EVFTA reflects maturity of multi-faceted relationship

08:26 | 13/02/2016 MUTRAP Corner

(VEN) - A year-end afternoon, Lotte Tower, the office of the Head of European Delegation to Vietnam is impressive with a large view of Hanoi from above. Bruno Angelet, Ambassado, Head of the Delegation of the European Union to Vietnam, who has over 10 year experience with Vietnam in different positions, spoke with Vietnam Economic News’ To Nga and Hoang Mai.

evfta reflects maturity of multi faceted relationship

Would you like to share your impression of Vietnam?

Since I came to Vietnam first in 1994 the country has made a tremendous step forwards. It’s truly amazing to see how far Vietnam went with its socio-economic development in only 20 years time. Today, it very much looks as if the people of Vietnam have never been so prosperous in their whole history. I am also very proud to see how much Vietnam and Europe achieved together in this transition and how open the Vietnamese society is towards the European history and culture. Fascinating also is the unique cultural richness and persity of the country. Culture, geography and demography make Vietnam’s future very promising. On top of that, people of Vietnam are very ambitious and dynamic giving the country a real drive to progress.

Is it true that Vietnam has made great progress but the country still has lots to achieve?

There are of course big challenges ahead. Potential is a starting block but says nothing about the final destination, which mainly depends on good policies and sustainable governance. Absorbing to Vietnam’s benefit all recent commitments regarding free trade agreements (FTAs), and meanwhile increasing the economy’s competitive edge in a challenging neighborhood, will be a big task ahead. This will also require a more dynamic private sector, more space for innovation and better education and vocational training. On top of that, more and more Vietnamese travel and study abroad and have new aspiration and more demanding expectations from the government. Examples are good public service delivery ensuring equal access to health, education, justice, better management of public budgets, a better and cleaner environment, safe food. Just as we learned in Europe, the government and line agencies can’t be effective in handling all this alone, in a top-down mode. Responsible and dynamic citizens can greatly contribute to the organization of public life and civil society should be one of the key players in a constructive dialogue with the government. Last but not least, strategic security challenges in Asia are on the rise and Vietnam is quite exposed to new risks.

Vietnam’s strategy of international integration, and its unique and robust partnership with Europe is actually a very good way to address those difficulties. Europe is on the frontline of innovation, a green and competitive economy, good governance and public service delivery, stability through regional integration. As one of Vietnam’s best partners, Europe will be of great help to ensure support to Vietnam in the future, just as we have always been with Vietnam over the last 25 years.

Vietnam and the EU officially concluded negotiations for the EVFTA. Is this considered the most ambitious and comprehensive FTA that the EU will sign with a developing country?

On the occasion of the official visit to the European Union by Prime Minister Nguyen Tan Dung, Minister of Industry and Trade Vu Huy Hoang and European Trade Commissioner Cecilia Malmstrom on December 2, 2015 announced the official conclusion of the EVFTA negotiations in Brussels. This announcement marked an important step of the finalization of the EVFTA negotiations.

Indeed this trade deal represents the most ambitious and comprehensive FTA that the EU has negotiated and concluded with a developing country. We are impressed by the high level of commitments by Vietnam. This is a model for other ASEAN partners which wish to enter into negotiations of a FTA with the EU. Importantly, the EVFTA reflects the maturity of the bilateral multi-faceted relationship between Vietnam and the European Union. Its positive implications go beyond the trade, economic, and investment fields. It will lift up the bilateral political relations to a new height thus promoting prosperity and wealth of the peoples and economies of both sides.

What will be the EU’s necessary steps?

The EVFTA will need to be legal scrubbed. This means that the services of Vietnam and the European Commission will work to legalize all the substances negotiated by the two teams. Although the substantial issues have been agreed there are minor things to clear up before we can freeze the text. There are internal procedures that both sides need to proceed before the official signing. From the EU side we will need to get the text translated into 24 official EU languages. Vietnam will also need to translate into its language. The text shall be submitted to the MS governments for their approval before we can sign the trade deal. This text will also require the ratification of the European parliament before it can be fully enforced.

It is expected that the EVFTA will enter into force by early 2018.

What should Vietnam do during this waiting period?

