How are the fisheries, leather and footwear sectors preparing to welcome EVFTA?

Vietnam's 10-billion-dollar export commodities such as fisheries, leather and footwear are full of hope the Vietnam-EU Free Trade Agreement (EVFTA) that will be effective in the next one month will bring a positive impact toexports. However, there are still many concerns about non-tariff issues that enterprises have to face to take advantage of the new opportunities

Fisheries enterprises have active preparations to take advantage of new opportunities when the EVFTA takes effect. Photo: Nguyen Thanh

Preparations from early

Phan Thi Thanh Xuan, General Secretary of the Vietnam Leather and Footwear Association, shared that leather and footwear exportsin the first five months of this year fell by 14% compared to the same period last year. In the first five months of the previous years, average export growth reached 10%. It can be seen that this year, leather and footwear export in the first five months dropped nearly 30%. Motivated by very good signs of the EVFTA, leather and footwear enterprises are looking forward and full of hope for export growth soon.

“The EU is a traditional market of Vietnam's leather and footwear industry, accounting for nearly 30% of export turnover, about US$6 billion per year. We expect that on August 1 when the agreement comes into effect, the promoting of exports to this market will help offset the losses of export in the first months of the year,”Xuan said.

Regarding the preparations to take advantage of new opportunities from EVFTA, Xuan said: “With the preparations of enterprises, we are also expecting to meet requirements of the EU market, as well as connect with customers of the EU market when the EU market is re-opening.”

According to the Ministry of Planning and Investment, in terms of exports, the EVFTA is expected to help Vietnam's export turnover to the EU increase by about 20% in 2020,42.7% in 2025 and 44.37% in 2030 compared to absence of the agreement.

According to the Ministry of Industry and Trade, in terms of commodity lines, the export growth of some industries to the EU such as agriculture, fishery, textiles, and footwear are expected to achieve high growth results. The EVFTA will bring great market potential for exports of agricultural and fishery products in Vietnam. Specifically rice will increase 65% in 2025; sugar 8%, pork 4%, forestry products 3%, cattle and poultry meat4%, beverages and tobacco 5% and seafood 2% in 2020-2030.

For the textile industry, it is forecast that the export turnover of textiles and garments to the EU market will increase by about 67% in 2025 compared to no agreement. In terms of output, EVFTA generally has a positive impact on output with a growth rate of 6% (for the textile industry) and 14% (for the garment industry) in 2030.

Similarly, for the footwear industry, the agreement will contribute to a significant increase in footwear exports to the EU. The export growth rate to the EU is expected to double in 2025 and total exports of leather and footwear will also increase by about 34%, the industry's output will increase 31.8%.

Sharing more about preparations of enterprises to be ready to take advantage of opportunities from EVFTA, Nguyen Hoai Nam, Deputy General Secretary of Vietnam Association of Seafood Exporters and Producers (Vasep) said: “Vasep has been actively working with the Ministry of Industry and Trade for the past two years and expects the business community to capture as much information as possible about the EVFTA. As soon as EVFTA comes into effect, we are also making further efforts after seeing some commodity lines lack information. For example, the issue of tariff quotas related to canned tuna or surimi, that is what the association is continuing to coordinate with the Ministry of Industry and Trade on to get full information as soon as possible about the registration of quotas for exported tuna and surimi to the EU.”

The activeness of seafood enterprises is clearly seen through the fact that they extremely pay attention to information related to the EVFTA. According to Nam, for programs that Vasep collaborates with the Ministry of Agriculture and Rural Development and training of the Ministry of Industry and Trade on the EVFTA for fisheries enterprises, all Vasep member enterprises have attended and asked many questions. “In addition, it is worth noting thatVasep received quite professional questions from enterprises, such as when can Vietnamese enterprises register for tuna exportsto the EU in the 1,500-tonne quota? In mid-July, Vasepproposed the Ministry of Industry and Trade coordinate with the Ministry's joint programme to have a separate training on the issue of rules of origin,”Nam said.

State and enterprises work together

The EU market has great potential and opportunities to promote exports of goods are remarkable but in fact when the EVFTA comes into effect, this is nota “ partyeasy to enjoy" for Vietnamese enterprises.

According to Nam, for FTAs such as the EVFTA or the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), besides tax advantages, there are other issuesrelating to sustainable development, intellectual property and non-tariff techniques. "In the current trend when the tax is reduced or cut to 0%, to make commitments in the remaining issues, the Government and enterprises will have to have the same internalization of law and have more capacity to meet commitments, especially on issues of sustainability, labour and environment, including the story of child labour, forced labour” said Nam.

Expressing many concerns in the leather and footwear sector, Thanh Xuan analysed that the EU has high requirements on conditions to enter the market. They are not as easy as requirements on techniques, high quality goods and requirements on labour, as well as the environment. These are the factors that enterprises, especially small and medium enterprises, must improve a lot to be able to enter the market.

“Regarding the leather and footwear industry, enterprises are limited in grasping information about the EVFTA. The reason is because of the model of export processing and production. We are heavily dependent on international customers. Regarding the market issue, it mostly depends on the initiative of the customers;we only produce and sell products. Enterprises are not active in approaching markets. In addition, enterprises have failed to meet internal human resources and infrastructure system requirements, because of small and fragmented development. We really expect enterprises should have positive changes to be able to access the ’game‘. Along with that, institutions and policies need to be improved. This requires consistency from enterprises, the State can execute and take advantage of market opportunities in the future,” said Xuan

Regarding rules of origin, Phan Thi Thanh Xuan said materials and accessories for Vietnam's leather and footwear industry were mainly imported from China (60%), followed by South Korea and Taiwan (China). In recent years, the activeness of raw materials has had a relatively good change when enterprises have gradually shifted supply and production chain of material and accessory to Vietnam. However, this is only done by large enterprises. Small and medium enterprises have limited resources, so are not proactive in solving raw materials locally.

“We hope the strategy of developing materials and accessories needs to create a specialized industrial zone for the footwear and textile industry to develop and there should be better tax incentive policies to promote the development of materials and accessories produced in Vietnam. In addition, we hope the supporting industry development strategy will solve bottlenecks on rules of origin, helping enterprises make better use of opportunities from EVFTA in the next stage,” said Xuan.

Looking at the overview of EVFTA implementation in the long-term, Nam said that not only accompanying and supporting enterprises in the current period, but the Ministry of Industry and Trade or ministries assigned to programmes of the agreement must have a permanent unit which works on a continuous process.

"In particular, the ministries and agencies should not only support domestic enterprises but also need a channel or way to show the EU that the Vietnamese side complies well with its commitments, so that they can have confidence in Vietnam and set new prospects for future development,” said Nam