The EU-Viet Nam Free Trade Agreement is expected to be signed this year. Visiting EU-ASEAN Business Council (EU-ABC) Executive Director Chris Humphrey spoke to Viet Nam News about likely impacts of the FTA on Vietnamese businesses.
The EU-Viet Nam free trade agreement is expected to be signed this year. Do you think this will happen?
There is strong political will on both sides to see the deal concluded this year. I think one or two more rounds of discussions will be needed before the deal is finalised. They seem to be very confident and I think it could be done in the next two or three months. I think this is good news. The EC certainly wants to have the deal done with Viet Nam.
And you can see from the way the Vietnamese Government is handling the whole range of trade negotiations that they want to open up more to international trade.
There are several issues that need to be addressed, but I'm sure the needed compromises can be reached through negotiations so that the deal is done.
How will the agreement impact Viet Nam's economy and business climate?
General speaking, a free trade deal always pushes the economy and pushes trade. Definitely it will push trade and then the economy will be pushed, too. And it would certainly help Vietnamese businesses export more to Europe. Equally, it will make Viet Nam a much more attractive destination for foreign businesses, including those from Europe. So more European companies will come and establish their manufacturing bases here.
You will see the trade relationship grow and given that the balance is already in Viet Nam's favour, I could probably say that the balance could swing more in your favour.
Viet Nam's trade has been growing at a good rate, at double that of the GDP growth rate, over the past few years and the FTA should push it further.
What advice would you give Vietnamese businesses on preparing for FTA challenges?
More business and investors will be coming to invest in Viet Nam, so it has to make sure that the local supply chain can support the investment. Part of this is the human resources question. Then there is the need to raise standards in terms of the supply going to Europe.
Vietnamese companies who are looking to trade more with Europe will find it easier if they do their homework and raise their own standards, because Europe has quite strict safety standards in a number of sectors. So they may need to invest in certification processes or in tracking processes to make sure that they meet those standards for exports.
Viet Nam has been working hard on its economic reform process. What are the key factors that can ensure its success?
Any country that is going through the reform process will have some teething troubles along the way. Viet Nam is clearly making a big stride in the process as they see advantages in the longer term and they should be encouraged to do so. And the Europe and European Commission could help you in that process.
The key thing is to ensure that you are not working alone on that road. People who want to invest in your country want certainty and sustainability. So they want to know whether any rule or regulation that is coming in to open up the market will remain there. And this must be done in a transparent way. These are the key things for any country to succeed.
You were a consultant assisting start-ups in Asia with their business and corporate development before joining the EU-ASEAN Business Council in June 2014. What advice can you give start-ups in Viet Nam?
My advice for start-ups always consists of two things. Do the homework on your market first. This means making sure you understand what the market is. And there are no shortcuts to it. The more research you can do and the more information you can gather, the better it will be for your operation.
The second one is your cash. Cash is the key for start-ups. You need to maintain your cash flow. One of the biggest issues anywhere in the world, particularly in ASEAN and in Viet Nam, is access to capital. This is the area where the Governments collectively need to help start-ups, making sure that business can access funds, to see them through, so they have the cash to keep trading, because until they can build up a reputation with banks and credit authorities, it is always going to be tough borrowing money at high rates, and lateral requirements are going to be very big – a big heavy load. And don't stretch yourself, be ambitious but do not overstretch yourself. — VNS