“In the context of globalisation and competition, Vietnamese companies must come to international standards of corporate governance to sustain business achievements and corporate values. This is one of the priority directions in the corporate restructuring process in Vietnam,” Mr Hoang Quang Phong, Vice President of the Vietnam Chamber of Commerce and Industry (VCCI), affirmed at the forum, “Vietnamese Businesses: Connectivity and Integration in New Generation FTA Era”.
The forum was held by VCCI together with the Interdisciplinary Steering Committee for International Economic Integration and the International Relations Committee of the National Assembly in Hanoi.
Turning challenges into opportunities
He said Vietnam has participated in and completed negotiations of 12 bilateral and multilateral free trade agreements (FTAs). Among them, eight FTAs have come into effect, namely the ASEAN Free Trade Area (AFTA); five FTAs between ASEAN with China, South Korea, Japan, India, and Australia - New Zealand; and two bilateral FTAs (Vietnam - Japan Comprehensive Economic Partnership Agreement and Vietnam - Chile Bilateral Free Trade Agreement). Two pacts were signed but yet to take effect, namely Vietnam - South Korea FTA and Vietnam - Eurasian FTA; and two pacts had negotiations completed, including Vietnam - EU FTA and Trans-Pacific Partnership (TPP).
Mr Phong said that the signed FTAs open up new opportunities for Vietnam in general and the business community and the entrepreneur force in particular to integrate and develop. When they come into force, Vietnam and partner countries will reduce tariffs according to their commitments, thus edging up competitiveness of their commodities. The domestic market has abundant foreign products while more Vietnamese goods may be exported to other nations in the region and the world.
He added that Vietnamese economy and business community are however facing difficulties and challenges as the country opens the market and integrates deeply into the world. Not to be held back, many businesses will continue to make investments for development, put in efforts to restructure and improve competitiveness, and turn challenges into opportunities.
Notably, foreign investors injected US$15.58 billion in 2,013 projects in 2015 to December 15. This showed their unchanged interests in Vietnam and opportunities awaiting them in this tough time. Again, entrepreneurial spirit, featured by their boldness and creativity, has aroused and entrepreneurs have made extraordinary efforts to contribute actively to the cause of national development.
Seeking to tap advantages
Mr Bui Huy Son, Director of the Vietnam Trade Promotion Agency (Vietrade), said that Vietnam is entering a new phase of substance. “We have free trade agreements with 55 economies in the world and any exports and imports of Vietnam are being governed by these agreements. The Government has tried to give us a ticket to a private door with many privileges and we will receive preferences from those economies when we cooperate with them. Perhaps, except in some South American countries, hardly any businesses refuse to do business with the US, Europe, Asia and Australia,” he added.
His analysis showed that nearly 160 countries around the world compete with each other but rarely any country has as low tax rates as Vietnam. Therefore, Vietnam is standing before a new phase against the backdrop of international integration. We enjoy many privileges and we must open more in turn. This is also the pressure for Vietnamese companies. In this context, Vietnam’s thinking and attitude needs to be changed.
Mr Son said Vietnam is willing to spend on trade promotion but Vietnamese companies lack interest in this activity. In a society where integration is extensive and competition is fierce as now, they must show up rather than sit to wait for being known. It is thought that spending on trade promotion is high but ineffective. But in reality, all economies, especially wealthy countries, still invest a lot in promotion because they see enormous benefits in the long term. “Each trip will bring in a lot of new relations and they will take gains sooner or later from these relations. This is like we spend a lot on costumes to send our message for others to see and assess us,” he added.
Mr Son said that Vietnam is carrying out a lot of national promotion programmes and businesses can easily look up on the website of the Vietrade. In the past time, the State has mobilised and directed trade promotion. Trade promotion is a very effective tool, not only efficient but also sustainable, for the entire business community.
Mr Ha Duy Tung, Deputy Director of the International Cooperation Department under the Ministry of Finance (MoF), said Vietnam needs to take notice of some following issues: In new generation agreements, tax is related to other issues. Meanwhile, Vietnam still has numerous barriers, such as origin, environmental bonds and employment. As a result, relations will be binding and intertwined. The enforcement of trade agreements will cause State policies to gradually change in a better way. However, business -to-government relationship needs to be strengthened to combat commercial frauds and consult negotiations of new generation agreements.
Mr Hoang Manh Phuong
Deputy Director of the Department of Legal Affairs, MPI
With its market opening commitments and non-discrimination between domestic investors and foreign investors, or among foreign investors, our commitments are without doubt quite broad.
Specifically, countries pledge to abolish requirements and conditions imposed on investors. For example, investors are not required to transfer technologies, or use certain technologies. They will eradicate other requirements and conditions like ending market restrictions.
As for market opening methods and access according to “give or take” methods, advantages will go to investors although difficulties will pose to State agencies.
Vietnam’s market access offer is built from its actual situations. The offer introduces Vietnam’s foreign investment attraction policies, particularly to investors in big countries like the United States and Japan. In the offer, restrictions in infrastructure investment will be almost abolished, except for airport infrastructure.
Vietnam has made long strides in some sectors like distribution. We also maintain a five-year reserve for market reserve requirements at the Ministry of Industry and Trade. In sensitive industries such as medicine and petroleum, reserves are very tight. Besides, some other areas like education, culture, land, mining and support have certain commitments to ensure State management over trade and communications information.
Mr Ha Duy Tung
Deputy Director of the Department of International Cooperation, MoF
ASEAN pledges 99 per cent of goods to have zero tax. Vietnam brought 92 - 93 per cent to 0 per cent in 2015, and expects to do with the rest by 2018.
As the United States has a relatively large trade, it is a major partner of Vietnam in TPP negotiations. Regarding the level of commitments, Vietnam previously entered into free trade agreements without any commitment of bringing taxes to zero as soon as such agreements take effect. Even, duty rates on some commodities are very low, only 3-5 per cent, and the validity period is up to 5-10 years.
ASEAN has commitment patterns that member countries follow but TPP has no definite patterns: Member countries define every commodity to assess and maximise benefits. Therefore, they negotiate every tariff and tax line for the applied period of 5 years or more. Hence, in negotiation, Vietnam must explain why a chosen item needs a five-year or 10-year roadmap. Conversely, its partners also need to prove their roadmaps and durations for such items as garment, textile, furniture and footwear
In TPP, Vietnam is committed to apply zero export tax to 65 per cent of commodities. Nevertheless, up to now, we have never had any similar commitments. Other countries also have commitments, even more than ours. The lowest commitment is 75 per cent to be applied zero tax and the highest is 95 per cent (Canada). The United States is committed with over 80 per cent. This shows the success of negotiations as well as the development level of each country. Specifically, the average tariff rate of Vietnam is about 13 per cent and the rate in developed countries is only 4-5 per cent. As a result, it is easy for them to bring duties to 0 per cent but we require a longer way to go.
Other countries have relatively centralised protection for agriculture although they are developed industrial nations.
Another characteristic is the legal mechanism. Previously, when we joined free trade agreements, we have faced no litigations and disputes in signatory countries if we committed wrongdoings. In TPP, the government can sue the government and investors can sue the government when a violation occurs. This is an enormous challenge and risk for Vietnamese enterprises.
Anh Mai
Vietnamese
