Seventy-two percent of the leaders of European companies in Vietnam have a concrete understanding of the commitments as well as the impacts of the EU-Vietnam Free Trade Agreement (EVFTA), and almost half of them believe the trade deal positively affects their operations.
The Business Competitiveness Index (BCI) report recently issued by the European Chamber of Commerce in Vietnam (EuroCham) shows that the trust of European companies in the Vietnamese economy has reached the highest level since the fourth wave of COVID-19 in April 2021. Many companies believe the EVFTA has positively affected their operations.
In the first quarter of 2022, the BCI increased to 73 points, up 12 points compared with the fourth quarter of 2021, against 58 points in the third quarter of 2021. European companies proved more optimistic after Vietnam eased restrictions related to the pandemic to accelerate economic recovery and development.
The report says European companies believe omicron is less severe than previous variants of the coronavirus and is controllable - and this enabled their rapid recovery in the first quarter of 2022. The BCI is expected to improve further in the second quarter of the year as more than two-thirds of surveyed companies expressed optimism about strong economic recovery.
The report also indicates that about six percent of the leaders of European companies in Vietnam believe the EVFTA has contributed significantly to the efficiency of their business. The trade deal is also expected to help accelerate Vietnam’s integration in the global economy.
EU technical requirements
As a new-generation free trade agreement with high-level commitments ensuring balanced interests for both sides, the EVFTA plays a very important role in boosting the economic and trade relations between Vietnam and the EU. The trade deal will remove almost 100 percent of tariffs for imports and exports between the two sides. Specifically, it eliminated tariffs for 65 percent of the EU’s exports to Vietnam when it took effect in August 2020, and the remainder will be gradually removed in the next decade. The EVFTA also eliminated the tariffs for 71 percent of Vietnamese exports to the EU when it took effect and this percentage will gradually increase to more than 99 percent within seven years.
The European-American Market Department of the Ministry of Industry and Trade forecasts that Vietnam’s exports to the EU will increase by about 18 percent or eight billion euros by 2035. EU demand for farm produce, seafood, tropical fruit and vegetables is expected to increase, along with demand for key Vietnamese industrial products such as textiles, garments, leather, footwear, and wood products.
The EU is a discerning market requiring imported goods to meet high technical standards, whereas the quality of some Vietnamese goods is unstable, according to some EU companies. The European-American Market Department warned domestic companies of the need to learn about the laws as well as quality requirements of foreign countries and each of their market destinations.