Free trade agreements (FTA), particularly new-generation deals, are instrumental in the buoyant performance of Vietnam’s export businesses, underpinning the country’s export target of 6 per cent in 2023 despite the global headwinds.
Fifty containers of local agricultural products including coffee, pepper, star anise, cashews, and more were shipped to Europe, the US, and the Middle East by Phuc Sinh Corporation in the early days of the New Year.
Thanks to the wide-ranging FTAs that have come into force between Vietnam and other countries, the company – a major exporter in the southern region – could choose the one that offered the best incentives for their export business.
For instance, the EU-Vietnam FTA (EVFTA) renders favourable tariffs for processed agricultural products with clear origin to enter EU markets, leading to a remarkable increase in Phuc Sinh’s export value to Europe.
In 2020, the company’s exports to Europe approximated $50 million, increasing to $63 million in 2021. This figure continued to expand by about 30 per cent in 2022.
Phan Minh Thong, chairman and CEO of Phuc Sinh Corporation, noted that 2023 would be tougher for Vietnam’s export firms as the country’s main export markets have been plagued with high inflation and the threat of recession.
“However, being an essential commodity, food still offers advantages in terms of exports. In addition, ongoing FTAs could bolster exports through tax exemptions or reductions, enabling local exporters to compete impartially with items from other countries,” Thong said.
Besides exports, the EVFTA is also beneficial to imports, helping firms to be more confident in their investment and business expansion while diversifying their products to gain an edge over other countries.
Phuc Sinh is one of the hundreds of local firms that have availed of FTAs and contributed a great deal to the agricultural sector’s total export value. This surpassed $53 billion in 2022, with coffee alone bringing in a record $4 billion.
After the slow growth due to COVID-19 in 2021, the textile and apparel sector regained growth momentum in 2022 with export value reaching $44 billion.
With the EVFTA, the sector’s export value to the EU came to $4.46 billion, up 34.7 per cent. In addition, exports to Japan reached $40.7 billion, equal to a 25.8 per cent jump on-year.
In 2023, the industry and trade sector aims to achieve a 6 per cent export growth target and maintain a trade surplus for the eighth consecutive year.
Such targets are deemed challenging since from the fourth quarter of last year the global merchandise market was slowing down and high inflation in major markets like the US, EU, and Japan has diminished purchasing power.
In this context, each sector and firm is well aware of the difficulties, but also the advantages, of crafting suitable business plans.
In the case of Phuc Sinh, in 2023, the company is set to boost the export of new quality items such as tea products made from Arabica coffee shells (Cascara tea), which stems from a step forward in the company’s research and development activities.
The product has been exported mainly to Italy and has effectively availed of the EVFTA's advantages.
Minister of Industry and Trade Nguyen Hong Dien opined that FTAs would lead to further efficiency in 2023 as the current global markets for Vietnam’s many sectors remain low.
For instance, the market slice of the seafood, rice, textile and apparel, footwear, fresh and processed vegetables, and fruit sectors stands at just 4.2 per cent, 2.7 per cent, 3.8 per cent, 20 per cent, and 2.7 per cent respectively.
To date, Vietnam has engaged in 17 FTAs. Of these, 15 are enforced and two are under negotiation.
A string of new-generation FTAs such as the CPTPP, EVFTA, UKVFTA, and RCEP have come into force in recent years, providing a great impetus for Vietnam’s exports.
Source: CCIPV / VIR