Transparency of information would be the key should Vietnam wish to harness this important trade deal. With transparency, I would underline the need to share information, particularly with companies, industries, consumers and other relevant stakeholders of potential benefits and possible challenges they may confront once the trade deal takes effects. Transparency of information among relevant competent authorities is of course no less important than sharing the information on preferential market access with the companies and exporters. This helps prevent and quickly tackle possible hiccups and confusions that tend to arise at the initial stage of implementing the FTA.

Having said that, I have no doubt about Vietnamese businesses’ ability to adapt and optimize the opportunities of EVFTA. The past experience has shown that Vietnamese companies and people have a great dynamics in doing business.

The EU’s FDI in Vietnam had been on a constant fall from 2011 to 2014. The situation is somewhat improved this year. Why was Vietnam unattractive to EU investors? What impact will the EVFTA have on EU investment in Vietnam?

The continuous drop of EU investments was an integral part of a wider context where global foreign investments kept falling. If you take a look at Vietnam’s foreign direct investments (FDI) in-flows during 2010 – 2014, such figures fell by an average 25 percent yearly but has re-bounced recently. With the return of foreign investments, in the first nine months 2015, the EU was ranked third in the list of FDI partners with US$1.3 billion of committed FDI.

It is probably not precise to say that Vietnam is unattractive to EU investors. It is better to say that the Vietnamese business climate, and its domestic reforms, albeit being improved over the years, has not yet been able to catch up with the expectations of a certain group of investors. Speaking about investors from Europe, it is important to distinguish them into two categories - big multinational companies and small and medium enterprises (SMEs). I can say that both of these groups of companies are excited about the EU-Vietnam FTA. One crucial factor that this FTA will bring to investors is the guarantee of a truly leveled playing ground, predictability, stability and transparency of the business climate.

For the big companies, many of them have already established their strong presence in Vietnam. The better market access and better investment protection offered by the pending EVFTA are a crucial reason for their decisions to continue and even make bigger investments into Vietnam. Those European companies already present in Vietnam mostly make profits. They have a long term strong commitment to the Vietnamese economy. As you can see, they went to Vietnam long before the EVFTA and even before Vietnam’s joining the WTO. The pending enforcement of the EVFTA will highly likely result in stronger investments for them.

For European SMEs, their limited resources used to disenable them to come to Vietnam. But the enforcement of the EVFTA offers a better predictable and more stable business environment to them. I think not many of the SMEs could resist from the temptation to come and do business in Vietnam or with Vietnamese companies.

The EU is leading the transformation into green economy. What plans does it have to help Vietnam with its experience?

The EU acknowledges Vietnam’s high exposure to climate change and the importance of the energy sector for its industrialization and growth. Vietnam needs support to improve its energy planning, markets, efficiency and productivity and to increase the share of clean and renewable energies. Notwithstanding this, the challenge will be to achieve economic growth without jeopardizing environmental resources (water, soil, forest, biopersity, etc.).

To assist Vietnam to tackle these issues, the EU has decided to focus its assistance to Vietnam for the period 2014-2020 on this specific sector of sustainable energy. Around 86 percent (EUR346 million) of the grant ODA the EU will provide to Vietnam will be dedicated to this sector. The EU believes that energy is a sector with strong multiplier effects on Vietnam’s economic and social development and contributes to broader EU policy objectives for poverty eradication and climate change mitigation and adaptation.

While the EU response cannot address all the challenges Vietnam is confronted with in the energy sector, it can together with other partners influence policies and choices (including addressing the water-energy nexus) that would aim at making the sector more sustainable by fostering private sector investment and greening of the sector, by increasing the share of renewable energies and by ensuring access for all to energy at affordable prices, especially for the poor and near poor.

The EU grant-assistance could be leveraged with loans from financial institutions through the Asian Investment Facility (AIF). This facility aims at promoting additional investments and key infrastructure with a priority focus on climate change relevant and “green” investments in the areas of energy, environment, and transport.

Finally, it is important to stress that the EU continues its cooperation with Vietnam in the field of research and development (R&D). In the past seven years (2007-2013), 45 Vietnamese projects in the field of R&D have had the opportunity to be funded by the EU’s 7th Framework Program for Research, better known as “FP7” for a total value of EUR122 million. The new scheme for the period 2014-2020 called “Horizon 2020” is now funding a new generation of projects. Horizon 2020 is the biggest EU research and innovation program ever with nearly EUR80 billion of funding available for over the next seven years (2014-2020).

To Nga & Hoang Mai