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Businesses need to comply with EVFTA regulations on product quality

Summary

Despite the EU-Vietnam Free Trade Agreement opening up a wealth of opportunities for Vietnamese businesses, it has also posed a number of challenges to firms due to stringent regulations regarding the quality of goods and services necessary to penetrate the EU market.

Updated on : 03-10-2019

The EU-Vietnam Free Trade Agreement (EVFTA)- a new-generation Free Trade Agreement (FTA)- includes commitments to uphold standards to protect workers and the environment. Along with strict requirements on environmental protection through production and business activities, Vietnam and the EU have agreed to implement commitments stated in the ILO Declaration on Fundamental Principles and Rights at Work which was adopted in 1998.

These commitments include freedom of association and the effective recognition of the right of collective bargaining, the elimination of forced or compulsory labour, the abolition of child labour, and the elimination of discrimination in respect to employment and occupation.

In order to fulfill these commitments, the Vietnamese Government has modified several of its labour policies and laws to fall in line with the real situation and international practices. This has posed numerous challenges to both workers and businesses who are required to adapt themselves to the new situation.

Nguyen Hai Minh, Vice President of European Chamber of Commerce in Vietnam (Eurocham) in Hanoi, noted that for a long period the priority of businesses has been to minimise costs, create products at a low prices, and sell high quantities. Nevertheless, multinational corporations, especially those based in Europe, now require their export partners to follow strict conditions in terms of social affairs and environmental protection.

Mr. Minh elaborated on several cases where Vietnamese enterprises have satisfied conditions in terms of price and product quality, yet have been unable to sign contracts as they have failed to meet other requirements.

The Eurocham representative underlined the need to raise awareness among businesses about social responsibility, especially in labour-related issues, as well as developing a good working environment for employees in order to boost labour productivity.

With the impact of new-generation FTA such as the EVFTA, Mr. Simon Matthews, General Director of Manpower Group Vietnam, Thailand, and the Middle East, said that by 2020, approximately 84 per cent of global businesses are to invest in training and improving the skills for their employees.

Vietnam therefore needs to put in place a proper human resource and talent development strategy that can keep up with global trends, especially in the face of a serious shortage of high-quality human resources and talents.

Mr. Matthews advised businesses to draw up appropriate strategies on developing and training high-quality workers, with a particular focus on a qualified workforce in the context of international integration and Industry 4.0.

Economists have underscored the importance of developing high-quality human resources at any stage of the economy, noting that along with the impact of new-generation FTAs, new business models and digital business will also require a highly qualified workforce, especially digital human resources.

According to a recent survey conducted by Nguyen Thi Thu Trang, Director of the World Trade Organization Center and Integration under the Vietnam Chamber of Commerce and Industry (VCCI), there remains an alarming fact that domestic firms and businesses have been unaware about their own challenges and opportunities in the new period.

She recommended that enterprises rapidly improve their knowledge about the EVFTA, its incentives, and impacts. According to the 2018 survey by the VCCI among over 6,800 firms, 60 per cent of them had heard of the trade pact, 21 per cent had grasped some information, whilst only 1.5 per cent understood the deal.

Ms Trang pointed out that gaining greater knowledge about the agreement’s commitments will bring practical benefits for firms, adding that businesses need to make thorough preparations to be ready for when state agencies issue official documents on the implementation of the agreement’s commitments.

If businesses have yet to pay attention to the provisions set out by the EVFTA, they will fail to seize the opportunities presented by the trade deal, especially the opportunities in production and international investment co-operation, Trang said.

Source: VOV