A recently-released report by WB with a title “Vietnam: Deepening International Integration and Implementing the EVFTA” estimates that making good use of tax preferences as per EVFTA will boost Vietnam’s GDP and export turnover to increase by 2.4% and 12% respectively, and lift an additional 100,000 to 800,000 people out of poverty in 2030.
These advantages are necessary to maintain positive economic development while Vietnam is fighting against COVID-19 pandemics.
EVFTA will be soon be approved, and Vietnam will become a highly attractive environment for many investors
According to the WB report, the advantages from participating in EVFTA and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) will be more tremendous if Vietnam effectively implements comprehensive economic and institutional reform, thus, to comply with all articles apart from tax-related ones in these FTAs.
These reform programs are expected to boost productivity, helping Vietnam’s GDP increase another 6.8% compared with the previous target for 2030.
As stated in the report, Vietnam government should improve implementation ability in 03 main points, including: (1) Rules of origin; (2) sanitary and phytosanitary measures, (3) the government-investor dispute settlement mechanism.
“If Vietnam can act in a decisive manner to close legal and implementation capacity gaps, it can capitalize a trade deal whose direct benefits are estimated to be largest in the country’s history,” said Ousmane Dione, World Bank Country Director for Vietnam. “With Covid-19 acting as a reset button and EVFTA as an accelerator, now is the perfect time to embrace deeper domestic reforms.”
With EVFTA, Vietnam will be the next destination for many European and global investors. The more foreign investment increases, the higher the number of commercial grievances will reach. Accelerating the establishment of a Systemic Investment Response Mechanism is recommended in the report to handle all dispute between Vietnam government and investors.
Take good advantage of EVFTA after COVID-19 pandemic
As stated in the WB report, it is advisable for economic recovery policies after COVID-19 to prioritize key sectors which account for the major share of Vietnam’s export turnover to Europe, in order to maximize the benefits of EVFTA,
Below are the top 10 exported products from Vietnam to EU markets between 2014 and 2019. Vietnam government needs to clearly define which sectors should be prioritized to receive published financial support packages.
All enterprises’ associations should enthusiastically enhance companies’ awareness of EVFTA’s huge benefits and guide them on the legal framework to capitalize on this agreement.
Additionally, policies should deal with all consequences of the COVID-19 epidemic in the long run. The combined impact of COVID-19 and commercial stress may possibly lead to a comprehensively restructured global value chain.
It is predicted that the global supply chain will become less dependent on certain manufacturing hubs, typically China, which will open more opportunities for Vietnam to step in and become a key part of the value chain. Moreover, the supply chain may be shortened with fewer companies involved.
The report stated that Vietnam needed to take more decisive, proactive, and appropriate actions. These measures include:
(1) Apply voluntary compliance risks management, implementing after-clearance investigation;
(2) Utilize information technology when investigating export-import commodities or goods in transit, ensuring integrated information among all related authorities.
(3) Effectively implement “National single window” and “ASEAN single window” mechanism;
(4) Improve transparency at all investigation authorities by issuing a list of goods exempt from the specialized investigation;
(5) Reduce logistics cost via a reduction in tolls and digitalization of fee collection procedure; improve infrastructure to well connect all value chains and boost multimodal transportation.
Translated and edited by: Dandelion