Trade deals create driving force for institutional reforms

Institutional reforms help improve economic and business competitiveness

Adapting legal documents

Some 17 free trade agreements, most of them signed and a few under negotiation, have provided Vietnam with huge opportunities. These deals focus on not only market opening for trade in goods, but also on institutional reforms and business development, which are key to Vietnam’s economic integration and effective use of free trade agreements.

Nguyen Thi Thu Trang, director of the Vietnam Chamber of Commerce and Industry’s (VCCI) WTO and International Trade Center, said institutional reforms are needed both for the internal requirements of the economy and the commitments Vietnam has made under free trade agreements. Vietnam’s economic integration and participation in various free trade agreements will help the business environment follow international standards and become more transparent and stable. To take advantage of opportunities provided by free trade deals, economic institutions must adjust in an appropriate manner, Trang said.

To Hoai Nam, secretary-general of the Vietnam Association of Small and Medium Enterprises (VINASME), said that if the institutional quality is low, Vietnam will only be an outsourcing and assembly destination, mainly depending on imported raw materials and integrating in the midstream part of the value chain. Stronger institutional reforms can help improve competitiveness but must be implemented in a thorough and synchronous manner, Nam said.

Foreign investment drop

The government, ministries and departments have implemented measures to improve the business environment and facilitate trade, helping enterprises make good use of trade deals, especially the most recent Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the EU-Vietnam Free Trade Agreement (EVFTA).

Nguyen Thi Thu Trang said that in 2020, foreign investment flows moved out of some regions in the world and Vietnam featured prominently on the radar thanks to free trade agreements to which the country is a signatory. Despite a decrease in foreign direct investment (FDI) in Vietnam in early 2021, investment from markets of CPTPP and EVFTA signatories still increased. Businesses faced unprecedented difficulties and many orders were transferred to other countries in the third quarter of 2021. However, Vietnam hopes that preferential tariffs offered by trade deals, the improved business environment and gradual opening of the economy will attract investors and orders, Trang said.

According to the Multilateral Trade Policy Department under the Ministry of Industry and Trade, legal documents to implement the commitments under free trade deals include 18 legal documents at the governmental and ministerial level for the CPTPP, 12 for the EVFTA and eight for the UK-Vietnam Free Trade Agreement (UKVFTA). Ngo Chung Khanh, deputy director of the Multilateral Trade Policy Department, attributed the speedy document issuance to government efforts and determination to create the legal framework for the implementation of trade deals.

The contents and regulations in legal documents are for the most part updated and adapted, Khanh said, adding that ministries and departments are urgently amending and supplementing a number of articles in laws in line with the commitments.