Being recognized as a market economy by 69 countries will create opportunities for Vietnam to attract investment and trade, encourage foreign investors to set up business in Vietnam.
Since joining the World Trade Organization (WTO) in 2007, Vietnam has been recognized by 69 countries as having a market economy. This is really important, meaning that Vietnam is considered as a market economy that is determined by open competition, not by state intervention.
This recognition has also contributed to accelerating economic development over the past decade, with improved exports and open to more markets. This also demonstrates that Vietnam is rapidly transitioning to a more open economy.
The fact that Vietnam is recognized by many trading partners as a market economy has opened up many investment and trade opportunities for the country, including many bilateral and multilateral trade agreements.
These agreements have helped the Vietnam economy attract more foreign direct investment (FDI) and promote economic growth, with a relatively high average growth rate of over 6.5% per year over the years.
In order to enhance the diversification of economic activities and improve competitiveness with the view to build a higher productivity growth model, Vietnam is desperate to seek new opportunities in strengthening trade and investment cooperation. The forthcoming major trade agreements include the Regional Comprehensive Economic Partnership
(RCEP – between ASEAN and 6 partners having free trade agreement with ASEAN, which are China, Korea, Japan, India, Australia and New Zealand) and the European Union – Vietnam Free Trade Agreement (EVFTA).
Launched in 2012, RCEP aims to establish a large regional free-trade area, accounting for 50% of the global population, about 30% of global GDP and more than 25% of global exports. By eliminating tariff and non-tariff barriers in the RCEP, Vietnam is expecting to increase the competitiveness of its exports and expand markets while minimizing the cost of importing technology that Vietnam needs to participate in global value chains.
As for EVFTA, this agreement will help Vietnam significantly expand its investment and trade opportunities, beyond the Asia-Pacific region. EVFTA is expected to come into effect in 2019 after being ratified in 2018 – will help Vietnam better access 28 European Union (EU) markets, which are the largest markets for electronic products of Vietnam. In addition, EVFTA will also help Vietnam attract more high quality investment flows from the EU.
Immediately after the EVFTA takes effect, about 85.6% of EU tariff lines on Vietnam goods will be lifted. 7 years later, this rate will increase to 99%. However, the rules of origin may not increase Vietnam’s exports to the EU immediately.
Vietnam will also have a similar policy on EU goods and will remove almost all tariff lines on EU exports within 10 years.
Vietnam has not been recognized by the US and EU as a market economy, as the US and the EU still believe that the Vietnam economy has not met the technical standards.
Being recognized as having a market economy from all WTO members, especially the US and the EU, will be particularly important for Vietnam in joining the global value chain, raising productivity and get rid of middle income trap.
The signing and adoption of EVFTA is also expected, the EU will recognize Vietnam has a market economy.
Finding the right business partner in Vietnam is also important. We recommend doing research on the reputation of the company and individual shareholders, corporate or individual, gathering publicly available company information, and performing background checks on key personnel to find potential risks in cooperation. Working with a reliable partner can help achieve economic benefits, saving time and money in business.