Small and medium enterprises face many challenges in taking advantage of FTAs


Economist Phan Duc Hieu, Standing member of the Economic Committee of the National Assembly.
Economist Phan Duc Hieu, Standing member of the Economic Committee of the National Assembly.

How do you evaluate the promotion of import and export of goods with FTAs, especially new-generation FTAs such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), the Vietnam FTA, South-EU (EVFTA) or Vietnam-UK FTA (UKVFTA)?

In 2021, exports will be one of the bright spots in the general economic picture. Vietnamese enterprises have made good use of export markets with FTAs. For example, with the CPTPP, goods are exported to a relatively new market, which is Peru, which has achieved great results and made quick use of it.

There are two problems here, in addition to exports. FTAs also bring benefits to businesses from the perspective of the import market. Enterprises can diversify their sources of goods with the expectation that prices will be more reasonable thanks to tariff reductions, but the quality will be better, more reliable and more stable.

This fact is seen quite clearly in the trade relationship between Vietnam and the EU. In 2021, thanks to the EVFTA, Vietnam’s exports to the EU will have high growth and vice versa, goods imported from the EU into Vietnam will also increase.

On the other hand, when Vietnam imports some food products and high-quality consumer products from other countries, it will also create competitive pressure for domestic enterprises. From a positive perspective, this means domestic enterprises who want to survive are forced to innovate, change, and improve product quality even when they do not have export needs.

Reality has proven that in the process of deep international economic integration, participating in many FTAs, at first, Vietnam was very worried about competition in the domestic market. However, many service areas such as legal advice, creating competitive pressure also created good room for development.

Besides the CPTPP, EVFTA and UKVFTA, the Regional Comprehensive Economic Partnership (RCEP) opens up many opportunities to promote the export of goods for Vietnam in 2022. How do you assess the benefits of exporters in this FTA?

In the context of the recent increase in logistics costs, geographical distance is also a matter of concern. With RCEP, businesses have cost benefits, especially logistics costs.

Another aspect that must be mentioned is that, in order to boost exports to markets such as the EU (EVFTA) or Canada and New Zealand (CPTPP), Vietnamese enterprises must meet huge requirements because this is a market with very high standards, especially for food. Meanwhile, the RCEP reduces a number of requirements and conditions. The benefit here is that enterprises have greater opportunities and greater choices in their export calculations.

The opportunities opened up by FTAs are huge, but there are challenges, especially for small and medium enterprises. Could you please share your views?

From the national and micro-level, it is easy to see that there are many challenges. Vietnam’s trade relations have developed, but who created that development? Are these large enterprises that already have commercial relationships? When FTAs are activated, these enterprises immediately take advantage of opportunities.

In fact, there are many small and medium enterprises interested in taking advantage of FTAs to export to large markets like the EU.

In order to export to a market with an FTA, besides meeting product standards such as on food hygiene and safety and animal and plant quarantine (SPS), under the Agreement on Technical Barriers to Trade (TBT), enterprises must also meet standards on labor, environment and certification of origin.

Another important factor is investment and output. Enterprises may be willing to accept investment capital, but the investment scale is enough to export, how to export is not a simple matter. Many businesses say they want to promote their products. They have tried buying booths on e-commerce platforms such as Alibaba and Amazon, but the cost for a booth to promote wholesale products is quite expensive.

Even in terms of awareness, although the Ministry of Industry and Trade and associations have propagated a lot of information about FTAs, enterprises’ awareness of FTAs is still limited.

A survey just published in 2021 on the CPTPP shows that up to 69% of enterprises have heard or have preliminary knowledge of the CPTPP, 25% of enterprises have certain knowledge about the CPTPP. Having a certain understanding can be understood that from the opportunity to practice, from awareness to action is still very challenging.

What advice do you have for state management agencies and the business community to help make the best use of opportunities brought by FTAs and promote Vietnam’s exports more sustainably?

With state management agencies, I think that more attention should be paid to the issue of cutting costs for businesses. Or more specifically, cutting costs of legal compliance, this is a very important issue both in terms of procedures and time.

Besides, supporting software and raising awareness for businesses is not enough, the State should have support in terms of infrastructure. For example, businesses in Can Tho want to export agricultural products, fruits need to have a warehouse, an irradiation area.

Enterprises can’t just bring their products to Ho Chi Minh City or Hanoi (where there is an irradiation facility for exporting fruits) to perform irradiation and then bring it back.

In addition, the State should promote the connection of enterprises with each other; the connection between enterprises is the focal point with other enterprises because it is very difficult for small businesses to mobilize themselves.

From a business perspective, I think that when aiming for the export market, businesses can develop products gradually. Currently, domestic demand is also very high. Enterprises can test and develop domestic products with standards equivalent to foreign markets such as the EU. That can be a motivation for businesses to gradually bring export goods to foreign markets.


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