, it is necessary to establish a centralized industrial area for timber industry to create a chain of links. "The opportunity is clear, even customers are rushing into Binh Duong. However, behind the big opportunity is the right to choose customers, choose the value in products. But to own the right, we have to have a "fair" so that when customers are ready to come to this "fair". Compared with woodwork exhibition centers of Singapore and China, the development pace of Vietnamese timber industry is not commensurate", Mr. Hiep worried.
Reported by Tieu My - Translated by Ngoc Huynh
