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Many solutions are being discussed to help companies overcome this difficult stage. One is to make the most of all the opportunities provided by the free trade agreements (FTAs) Vietnam has signed.
Use of FTAs is still modest
So far, there are 15 FTAs that Vietnam has signed for participation. Nevertheless, by the end of 2021, the export turnover of goods utilizing tariff incentives from the new FTAs accounted for 20% of Vietnam’s total export turnover. In many markets with new-generation FTAs such as EVFTA and CPTPP, the market share of Vietnamese products is still very small despite strong tax cuts.
For example, in the Canadian market under the CPTPP, Vietnamese timber products will be duty-free as soon as the agreement comes into force, but only accounts for 1.6% of the country’s market share. Similarly, as soon as the CPTPP comes into effect, tax exemption on seafood will also be exempted, but so far this product accounts for only his 6.9% of the Canadian market share.
Dang Thai Tien, deputy director of the Ho Chi Minh City customs supervision department, said in many training classes, trainees are only interested in lowering import tariffs and not so much in exports. This is because many companies believe that they cannot meet the rules of origin and regulations to enjoy the preferential treatment of the FTA when exporting goods.
This is very unfortunate for the export sector of Vietnamese companies. Tien shared that the opportunities offered by FTAs are not permanent. Because they have many of his FTAs in common, they have to compete with other competitors in exports as well. Therefore, the opportunities of FTAs should be taken advantage of, especially for exports that are facing difficulties.
The fact that difficulties arise from fear of not meeting rules of origin is just one of the barriers that make it difficult for companies to benefit from FTAs. A survey of firms affected by FTAs found that 40.1% of these firms faced difficulties due to a lack of specific information on commitments and how to apply them, while 40.6% said they were facing difficulties due to competitiveness restrictions.
This limitation can be attributed to a variety of factors, such as lack of capital or technology, or brand positioning that limits our ability to meet standards in a difficult market. 28.2% of companies faced difficulties due to the deficiencies in the organization and implementation of FTAs by state agencies.
keep pace
The active role of companies is the first and most important step in making effective use of FTAs. At a seminar on the new generation of FTAs held in Ho Chi Minh City at the end of November, Phuc Sinh Group Chairman of the Board Phan Minh Thong said his business is making good use of the EVFTA. both exports and imports.
In 2020, his company’s exports to the EU reached $50 million, and by 2021 export turnover increased by 26% to $63 million. Once the EVFTA takes effect, the number and value of orders will increase, expanding the market and attracting more customers. Meanwhile, EVFTA has helped companies enjoy preferential tax rates when importing machinery and equipment for the production and development of deep-processed products.
According to Thong, to effectively use FTAs, companies need to be constantly updated with new information and to coach and train staff on how to approach and make the most of what FTAs offer. Companies must always be ready to improve their products and processes to meet international market regulations and benefit from FTAs.
Also, enterprises must strictly adhere to the information and guidance from the Ministry of Industry and Trade, the Trade Promotion Agency, and other relevant agencies in order to proactively respond to changes in international trade. In addition to their own efforts, companies can hire consultants to help them how to get the most out of FTAs.
Phạm Đình Thưởng, General Director of FTA Utilization and Investment Consulting Company (KTPC), said companies should understand the opportunities from FTAs, formulate business plans, approach the market methodically, and make commitments under FTAs. It said it would be consulted to ensure it meets the stated requirements. FTAs.
Not all companies have enough qualified staff who understand the regulations to get the most out of FTAs, or not enough to get a consulting arm to take advantage of FTAs. Most of the time companies don’t try hard enough because they don’t have the money. At the moment, the supportive role of national institutions, especially the Ministry of Industry and Trade, is very important.
In the future, the Ministry of Industry and Trade will update and upgrade the FTA Portal to implement and evaluate provincial and municipal FTAs through the FTA Index. In particular, the ministry will innovate forms of communication via social networks, develop short videos, and focus more deeply on training courses, short seminars and practical topics. Facilitate the implementation of FTA-based corporate access to credit and identify the key industries that accompany each small step. These solutions greatly support the business community.
In addition to the Ministry of Industry and Trade’s drastic measures, other ministries and agencies should also actively participate in helping enterprises achieve the FTA’s standards step by step. The shrimp industry is one example. Hồ Quốc Lực, Chairman of the Board of Sao Ta Food Joint Stock Company, said ASC-certified shrimp is his passport to avail of the EVFTA. However, in order to have many large farms that meet ASC standards, countries need to consider deadlines and policies to encourage investment in shrimp farming. If we don’t hurry, we will lose to Ecuador, our biggest rival at the moment.
Ecuador currently has an FTA with Europe and produces about 1 million tonnes of shrimp, of which about 20% is ASC certified. Ecuador has also invested in modern factories for deep processing. Vietnam, on the other hand, also produces 1 million tons of shrimp, but only about 2,000 tons are ASC certified. Luc worries that Vietnamese shrimp will fall out of favor in the international market in a few years if we don’t hurry to keep pace.
