The European Union-Vietnam Free Trade Agreement (EVFTA) and the EU-Vietnam Investment Protection Agreement (EVIPA), scheduled to become effective in July, will help improve Vietnam’s business and investment climate and boost its institutional reform, thus contributing to fostering its growth in a long term, according to an official.

Bags of rice loaded into a ship for export (Photo: VNA) 

In a recent interview granted to the Vietnam News Agency, General Director of the General Statistics Office (GSO) Nguyen Bich Lam cited the European Trade Policy and Investment Support Project (MUTRAP)’s prediction as saying that the EVFTA will help Vietnam’s gross domestic product (GDP) increase by 2-2.5%, especially its exports to the EU up 75% and its imports from the union up 25-35%.

The European Parliament’s ratification of the EVFTA made Vietnam the first developing country in the Asia-Pacific having free trade relations with the EU, thus helping affirm the country’s important political position and role in the region.

Once the agreement takes into effect, over 99% of tariff lines will be lifted after seven years, facilitating the export of Vietnamese products to the EU.

The agreement will open up more opportunities to attract investments from the EU, Lam said, adding it will also create pressure both directly and indirectly for Vietnam to improve its institutions and business environment through stricter requirements on the business and investment climate, fair competitiveness, sustainable development and labour conditions.

The GSO head also cited reports’ results as saying that the EVFTA will help increase Vietnam’s GDP by 2.18-3.25% in 2020-2023 and above 4% in the next years.

However, besides positive impact, Lam pointed to several challenges facing the Vietnamese economy.

Weaknesses in domestic enterprises’ competitiveness and weak, overlapping law and policy systems, unequal growth in several industries and limited awareness of people and enterprises are the biggest challenges, he stated.

Furthermore, once the agreement becomes effective, the EU’s goods with high quality and attractive packaging will flood the Vietnamese market, thus causing more pressure on Vietnamese products.

To take advantage of the EVFTA, he suggested the Government reform economic institutions to create an environment and economic policies in accordance with the agreement’s contents, and encourage local businesses to invest in technology to increase their products’ quality and competitiveness.

The Government should complete the legal framework to eliminate trade frauds and make transparent origins of goods in international commerce between Vietnam and the EU, and at the same time, increase the quality of education and training, especially vocational training to meet higher market demand.

It is also important to put forward scientific, strategic and long-term steps during industrialisation and urbanisation, he said, adding that administrative procedures must be simple to prevent corruption so as to ensure a sustainable and long-term relationship in business and investment.

The Government should assign a specific organisation, such as the Vietnam Chamber of Commerce and Industry, to provide guidance for the business community to make them understand more about the EU market as well as its requirements. Meanwhile, enterprises themselves should study the EVFTA to have suitable movements, Lam added.