FTAs, a key to growth in trade, investment

High trade turnover

Export-import activities are considered one of the brightest points in Vietnam’s economic picture. By April, the country’s total export-import turnover reached US$143.89 billion, an increase of 14.3 percent compared to a year ago. In particular, Vietnam achieved a trade surplus of US$3.9 billion. These positive results are attributed to opportunities provided by FTAs.

For example, the Korea-Vietnam Free Trade Agreement (KVFTA) that took effect on December 20, 2015, has created opportunities for the two business communities to expand markets and promote consumption.

Le An Hai, deputy director of the Asia-Africa Market Department under the Ministry of Industry and Trade, said the KVFTA boosted two-way trade turnover from US$37.5 billion in 2015, to US$45.1 billion in 2016, and US$62 billion in 2017. This figure is expected to reach US$100 billion by 2020.

Vietnam mainly imports machinery and equipment from the RoK for Korean investors’ factories to produce export goods in Vietnam, resulting in a trade deficit with the RoK.

The ASEAN-Australia-New Zealand Free Trade Agreement (AANZFTA) came into effect in January 2010, doubling trade between Vietnam and Australia from about US$3 billion to more than US$6 billion. The effects of the AANZFTA has also helped Vietnam’s agricultural products such as litchi, mango, and dragon fruit enter the Australian market.

The recently signed Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) among 11 Pacific Rim economies, which replaced the Trans-Pacific Partnership (TPP), which was scrapped after the US pulled out last year, is designed to benefit all member countries. For Vietnam, it will mean development opportunities in many fields, such as diplomacy, economic growth and foreign direct investment (FDI).

Le Quoc Phuong, former deputy director of the Industry and Trade Information Center under the Ministry of Industry and Trade, said the CPTPP has the potential to yield benefits and foster cooperation in the region. The CPTPP will contribute to boosting exports to major markets such as Japan, Australia, Canada and Mexico. In addition to economic growth, the CPTPP will provide opportunities for Vietnam to strengthen FDI attraction in fields that the country needs to develop. Vietnam’s participation in the CPTPP will also force the country to make greater efforts in institutional reforms in order to create a more transparent business and investment environment.

There are rosy forecasts ahead for Vietnam’s export-import activities as additional FTAs are signed or implemented on a larger scale. Accordingly, the EU-Vietnam Free Trade Agreement (EVFTA) expected to be signed this year will boost the strong development of recent years in cooperation between Vietnam and the EU.

Attractive investment destination

FTAs have provided opportunities for Vietnam to strengthen FDI attraction, too. According to a representative from the RoK’s Ministry of Trade, Industry and Energy, since the KVFTA came into force, the RoK’s major groups such as Samsung, LG and Doosan have expanded their investment in Vietnam.

By the end of 2017, the RoK had invested US$57.6 billion in more than 6,500 projects in Vietnam, making it the biggest foreign investor in this Southeast Asian country. The RoK’s projects have mainly focused on manufacturing industries and production for exports, creating a momentum for the two nations to achieve the target of US$100 billion in bilateral trade by 2020.

Vietnamese Trade Representative in Australia Nguyen Thi Hoang Thuy said SunRice - Australia’s largest rice producer, plans to invest US$100-200 million to conduct research and development of rice varieties in Vietnam. SunRice’s investment will help Vietnam access modern farming methods in order to produce high-quality rice. In addition, with its extensive distribution network, the opportunities to increase rice exports are huge. At present, SunRice imports about 50 percent of Vietnamese grown Japonica rice.