Stumbling blocks facing businesses in FTA implementation
Updated : Saturday, January 13, 2018 9:25 AM (GMT+0700)

Lackof information, human resources and viable strategies are the three majordifficulties facing Vietnamese businesses attempting to carry out the FreeTrade Agreements (FTAs), says Nguyen Dinh Cung, Director of the CentralInstitute for Economic Management (CIEM).

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Are foreign-investedenterprises (FIEs) better positioned to seize the new opportunities fromintegration and FTAs than domestic businesses? What are the hindrances of localbusinesses in capitalizing on these FTAs? 

Obstaclesto foreign market access

The markets with whichVietnam has signed FTAs, have applied diverse and complicated non-tariffmeasures such as animal and plant health quarantine, Technical Barriers toTrade (TBT) and limitation on distributions.

Contrary to tax reduction,the elimination of non-tariff barriers demands institutional, legal andtechnological changes , thus posing a big challenge for local businesses thatneed greater investments and better production procedures and management.

A factual survey has shownthat local businesses have been confronted with higher requirements on productquality, food hygiene and safety and technical standards while finding deeperinroad into developed economies.

Nearly 50% of businesses saythey have encountered difficulties in meeting strict requirements on productquality, design, and packaging set by the EU market. Meanwhile over 40% ofbusinesses lack the relevant information on general market trends, consumertastes and find it difficult to meet stringent food safety standards.

Additionally, investment andbusiness models of most Vietnamese businesses are unsuitable with economicintegration as they failed to work out long-term business targets and toprepare sufficiently  for the implementation of FTAs.

Trinh Minh Anh, Deputy Headof Office of the Inter-sectoral Steering Committee for Global EconomicIntegration, says that the overlapping dissemination of information on FTAs andthe integration process  has yet to meet demands of state managers, localauthorities, businesses and residents.

Businessesin dire need of information

Mr Cung said that in orderfor businesses to take full advantage of the new opportunities made possible bythe FTAs they must have access to much more clear and detailed information.They need to be educated on the contents of each FTA and opportunities as wellas challenges should be sufficient and concrete.

The economic expert proposedchanges that should be made by businesses to fully grasp opportunities broughtby FTAs.

A representative from the DaNang city People’s Committee says the number of businesses directly involved inimport-export activities remain low at approximately 2.5%, just around 100businesses of which have maintained stable exports.

To capitalize onopportunities made possible by the FTAs, municipal businesses need to graspinformation on opportunities brought by FTAs aiming to identify their targetmarkets in the short and long-term.

Developing brand names tosecure a firm foothold in the domestic market is seen as a solid foundation foroverseas market expansion.

Quang Nam province’s departmentof industry and trade reports 96% of small and micro businesses in the localityneed to manage themselves to deal with challenges after a series of the FTAstake effect.

Therefore, to ensure theirexistence in the marketplace, businesses are now in urgent need of relevantinformation and proper mechanisms and State policies regarding goodsconsumption, market access, and greater investment in exports of key productsamid deeper international integration.

Specifically, supportpriorities should be given to investment in industrial infrastructure,technological transfer, and trade promotion activities in potential markets inthis region and the world. 


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