(VOvworld) – As from October 5th, the free trade agreement (FTA) between Vietnam and the Eurasian Economic Union (EAEU) has came into force, opening up new development opportunities for the two business communities. The agreement promises to create favorable conditions for both sides to promote their goods and attract investment.
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| FTA bodes well for Vietnam-Eurasian Union economic ties |
The FTA between Vietnam and EAEU members –Russia, Belarus, Kazakhstan, Armenia, and Kyrgyzstan – was signed on May 29, 2015.
Under the agreement, more than 90% of Vietnam’s export items to EAEU countries will be exempted from tax. In the first year of the agreement, exporters will save about 40 million USD in taxes.
Dang Hoang Hai, Director of the European Market department under the Ministry of Industry and Trade, said that, as the first partner to sign a free trade deal with the EAEU, Vietnamese exporters will have more opportunities.
He said: “It is a comprehensive state-level agreement but will not only open the commodities market, but also boost investment and services. This is the first agreement the EAEU has signed with a non-member country and the first Vietnam has signed with an economic alliance. With careful preparation, the agreement will surely create a breakthrough in the relations between Vietnam and the EAEU.”
Currently more than 900 Vietnamese businesses are exporting to the EAEU market, 200 of which have a large turnover, mainly in seafood, coffee, tea, rice, textiles, and footwear.
Russian Ambassador to Vietnam Konstantin Vnucov said that pursuant to the agreement’s commitments, the two sides will open market access for certain trade services and investment in addition to slashing nearly 90% of tariff lines.
“The agreement aims to increase the volume of trade and create favorable conditions for investment and technology using qualified personnel resources. Thanks to this mechanism, Vietnam can access a larger and more promising market involving 5 countries with a total GDP of nearly 2.2 trillion USD and more than 180 million consumers. EAEU countries can promote their products to Vietnam, which has a population of 90 million people,” according to the Russian Ambassador.
Bilateral trade is forecast to grow from the current level of 4 billion USD to 10 billion USD in the next few years.
Vietnam will abolish import duties on more than 59% of tariff lines on all kinds of goods from EAEU members. For another 30% of tariff lines, the import duty will gradually be reduced to 0% in the transition period. Vietnam’s average import tariff on goods from these countries will fall from 10% to 1%.
Hai explained further: “To optimize the agreement’s opportunities, the two sides need to outline specific support measures on transportation, customs, and policies that can make the deal practically useful for the business communities and the economies of Vietnam and the EAEU. Both have also set out an ambitious goal that bilateral trade revenue will reach 10 to 12 billion USD by 2020. To this end, Vietnam hopes to get close cooperation from embassies, ministries, and agencies of the EAEU members in implementing the agreement.”
Under this deal, Vietnam producers will get preferential treatment in market access from the EAEU members and can improve their competitiveness there against similar products.
Penetrating the EAEU market will create a golden opportunity for Vietnam’s most competitive items but will also create stiff competition from imports from the union. Nguyen Quang Thai, Vice Chairman and Secretary General of the Vietnam Economic Association, said: “We need to learn more about market, forces, and regulations when penetrating a new market. It’s important to pay particular attention to the origin of products. For a new market, it is essential to learn in details consumer tastes, requirements for product quality, and possible technical barriers. The government should provide legal support, certification of the origin of goods, and labeling for Vietnamese products so that they can penetrate these potential markets and reach other markets in the future.”