Post-FTA export import should not repeat WTO scenario

Recently signed free trade agreements (FTA) between Vietnam and South Korea and the Eurasian Economic Union are expected to be good opportunity for export promotion. However there is a long distance from expectation to reality, requiring both authorized agencies and businesses to quickly solve related issues to prevent WTO scenario from reoccurring.

A export rice warehouse in the Mekong Delta (Photo: SGGP)

Vietnam’s WTO membership was supposed to vigorously boost exports. However, the Ministry of Planning and Investment has reported that five years after the WTO entrance, the country’s economy was inferior to that in the previous five years in many fields including Gross Domestic Product growth rate, growth quality and export import.

Export turnover increased but the growth mainly came from Foreign Direct Investment (FDI) sector. It reached 33.5 percent for FDI sector and only 1.3 percent for domestic sector in 2012.

The condition has not changed after Vietnam signed FTAs.  FDI exports continued growing strongly.

The total export turnover was estimated to touch US$13.5 billion in May, up 1.1 percent over the previous month. Of these, domestic sector grew 3.5 percent to obtain US$4.1 billion while FDI sector grew 0.2 percent to hit US$9.4 billion.

May export turnover hiked 9 percent over the same period last year. The growth rate was 1 percent for local sector and 12.8 percent for FDI sector.

In the first five months this year, the export turnover was recorded at US$63.2 percent, up 7.3 percent over a year ago. Of these, local businesses saw a reduction of 2.7 percent to US$18.8 billion, FDI sector posted an increase of 12.2 percent to reap US$44.4 billion.

The concern is that the import turnover of local businesses has been higher than foreign firms.

May trade deficit was US$900 million taking the total to US$3 billion equivalent to 4.7 percent of total export turnover in the first five months this year. Domestic economic sector created a trade deficit of US$7.7 billion while FDI sector posted a trade surplus of US$4.7 billion.

It is likely that Vietnamese businesses’ imports have been easier than that before FTAs were signed. At first sight, it will benefit consumers because of price drop thanks to tax cut. However from a farer-reaching sight, import acceleration might kill local production.

The Government’s efforts in FTA negotiations and signing aim to help local businesses develop production and boost exports to improve their competitiveness in regional and global scales. However this target has been fully taken advantage of by FDI sector not Vietnamese firms.

Information shortage for businesses

According to a survey by English Newspaper The Economist, the use ratio of FTA incentives of Vietnamese businesses is rather low at only 37 percent.

When being asked about the issue’s cause, 52 percent companies attributed it to complex negotiations, 40 percent said unattractive market, 38 percent believed benefits insufficient to make up for difficulties in exploiting these incentives, 50 percent said FTA information insufficiently announced.

Handicraft and Wood Industry Association of Ho Chi Minh City (HAWA) Chairman Huynh Van Hanh said that although FTA contents directly affected businesses, those in charge of negotiations said negotiated contents should be kept silent.

For instance, while the American Chamber of Commerce in Vietnam invited businesses to talk about the Trans-Pacific Partnership agreement, Vietnamese officials said it secret and unable to reveal any thing.

Only the May signed Europe-Asian Business Alliance was consulted businesses. Other FTAs have been announced to them after being signed.

Many businesses at a recently hosted seminar expressed concerns over the Vietnam-South Korea FTA signed on May 5 saying they have been accessible to the agreement in Vietnamese too late while Korean businesses have got a Korean textbook on the FTA agreement since it was initialed.

Many seminars on FTAs have been organized. However, most of them just provided general not specific information. Contents of the seminars should be changed to detail the agreements’ information to businesses.

Policies should not be issued suddenly. Therefore, authorized agencies should consult businesses in negotiating and signing FTAs. Tariff, non-tariff, intellectual property and environment should be discussed publicly and transparently for enterprises to have preparations, said lawyer Tran Huu Huynh, chairman of the International Trade Advisory Committee under the Vietnam Chamber of Commerce and Industry.

The Government has tasked the Ministry of Industry and Trade to work with other ministries to propagandize international integration commitments from FTAs to businesses, Minister Vu Huy Hoang told the press recently.

However, that work has been implemented without results as expectations, causing businesses’ little acknowledge of the matter. The ministry needs close coordination from other ministries especially information and communications agencies to better the propaganda, he said.

Of course it is impossible to only blame authorized agencies for businesses’ weak acknowledge of FTA. This is partly because the firms themselves have been passive in catching information as well as improving their goods quality to meet importers’ demand. 
More FTAs will be signed this year. It is time to help businesses improve their knowledge and goods quality to take advantage of opportunities from the agreements.

Businesses themselves should take more initiatives to find out information related to their fields and closely work with importers to catch up with import markets’ regulations for export promotion.

By Thanh Dung – Translated by Hai Mien

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