Experts point out that the substantial reduction in tariff lines due to the EVFTA has benefited enterprises from both sides and has contributed to attracting foreign direct investment (FDI) in the nation.
Despite this advantage, local firms must strive to enhance their capacity in order to participate in global supply chains through the trade deal, according to Ambassador Giorgio Aliberti, head of the EU Delegation to Vietnam.
Vu Tien Loc, president of the Vietnam Chamber of Commerce and Industry (VCCI), emphasizes that despite the novel coronavirus causing numerous difficulties for Vietnamese exporters, the EVFTA has helped several textile, footwear, and seafood companies sign major export contracts. This has therefore opened up an array of bright prospects to enjoy greater export opportunities amid the ongoing challenging period.
Most notably, the EU market is a key part of global value chains, featuring a range of stages such as design, production, marketing, distribution, and re-production.
The country can therefore enjoy numerous advantages in terms of data, information sources, skills, and networks by attracting greater FDI from the EU, a move which is expected to help upgrade the country’s infrastructure and human resources, notes Nguyen Thi Thu Trang, director of the WTO Integration Centre under the VCCI.
Although the EVFTA presents a wealth of opportunities for domestic enterprises to participate in the value chain, it also poses numerous challenges ahead.
According to a study conducted by JETRO, Japanese enterprises operating in Vietnam currently purchase approximately 32.4% of input goods and services from local suppliers, with the rate being 67.8% in China, 57.1% in Thailand, and 40.5% in Indonesia.
The average revenue of Vietnamese manufacturing enterprises was only able to reach US$2.9 million per year, while businesses are still required to have an annual minimum turnover of US$5 million in order to join the EU market.
Experts have therefore warned that a number of local firms remain satisfied with the participation in the lowest part of the value chain and are not willing to make greater investments when joining the global value chain, says Ngo Chung Khanh, deputy director of the Multilateral Trade Policy Department.
To take full advantage of the EVFTA’s opportunities, Nguyen Dinh Cung, former director of the Central Institute for Economic Management, states that domestic enterprises are required to boast strong financial resources in order to attract reliable partners.
He also believes that the State should remove inadequacies in relation to policies, institutions, the quality of human resources, and infrastructure, while also reducing different costs for businesses so that they can become more deeply involved in the global value chain.