VN Needs major institutional reform to carry out FTA with EU

Vietnam will have to proceed with major policy and institutional reform to implement a free trade agreement (FTA) with the European Union (EU), said the president of the Central Institute for Economic Management (CIEM).

Nguyen Dinh Cung, speaking at a seminar on implications for policy and institutional reform in the process of implementing the Vietnam-EU Free Trade Agreement (EVFTA), held by CIEM and the Embassy of Denmark in Hanoi before the start last week of the Lunar New Year holiday, said the Government of Vietnam would set up an agency in charge of State holdings in enterprises this year.

“In 2017, the agency acting as the State owner of shares at enterprises will be established to ensure and promote the neutrality of State-owned enterprises (SOEs),” Cung said, describing this forthcoming move as a big policy change.

For instance, dozens of large state-owned corporations would be detached from the Ministry of Trade and Industry and others, he said. “The role of ministries would be fundamentally changed as they would no longer oversee SOEs.”

The Competition Law would be amended, with the Vietnam Competition Authority to be vested with greater power and separated from the Ministry of Industry and Trade to become a government agency.

Cung said, “These changes are aimed at fostering a market economy, making Vietnam compatible with the new-generation FTA, promoting fair competition, and elevating the status of Vietnam’s market,” he remarked.

Hoang Van Phuong, head of the ASEAN division under the Ministry of Industry and Trade’s Department of Multilateral Trade Policy, said the EVFTA is a high-quality and comprehensive agreement as it touches on multiple areas such as government procurement, environment and SOE reform.

The trade pact is divided into several chapters and 17 main components, including goods, customs, trade in services, investment, competition, SOEs, government procurement and sustainable development.

Regarding trade in goods, the deal features a high commitment. Vietnam’s roadmap is to remove 48% of tariff lines as soon as the agreement takes effect, and 99% of them will go after 10 years.

In return, the EU will offer Vietnam faster tax adjustments. In the first seven years after the agreement goes into force, the EU will slash 99.2% of tariff lines to a mere 0.8%, or almost fully open its market to Vietnamese goods in seven years.

“Vietnam’s exports to the EU will enjoy tax reductions following a certain roadmap. The major items like textiles will benefit,” Phuong said. “Major changes would come if the EVFTA becomes effective in 2018.”

The agreement is under expert-level review, Phuong said. “Many companies have asked us why the approval process takes so long. The process is still going on. We are doing a legal review. Vietnamese and EU delegations are sitting together to discuss chapter by chapter and solve the remaining differences.”

Source: Saigon Times