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EVFTA: challenges for SMEs

10/06/2020 10:17 AM
Besides opportunities and benefits, small and medium enterprises also face many challenges when the EU-Vietnam Free Trade Agreement (EVFTA) comes into force.
EVFTA: challenges for SMEs


At the Conference on Supporting Small and Medium Enterprises (SMEs) to take advantage of the opportunities from the EVFTA held in Hanoi, Minister of Industry and Trade Tran Tuan Anh emphasized that within just the first 7 years after the agreement becomes effective, the reduction of tariffs on Vietnamese products to the EU will reach 97%.

As a result, Vietnam's will enjoy much more favorable conditions in the context of globalization, nationalism and unilateralism in trade relations. In addition, the advantages of institutional reforms and bilateral cooperation will continue to create opportunities for Vietnam to affirm its regional position in attracting investment and improving technology, qualifications of human resources and labor productivity.

However, the representative of the Ministry of Industry and Trade also said that since Vietnam participation in FTAs in general, so far, there have been many issues that the SME community needs to learn from experience. For example, they need to improve their ability to access and grasp legal information as well as the content of commitments in the agreements. There still seems to be a gap between the state management agency and the business community.

“Vietnam is a developing country, with the number of SMEs accounting for 97%. Therefore, the Ministry of Industry and Trade has strictly followed the directions of the Prime Minister and the Government, and took the initiative in the Government's Action Plan to prepare for the implementation of the FTA.” said Minister Tran Tuan Anh.

Mr. Nguyen Van Than, Chairman of Vietnam Association of SMEs emphasized that the opportunity brought by EVFTA is great, but the challenge for Vietnamese enterprises joining this Agreement is not small. The EU market is a large one with 27 member countries, a population of over 450 million people, and its average income is about USD 36,000 per capita. It is believed to be a fastidious market, requiring high product quality.

EVFTA: challenges for SMEs

Challenges for SMEs

The biggest challenge facing SMEs is the technical barriers such as food hygiene and safety, epidemiological hygiene, codes of conduct, regulations on environmental protection and origin of goods imported into EU, regulations on localization rate, etc., all of which will cause many difficulties for businesses.

Meanwhile, according to trade experts, when tariff barriers are no longer an effective tool to protect businesses, import markets tend to apply anti-dumping, anti-subsidy or self-defense measures to protect domestic production.

The next challenge is labor competition. When the economy is open under EVFTA commitments, production shifting processes begin to take shape and there will be more and more investors from the EU seeking opportunities in Vietnam, creating competition for labor resources in industries. Therefore, there will be industries which will lack local labor.

Representative of the Association of SMEs emphasized that Vietnamese enterprises lack information on the EU market, as well as information about EU regulations on goods imported into this market. Vietnamese enterprises have not yet been prepared with sufficient knowledge and skills on exporting goods to the EU, and Vietnamese SMEs are still in shortage of capital for production and business activities.

Facing such difficulties, the Association recommends that the Government should accelerate the process of reforming administrative procedures, reviewing and perfecting institutions and policies; propose and submit to the National Assembly for amendments of laws and promptly approve a number of important laws such as the Investment Law, Business Law, Law on Environmental Protection, Labor Code and some tax laws, in order to comply with the provisions of the EVFTA.

In addition, the Government should direct relevant ministries and agencies to actively intensify the propaganda on the content, commitments and regulations of the Agreement through the media in order to improve the knowledge and awareness for businesses, helping them to take advantage of the Agreement effectively.

In response to the recommendations of the Association, Minister Tran Tuan Anh affirmed that most of the above recommendations were mentioned in the Government's Action Plan to implement EVFTA. This plan will be issued immediately after the National Assembly ratifies the Agreement.

It is expected that on June 8, the National Assembly will consider ratifying the EVFTA. If approved by the National Assembly, this Agreement may take effect as early as July 2020.

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