Vietnam’s economy in 2016 – Year of integration

Thursday, 07 January 2016
A string of Free Trade Agreements (FTAs) made ‘bumper’ debut in 2015, creating a solid foundation for 2016 which is so-called the year of economic integration.

Prospects from FTAs

In 2015, Viet Nam set a global record in the number of FTAs signed with other partners. This was a deserving outcome for Viet Nam in 2015, the year of ‘trade liberalization’, said Media and Government Relations Manager at the Russian International Affairs Council (RIAC) Anton Tsvetov.

The signing of FTAs was expected to open up vast opportunities for Vietnamese enterprises to enlarge market, raise revenue, and improve production capacity.  

Illustrative image

In 2015, the Southeast Asian country sealed a FTA with the Eurasian Economic Union (EAEU), the Republic of Korea, concluded negotiations on the Trans-Pacific Partnership Agreement, and finalized the Viet Nam-EU Free Trade Agreement Negotiation (EV-FTA).

Viet Nam is the country with the lowest level of development among TPP member countries and is expected to benefit most from the TPP. Economists forecast that TPP would boost US$23.5 billion of Viet Nam’s GDP by 2020 and US$35.5 billion by 2025.  

Under the EV-FTA, Viet Nam and the EU would cut over 99% of tariff lines, the highest commitments ever made by Viet Nam. Thus, the benefits of the EV-FTA for Viet Nam is equal to TPP’s ones.

Earlier, the FTA between Viet Nam and the member countries of the Economic Alliance Asia – Europe (EEU) - Russia, Armenia, Belarus, Kazakhstan and Kyrgyzstan - was reached on May 29. The two sides are expected for each level of market opening in goods that account for about 90% of tariff lines, equivalent to over 90% of bilateral trade. Once the FTA takes effect, two-way trade turnover would hit US$10-12 billion by 2020 and rise three times against 2014.

Especially, the ASEAN Economic Community (AEC) came into effect on January 1, 2016, and created the world’s seventh-largest single market of 600 million people, larger than the European Union or the North American Free Trade Agreement.  

Turning challenges into opportunities

It is the right time for Viet Nam to “play” with big partners across the globe, said Dr. Vo Tri Thanh, Vice President of Central Institute for Economic Management (CIEM). The economist also regarded this as a unique opportunity for local enterprises to play with the best.  

In 2016, Viet Nam will integrate comprehensively and intensively into the global economy. The integration process will bring back both opportunities and challenges.  

According to Minister of Planning and Investment Bui Quang Vinh, Viet Nam joined the AEC on December 31, 2015 and faced three challenges including the free movement of products, investment and high-skilled laborers.

Without higher competitiveness, Vietnamese people may lose jobs right at ‘their playing ground.’ Once trade liberalization is effective, a “large piece of the cake” would be taken by FDI enterprises, not domestic ones.

Minister Vinh also suggested the necessity to work with associations and enterprises to build mechanisms and policies which give a impulse to internal strengthen; seize FTA opportunities; and overcome challenges.

Van Hai (Source: VGP)

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