Hanoi (VNA) –To a small-scale economy like Vietnam, the signing of the Vietnam-EU Free Trade Agreement (EVFTA) will be an important impetus for the country’s integration and development process, thereby creating an attractive and competing investment destination in the region and opening up great opportunities in attracting foreign capital into Vietnam.
A report from the Ministry of Planning and Investment said that in the first half of the year, registered foreign direct investment (FDI) and capital to buy shares reached 18.47 billion USD, 90.8 percent compared to the same period in 2018. Of which, FDI projects disbursed 9.1 billion USD, up nearly 8 percent over the same period last year.
Increasing opportunities for investors to access the market
Regarding this, Minister of Planning and Investment Nguyen Chi Dung pointed out that, after the successes of 2018, Vietnam’s economy returned to a fast-growing trajectory with a GDP growth rate of over 7 percent, which manifested the determination and efforts of both the political system and the important contributions of the business community, domestic and foreign investors.
Impressive figures are a record of over 131,000 newly established enterprises with a total registered capital of 1.4 million billion VND. In addition, foreign direct investment activities grew strongly in the context of fluctuating global investment flows, reaching 36.3 billion USD of registered capital and 19.1 billion USD of disbursed capital. This is the highest level in 10 years.
However, in 2019, the domestic and foreign economic situation has many complicated developments with difficulties and challenges, creating objective factors and affecting the flow of foreign investment into Vietnam in the first half of the year.
Specifically, in the first 6 months, total newly registered capital and additional capital of the foreign direct investment reached 10.35 billion USD down 36.3 percent over the same period, but the total disbursement capital in the 6-month period reached 9.1 billion USD, up 8.1 percent as compared to the same period in 2018.
According to Nguyen Anh Duong, Head of the General Research Department, Central Institute for Economic Management, compared with other countries in the region, Vietnam is not the most competitive environment, but the fastest competitive environment improvement, so when foreign investors invest in Vietnam, they will have advantages in the future. In terms of legal management, Vietnam currently ranks fourth in the region, on par with Thailand and only behind Singapore and Malaysia, due to the Vietnamese government’s commitment to improving the business and investment environment with stable political environment.
Is the opportunity from EVFTA easy to come true?
The Free trade agreement between Vietnam and the European Union (EVFTA) was signed to open up opportunities for Vietnam’s economic development in the long term.
According to calculations from the Ministry of Planning and Investment, the EVFTA when coming into effect will help increase Vietnam’s export turnover to the EU by about 20 percent by 2020 and even by 42.7 percent (by 2025) and 44.37 percent (by 2030), simultaneously contributing to GDP growth from 2.18% – 3.25% (2019-2023 period) and by 7.07 percent – 7.72 percent (2029-2033 period).
Totally agreeing with the above figures, Nguyen Thi Thu Trang, Director of the WTO and Integration Center, Vietnam Chamber of Commerce and Industry (VCCI), explained that Vietnam had a large trade relationship with the EU so when the EVFTA was successfully signed, it will will create favorable conditions for Vietnam’s key export industries (such as textiles, footwear, and aquatic products). In addition, other industries, which were once heavily protected, will now open up and create new momentum for Vietnam’s export growth to the EU.
“For Vietnam’s economy, exports now contribute a large proportion to the GDP, so when the EVFTA helps boost exports, it will also contribute to GDP growth,” said Trang.
However, to realize these opportunities, according to Vu Tien Loc, Chairman of VCCI, it is not an easy task.
According Loc, with the current speed of signing bilateral and multilateral, the openness of the economy is very high while the capacity of Vietnam’s integration is still low. According to the World Economic Forum’s ranking, Vietnam’s competitiveness index ranked 77th/140th of the world economy, so if we want to realize the opportunities from the EVFTA, we need a process with a great deal of effort from both the managers and the business system, Loc said.
Changing the situation
Regarding attracting FDI capital, according to Mr. Kyle F. Kelhofer, Senior Country Director of Vietnam, Laos, Cambodia, the International Finance Corporation (IFC), Vietnam needs to prepare a high-level labor force across all sectors, from infrastructure to finance to serve the digital economy and increase the efficiency of key economic sectors to meet the role of promoting development.
But in order to do this, the local business environment will have to be strengthened to create opportunities for domestic private enterprises to join global value chains with increasing FDI.
According to Minister of Planning and Investment, “participation in new generation free trade agreements such as the CPTPP and EVFTA is a great pressure on the requirements of sustainable development and social integration of Vietnam’s economy.”
To overcome these shortcomings, Minister Nguyen Chi Dung affirmed that the Government is determined to reform with the comprehensive renovation of the economy towards improving internal capacity and resilience of the economy, strengthening macroeconomic stability while promoting scientific application and effectively taking advantage of the fourth industrial revolution./.
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