How to take full advantage of FTAs?

Lai Cach industrial park in Cam Giang district. Source: Internet

Over the past time, Vietnam has singed many new-generation free trade agreements (FTAs) such as the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP), the EU - Vietnam FTA (EVFTA), the ASEAN - China Free Trade Area (ACFTA), the ASEAN - South Korea FTA (AKFTA), etc. The business community in Hai Duong province has been taking full advantages of these agreements.

Thorough propaganda of regulations

According to a leader of the Economic Department of the South Korean Embassy in Vietnam, not only large enterprises, small- and medium-sized ones also benefit from FTAs.

Therefore, Hai Duong authorities should intensify dissemination of regulations and procedures for applying FTAs’ terms to the business community in the province to help them gain maximum benefits from FTAs.

When applying FTAs’ terms, enterprises need to anticipate the possibility of being inspected and verified about the process implemented. Goods following FTAs will be subject to inspection and verification by tax authorities.

During inspection, producers will have to present papers proving the authenticity of the origin of their goods and materials. Without preparation, they may have to pay a large amount of tax arrears later.

Businesses should build systems and mechanisms to be able to issue and manage certificates of origin (C/O), thereby improving their own competitiveness.

Further business support

Tran Van Hao, Director of the Hai Duong Department of Industry and Trade, said 357 exporters in the province had participated in FTAs.

The Department of Industry and Trade has actively coordinated with departments of the Ministry of Industry and Trade to organize intensive training courses on rules of origin for importers and exporters in the province to help them clearly understand policies, regulations, rules of origin, cumulative rules of origin, and documents showing materials following regional supply chains in FTAs; intensified information capture and promptly informed businesses about export markets to proactively work out appropriate production and business plans; continued to propagandize commitments and agreements that Vietnam participates in to every locality, enterprise, and citizen for relevant entities to effectively implement them; continued to counsel businesses on business law, knowledge of international economic integration, as well as experience in dealing with international lawsuits and trade barriers of import markets; etc.

Meanwhile, Nguyen Cao Thang, Director of the Department of Information and Communications, believed that the main role of digital transformation in taking advantage of opportunities brought by FTAs is to provide domestic businesses with a digital platform to access the world market more effectively than previous forms, thereby diversifying markets and reducing dependence on a certain market group.

With great progress of information technology, all businesses, especially small- and medium-sized ones, can directly approach foreign consumers.

Moreover, thanks to big data technology, enterprises can easily analyze consumers’ behaviors in all markets accurately, take care of customers, market products to the right audience at low costs, etc.

Improving attractiveness of beneficial industries

In Hai Duong, the industries that have advantages when Vietnam deploys FTAs are garment, textile, and footwear. This is a great opportunity and benefit created by FTAs, especially in the coming period since the world is gradually recovering from the impact of Covid-19 epidemic. That is the opinion of Dinh Xuan Vinh, Deputy Director of the Hai Duong Customs Branch.

According to Vinh, businesses operating in the benefiting fields should strengthen their competitiveness, proactively access modern technology, and participate in stages that create greater added value in product value chains.

The key point that affects the competitiveness of businesses’ exports is the initiative in input materials. Therefore, enterprises need to have a strategy to expand partners to avoid complete dependence on supply from a few fixed partners.

Ministries and branches should have policies to encourage more investment in developing supporting industries, especially those in which Vietnam has comparative advantages, to expand market share.

On the other hand, commitments in FTAs will create greater competitive pressure on the domestic market in a number of industries like pharmaceuticals, financial services, banking, insurance, logistics, and information and communications.

Enterprises should turn this competitive pressure into a development strategy and build cooperation channels with foreign partners and investors.

Human resources - essential element to realize enterprises’ missions

A representative of Hyundai Kefico Vietnam Co., Ltd. said that in the current economic context, along with opportunities and challenges brought by new-generation FTAs, human resources play an extremely important role to each enterprise.

Hyundai Kefico Vietnam always looks for and constantly trains high-quality employees who understand technology, continuously hone their skills, and are ready to work with leading experts from major corporations around the world.

Besides, the company focuses on specializing its trade promotion section and developing skillful employees knowing foreign languages and capable of thoroughly understanding the market and approaching potential customers worldwide.

To make the most of opportunities opened up by FTAs as well as expanding the market, aside from human resources, the company always upholds concentration on further improving product quality, strengthening brand popularization through prestigious events and channels, and diversifying product lines in line with future development trends of the industry and meeting the needs of various groups of customers around the world.

Hyundai Kefico Vietnam Co., Ltd., a wholly South Korean-invested enterprise, is employing nearly 2,000 laborers.

The company operates in the field of manufacturing spare and auxiliary parts of motor vehicles and vehicle engines. Its average output in 2022 is estimated at more than 75.3 million products.

Overcoming difficulties in rules of goods’ origin

Do Xuan Hung, Financial Manager of Regent Garment Factory Ltd., said that one of the biggest benefits from FTAs for businesses when exporting goods is tariff preference.

However, to enjoy the preference, enterprises’ products must meet rules of origin. This is one of difficulties of businesses when realizing FTAs.

To be eligible to apply for a C/O under each FTA for customers, companies must proactively study and work with material providers about supply, papers proving the origin of input materials, etc.; proactively learn about rules of origin in each FTA to make the most of tax incentives for customers; and have a system to store export and import papers to work with customs agencies and C/O issuers as well as for post-inspection.

Thorough understanding of each import market’s rules of origin according to each commitment enables businesses to meet and take advantage of tariff incentives and increase opportunities for market expansion.

HA KIEN – HUYEN TRANG