FTA - An effective driver of exports

Wednesday, 2018-05-30 17:50:00
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Exports of garment and textiles grow strongly thanks to FTAs (illustrative image)
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NDO - Vietnam has a great opportunity to increase its import-export revenue through the implementation of 10 free trade agreements (FTAs) which are being utilised effectively by enterprises.

FTAs signing markets all see strong growth

As one of the Vietnam's key export goods, garment and textile is one of the sectors to have gained high export turnover in recent years. Vice President of the Vietnam Textile and Apparel Association (VITAS), Truong Van Cam, said that FTAs have played an important role in boosting the growth of garment and textile exports.

Specifically, the VKFTA signed between Vietnam and the Republic of Korea (RoK), which took effect in 2015, has helped to expand Vietnam's textile and garment exports to the RoK. Vietnam's textile and garment export turnover to the RoK reached US$2.6 billion in 2016, up 9.5% compared to the previous year, while the export revenue was reported at US$2.9 billion in 2017, up 11.8% compared to 2016.

The FTA between Vietnam and the Eurasian Economic Union which became effective in October 2016, has also contributed to increasing Vietnam's textile and garment exports to Russia from US$84.8 million in 2015 to approximately US$172 million in 2017.

In addition, the establishment of the ASEAN Economic Community (AEC) in late 2015 has also had a positive impact on Vietnam's textile and garment exports to the ASEAN market, rising from US$1 billion in 2015 to US$1.35 billion in 2017.

Similar to the Chinese market, the effects of the Framework Agreement on Comprehensive Economic Cooperation between ASEAN and China, the ASEAN-China Agreement on Trade in Goods, and the Memoranda of Understanding between Vietnam and China have all helped to improve Vietnam's textile and garment exports to China, which ballooned from US$2.2 billion in 2015 to US$3.2 billion in 2017.

Textile and garment is also one of the sectors to have effectively taken advantage of FTAs to increase its export turnover. Statistics from the Import-Export Department under the Ministry of Industry and Trade showed that Vietnam has so far implemented 10 FTAs.

In particular, all FTA signatory markets have recorded higher rates of import and export growth compared to the time before the signing of FTAs. Of those, Chile is among the markets posting the highest export growth rate with an annual growth rate of 46.68% per year. It is followed by India with an average annual growth rate of 31.58%, the RoK with an annual growth rate of 29.8% per year, and China with an average growth rate of 21.71% per year.

Vietnam reported an export turnover to China of US$8.25 billion in the first three months of 2018, up 33.6% compared to the same period last year. During the period, Vietnam's export revenue to RoK also increased by 14.4%; to ASEAN rose by 19.2%; to Japan up by 36.9%; and to India it soared by 111%; among others.

In addition, the number of shipments applying for a certificate of origin (C/O) to receive tax incentives has increased sharply, demonstrating the utilisation of FTA provisions. C/O issuance agencies authorised by the Ministry of Industry and Trade granted more than 216,000 sets of C/O worth over US$10.6 billion in the first quarter of 2018, up 40% in terms of value and 39% in number over the same period of 2017.

The Import-Export Department affirmed that the rate of utilising FTA incentives in Vietnam is quite high compared to other countries participating in FTAs with Vietnam. However, there remains large room for enterprises to take advantage of FTAs in the future.

Continuing to make good use of FTAs

Vietnam's import and export activities are forecast to continue to flourish thanks to the signing, effectiveness and implementation of more FTAs. In particular, the Vietnam-EU FTA (EVFTA) is expected to be signed in 2018 which will create a turning point in the trade cooperation between Vietnam and EU countries.

Accordingly, the EVFTA will create more favourable conditions for the export of goods and the expansion of Vietnam’s market share in the EU due to commitments in cutting tariffs and opening the door to the market.

Deputy Director of the Import-Export Department, Tran Thanh Hai, said that the Ministry of Industry and Trade will continue to spread information on FTA incentives, how best to take advantage of FTA preferences, rules of origin, and how to meet rules of origin to assist enterprises in making the most of signed FTAs.

In addition, Vietnam should develop supporting industries to increase the localisation rate of its products and meet the rules of origin set by the markets with which Vietnam has signed FTAs.

The government also needs to create more favourable conditions for enterprises to apply for and get C/O, including shortening the time of issuance of C/O; simplifying the C/O issuance process; providing electronic C/O declaration; and expanding the pilot issuance of C/O via the Internet.

It is also advisable to expand and apply the self-certification mechanism of origin while reducing the criteria of self-certification to facilitate enterprises in participating in this mechanism.

"In particular, administrative reform is one of the most important activities that has facilitated trade activities over the recent years. This activity will be further promoted in the future in order to create optimal advantages for enterprises and make the most of FTAs," Tran Thanh Hai emphasised.