EVFTA’s openness poses challenges for Vietnamese retailers
Even as the European Union-Vietnam Free Trade Agreement (EVFTA), which will take effect from August 1, 2020, promises to bring about tremendous opportunities for businesses and consumers of both sides,
Vietnamese retailers and distributors are apprehensive that its openness may lead to them losing their home advantage and facing more competition from EU companies.
Data from the Ministry of Industry and Trade revealed that Vietnam exported goods worth US$41.45 billion to the EU and spent US$14.9 billion on imports from the union in 2019, earning a trade surplus of US$26.55 billion.
The Ministry of Planning and Investment estimated that the EVFTA could boost Vietnam’s imports from the EU by 33.06% by 2025 and 36.7% by 2030.
Although products made in Vietnam still account for more than 60% of goods currently sold at supermarkets, the Vietnamese retail market is seeing fierce competition between local giants like Saigon Co.op, VinCommerce, Bach Hoa Xanh and Satra and their international rivals such as Lotte, Big C, and Circle K. This is only expected to get more intense once the country opens its doors wider to EU businesses.
“The EVFTA will boost high-quality investments from the EU and its partners to Vietnam, accelerating the restructuring and renovation of the country’s retail sector,” the Domestic Market Department under the Ministry of Industry and Trade said in a statement, adding that Vietnamese retailers that fail to adapt to the fast-changing business environment would find it tough to survive.
Challenges that Vietnamese businesses, especially small and medium-sized retailers and distributors, would face are increasing competition, underdeveloped e-commerce infrastructure and management and food safety and hygiene. With lower competitiveness compared to EU enterprises, they stand to be taken over or lose their market share.
The Ministry of Industry and Trade noted that deadlines for realizing commitments at the EVFTA would also be challenging for Vietnam. For other free trade agreements, the participating parties are required to realize their commitments in 10 years. However, the EVFTA requires Vietnam to realize its commitments in five to seven years, with some provisions expected to be executed right after the EVFTA comes into effect or within two or three years.
According to the Domestic Market Department, Vietnamese products, especially farm produce, livestock products and seafood, will have to compete with cheap but quality goods from the EU in the domestic market. SGT
Vietnam will be able to reap fruit from the EVFTA if it can improve the legal framework and enhance implementation capability.
Starting from this year, investors from EU member states will for the first time be allowed to tender for many types of public projects in Vietnam under EU-Vietnam Free Trade Agreement commitments.