Lack of information, human resources and viable strategies are the three major difficulties facing Vietnamese businesses attempting to carry out the Free Trade Agreements (FTAs), says Nguyen Dinh Cung, Director of the Central Institute for Economic Management (CIEM).
Are foreign-invested enterprises (FIEs) better positioned to seize the new opportunities from integration and FTAs than domestic businesses? What are the hindrances of local businesses in capitalizing on these FTAs?
Obstacles to foreign market access
The markets with which Vietnam has signed FTAs, have applied diverse and complicated non-tariff measures such as animal and plant health quarantine, Technical Barriers to Trade (TBT) and limitation on distributions.
Contrary to tax reduction, the elimination of non-tariff barriers demands institutional, legal and technological changes , thus posing a big challenge for local businesses that need greater investments and better production procedures and management.
A factual survey has shown that local businesses have been confronted with higher requirements on product quality, food hygiene and safety and technical standards while finding deeper inroad into developed economies.
Nearly 50% of businesses say they have encountered difficulties in meeting strict requirements on product quality, design, and packaging set by the EU market. Meanwhile over 40% of businesses lack the relevant information on general market trends, consumer tastes and find it difficult to meet stringent food safety standards.
Additionally, investment and business models of most Vietnamese businesses are unsuitable with economic integration as they failed to work out long-term business targets and to prepare sufficiently for the implementation of FTAs.
Trinh Minh Anh, Deputy Head of Office of the Inter-sectoral Steering Committee for Global Economic Integration, says that the overlapping dissemination of information on FTAs and the integration process has yet to meet demands of state managers, local authorities, businesses and residents.
Businesses in dire need of information
Mr Cung said that in order for businesses to take full advantage of the new opportunities made possible by the FTAs they must have access to much more clear and detailed information. They need to be educated on the contents of each FTA and opportunities as well as challenges should be sufficient and concrete.
The economic expert proposed changes that should be made by businesses to fully grasp opportunities brought by FTAs.
A representative from the Da Nang city People’s Committee says the number of businesses directly involved in import-export activities remain low at approximately 2.5%, just around 100 businesses of which have maintained stable exports.
To capitalize on opportunities made possible by the FTAs, municipal businesses need to grasp information on opportunities brought by FTAs aiming to identify their target markets in the short and long-term.
Developing brand names to secure a firm foothold in the domestic market is seen as a solid foundation for overseas market expansion.
Quang Nam province’s department of industry and trade reports 96% of small and micro businesses in the locality need to manage themselves to deal with challenges after a series of the FTAs take effect.
Therefore, to ensure their existence in the marketplace, businesses are now in urgent need of relevant information and proper mechanisms and State policies regarding goods consumption, market access, and greater investment in exports of key products amid deeper international integration.
Specifically, support priorities should be given to investment in industrial infrastructure, technological transfer, and trade promotion activities in potential markets in this region and the world.
VOV
