Vietnam’s "golden key" to global integration

In July 1995, Vietnam signed international treaties related to its accession to ASEAN, and officially joined the ASEAN Free Trade Agreement in January 1996. Since then, Vietnam has participated in the FTA between ASEAN and China signed in 2002, the FTA between ASEAN and the Republic of Korea (2006), and the FTA between ASEAN and Japan.

In October 2011, Vietnam signed an FTA with Chile, and since mid-2012, negotiations on other pacts have accelerated. In late 2014, Vietnam and partner countries completed negotiations on three bilateral and multilateral FTAs, including the FTA with the European Union (EVFTA), the Republic of Korea (KVFTA), and the Customs Union of Belarus, Kazakhstan and Russia. These FTAs marked significant milestones in Vietnam’s integration into the global economy.

Apart from the FTAs which have been signed or completely negotiated, Vietnam is negotiating other FTAs, including the Regional Comprehensive Economic Partnership (RCEP), the FTA between ASEAN and Hong Kong (China), and the FTA between Vietnam and Israel. The RCEP is expected to be a 21st-century FTA covering trade activities of the entire ASEAN region.

EVFTA negotiations started in June 2012 in Brussels, Belgium. After 10 official negotiating sessions and many mid-term negotiations, Vietnamese Prime Minister Nguyen Tan Dung and European Commission (EC) President Manuel Barroso met in late 2015 to talk about the conclusion of EVFTA negotiations. The agreement is expected to be signed this year and take effect in 2018. It is a new-generation FTA with 28 EU member countries. The two sides are dealing with key issues to prepare for the implementation of commitments in the fields of trade in goods and services, investment and public purchases, as well as regulations and rules pertaining to state-owned enterprises, investment protection and, especially, intellectual property.

The EVFTA will provide Vietnam with opportunities to tighten its long-standing relations with central and eastern European countries, access modern technologies, improve worker skills, generate more jobs, and maintain social security. Tariff cuts will help Vietnam increase exports to the EU by 30-40 percent. The agreement is also expected to increase social welfare and have a positive impact on poverty reduction.

The US withdrawal from the Trans-Pacific Partnership and major policy changes decided by President Donald Trump have increased expectations from the EVFTA.

The FTA between Vietnam and the Eurasian Economic Union (EAEU) took effect on October 5, 2016, opening big opportunities for businesses of the two sides in trade and services. It paves the way for Vietnamese businesses to enter a large market with total gross domestic product of nearly US$2.2 billion and 183 million consumers, and promotes the presence of EAEU businesses in the Vietnamese market, with more than 90 million consumers.

Although it has been in effect for just one year, the KVFTA has increased trade and investment between the two countries. Bilateral trade has grown continuously throughout 2016 and in early 2017. In January 2017, Vietnamese exports to South Korea grew 29.4 percent compared with January 2016, while imports from this market grew 30 percent. Vietnam expects to see further breakthroughs in trade with South Korea this year, and the US$70 billion target set for bilateral trade by 2020 is believed to be feasible.

FTAs have presented Vietnam with major opportunities but also with strict technical requirements for Vietnamese exports.
Vietnam’s competitiveness is still lower compared with some of its important trading partners, such as Singapore, Malaysia and Indonesia. According to the General Statistics Office of Vietnam, 73.86 percent of non-state companies are small in size with capital of less than VND10 billion, and financial limitations have hindered their investment in technological improvements to enhance their competitiveness.

Moreover, FTAs have removed trade barriers, making it difficult for Vietnam to control imports from other countries and protect domestic production.

To implement its FTA commitments, Vietnam will have to continue cutting taxes and take appropriate measures to make the most of opportunities from these trade deals.

Specifically, Vietnam should improve its investment policies and mechanisms to attract foreign direct investment in a selective manner. At the same time, it needs to adjust the structures of import, export and domestic markets, along with improving trade policies in accordance with Vietnam’s actual condition and the contents of FTAs.