The challenges on market access, circulation of products, and tax in the Vietnamese market are expected to be solved ahead of the European Parliament’s crucial vote for the ratification of the EU-Vietnam Free Trade Agreement scheduled for early 2020.

Market issues ironed out for EVFTA (illustration photo, source:Zing) 

Hundreds of representatives from European enterprises gathered at last week’s high-level dialogue between the prime minister’s Advisory Council for Administrative Procedure Reform (ACAPR) and the European Chamber of Commerce in Vietnam (EuroCham) which discussed the hurdles of doing business in Vietnam and solutions which can help streamline procedures for international companies.

The event is significant as it is aimed to prepare the ground for the smooth implementation of the EU-Vietnam Free Trade Agreement (EVFTA), which is expected to be ratified in early 2020 and take effect within the next year.

To that end, Vietnam is required to address the concerns of the European Parliament and remove the barriers that EU companies face in doing business in Vietnam.

ACAPR chairman Mai Tien Dung said, “The Vietnamese government is determined to strengthen administrative reform, improve the business climate, increase national competitiveness, and solve businesses’ concerns. In 2019, the government issued three decrees to cut over 100 conditional business lines, thus saving nearly six million working days, or VND893.9 billion ($38.86 million) annually. This work will continue in the time to come.”

Barriers untied

At the dialogue, ministries announced solutions to deal with the barriers to product registration, import-export procedures, customs processes, and tax.

A value-added tax (VAT) refund is now applied for exports and investment, but there is no VAT refund for manufacturing and business. “We will consider revising the prevailing regulation to add a VAT refund for manufacturing and business,” said a representative of the General Department of Taxation.

The other challenge is market access for goods and investment, focusing on product registration, import-export procedures, and customs processes.

Elsewhere, a long-awaited revision of Decree No.116/2017/ND-CP issued in 2017, regulating the requirements for manufacturing, assembly, and imports of motor vehicles as well as the trade of motor vehicles, warranties, and maintenance services, is being completed with one of the key improvements being the category-based approval for imported completely built-up products.

“The draft amendment to Decree 116 is expected to be issued this month to facilitate international automobile manufacturers and importers,” said Dung.

According to the Ministry of Transport (MoT), a circular amending Circular No.03/2018/TT-BGTVT guiding the implementation of Decree 116 from 2018 is now ready for issuance.

The MoT also issued Circular No.46/2019/TT-BGTVT on November 12 to amend Circular No.25/2019/TT-BGTVT, dealing with all concerns caused by the UN Economic Commission for Europe (ECE) test certificates not being accepted for test exemption.

“This new circular, which will take effect from December 27, will accept the ECE certificates for test exemption, and all the certificates granted during the effectiveness of Decree 116, thus crushing the current worries that certificates qualified with the Decree 116 will potentially expire by December 31,” said an MoT representative.

Moreover, many barriers to the circulation of products have been solved. Specifically, the Ministry of Industry and Trade (MoIT) has finished the amendments to Decree No.105/2017/ND-CP from 2017 on wine and spirits trading and submitted it to the government for approval.

“The amendments remove the ban on selling beverages with at least 15 per cent alcohol online, to be consistent with the newly-approved Law on Prevention and Fighting Harmful Effects of Liquor and Beer, which will take effect from January,” said an MoIT representative. “There will also be no sanctions if the tax stamps on imported alcohol products are damaged or broken.”

More investment inflows

The dialogue, which follows EuroCham’s recent mission to Brussels to advocate for ratification of the EVFTA, shows the Vietnamese government’s strong efforts to further improve the trade and investment environment and sends a positive signal at a crucial time in the ratification process.

According to Nicolas Audier, chairman of EuroCham, the EVFTA represents a historic change in the EU-Vietnam relations.

“Vietnam is quite an attractive trade and investment destination for European companies and will become even more so once the EVFTA is ratified and takes effect,” he said.

Around 80 per cent of EuroCham members have said that the EVFTA would have either a ‘significant’ or ‘moderate’ impact on their medium- and long-term business plans. Manufacturing will also remain one of the most attractive sectors for European companies. according to EuroCham.

The FTA will leverage high-quality EU investment inflows into Vietnam, driven by greater market access, growing middle-class consumers, and high demand for European products and services; from world-leading cars to medical devices, as well as more innovative service sectors across the board.

“Even before the landmark agreement is ratified and implemented, new European firms have been opening representative offices and branches or are looking for sourcing partners in Vietnam, in anticipation of the benefits that this historic agreement will bring,” Audier told VIR.

“The EU is set to import ever greater quantities of agricultural products and seafood from Vietnam, taking advantage of lower prices once tariff reductions come into effect,” he added.

EuroCham now has over 1,000 members in Vietnam. As shown by statistics from the Ministry of Planning and Investment, investors from 23 out of 28 EU member states has registered about $25 billion into more than 2,200 projects over the course of the past 28 years.

Among EU member countries, Vietnam sees most investment from the Netherlands, France, Luxemburg, and Germany.