Coronavirus has brought to the worldwide economy various challenges and difficulties, which includes Vietnam. The GDP of Vietnam has fallen dramatically like other countries that meet the COVID-19 pandemic. It declined to 3.8% in the first quarter of 2020 compared to the same previous year.
However, this is still a spotlight for the Vietnam economy, when Vietnam still has a chance to continue to grow, while other countries are about to step into the recession. Due to the COVID-19, Vietnam meets many difficulties even though the GDP of Vietnam is able to control and develop. What is more special during the pandemic is the EU-Vietnam Free Trade Agreement, which is worth waiting and investing for. EVFTA is the agreement which will help Vietnam to recover its economy. International trade usually has a big impact between signatory countries when it removes the barriers to trade by removing and reducing the tariffs, firms can take the advantage from accessing the international market and easier to import, export. However, FTA can be harmful to the country, when there are some drawbacks such as market share or foreign ownership, etc that nation, businesses and firms need to be careful.
With all of the best efforts from Vietnam in the first quarter of 2020, however, it turns out to be worsen scenario due to the impact from COVID-19. In particular, Vietnam’s trade flow met problem with its main trading partner market, especially Europe. Vietnam also struggled in April when the exports drop to 27.1% and 16.4% of imports has been declined compared to March.
Not only Vietnam, but also the economy of the EU as well, which is damaged by the COVID-19 pandemic. The total trade of the EU (import-export) has fallen dramatically, from 252 billion EURO to 228 billion EURO. Not only that, but the trade of the EU between other countries has also declined. COVID-19 has limited the economic activity, therefore this also has limited the trade flows as well. EU has been received a 9.7% decrease in global trade, and the extra-EU exports goods and services have seen the reduction of 9.2%
The FTA between the European Union and Vietnam is considered as the bright light at the moment. Since coronavirus occurs in China and the trade wars become more stressful than ever, the EVFTA trade, this makes the businesses and firms in hard circumstances to improve and boost their economy. The ratification between Vietnam and EU will help both of the countries to recover since the COVID-19 pandemic becomes complicated, pushing up Vietnam’s economy bilateral trade and investment relations, and also support firms, businesses and enterprises to be developed. Vietnam can take advantage of proving the economy to be ‘worth-investing’ in many sectors. Furthermore, Vietnam expected to increase its economy by 2.4% after the EVFTA and thus hoping an increase in production and exporting for Vietnam, and have an improvement in reaching the standards of managing enterprises, businesses and labour market as well.
The EVFTA will create more and more opportunities for Vietnam’s economy, and businesses, firms as well. In addition, the tariffs of 71% of exports will be cut off, vice versa with Europe, with tariffs free for 65% of goods and services when it comes to Vietnam. Moreover, Vietnam expects to boost its rate of exports by up to 42.7% to European countries in the first 5 years after the agreement implements. Vietnam can be able to produce its comparative advantage and develop more on its strength by exporting goods and services which have a lower opportunity cost. Exports will be focused mainly on goods and services such as agriculture (rice, seafood); manufacturing (footwears, textiles), and services (transportation, etc). This will show the strength of Vietnam’s goods and services when Vietnam has better quality resources of land, labour and capital in producing the comparative advantage, which is Vietnam’s best trade. Not only that, but since the EU is widely open the chance for Vietnam, comparative advantage can also be a tool in order to prove the best and quality exports of Vietnam to the EU, therefore increase the trade between Vietnam and the EU due to the higher level of Vietnam’s comparative advantage, since it is better than the EU and the EU wants to consume it.
Vietnam is known as the country where it relies mainly on foreign direct investment. Since COVID-19 occurs, this will definitely impact the economy of Vietnam. Some well-known FDI manufacturing in Vietnam has stopped its production process, therefore the process is being slowed down because plans must be delayed. What is more, Vietnam has closed its international flights and borders when the COVID-19 pandemic starts outbreaking. Nevertheless, this has become a disadvantage due to the limitation of foreign people to come, especially foreign investors, hence reducing the total FDI of Vietnam since foreign investors are unable to come and invest. However, although the rate of foreign direct investment lower than the previous period, Vietnam still has many opportunities to attract more FDI and improve again its FDI by its excellent achievements during the COVID-19 pandemic. In addition, politics, economic growth and social stability still have a high rate compared to other countries. EVFTA will also be forced to make the agreement, therefore boosting the FDI to Vietnam at the same time. When FDI increases, this also means that the standard of living of Vietnamese will be also improved during the COVID-19, when people’s income is increased and more jobs are created since there are more FDI and make Vietnam’s economy to be prosperous after the consequences from the outbreak. Businesses and firms will have the opportunity to cooperate in order to build a plan and investments project with the new technologies and knowledges, and also a premise for businesses from Vietnam and the EU to have a successful working environment, then it contributes to the economic development
The COVID-19 pandemic has created barriers to the economic relationship between Vietnam and the EU. In particular, it has been affected to the visa policies and exports restriction. Quotas was created by the EU government in the first quarter of 2020, in order to restrict exports to ensure the safety of the EU residents. Not only that, since quarantine occurs widely, trade meets difficulties when demand for goods is not essential when shops are shut down. On the other hand, Vietnam is ready to support other countries when the scenario turns out to be better in Vietnam. In particular, Vietnam has sent 550.000 anti-splash fabric masks, which is Made in Vietnam since the effect from the pandemic has burdened globally, including European countries. Vietnam also hopes that a part of their support can help the European economy, therefore protecting the health and encouraging residents to overcome the epidemic. This has also made the agreement to be in a good position when both Vietnam and Europe are able to maintain it efficiently. This is also the way which helps countries to share information and collaborate more, hence to overcome the hard circumstances. In addition, this is has evaluated to be the effort in making Vietnam’s economy to develop again when this will directly help the EVFTA turns out to be better and this is also a Vietnam’s multi-faceted approach
In my opinion, the free trade agreement between Vietnam and the European Union will bring success to Vietnam’s economy, and also brings more new challenges and difficulties as well during the COVID-19. In particular, these are some reasons that Vietnam concerned about during this sensitive period
The foreigners’ entry is one of the most concerned topics of Vietnam’s government. In particular, this will limit Vietnam’s FDI since foreign investors are unable to come and invest. Furthermore, Vietnam faces some problems with FDI inflow. The interaction between FDI enterprises and domestic firms still at a low rate, therefore lead to the regulatory problem and create an effect on environmental pollution, prices, taxes, etc (Financial Magazine). Businesses and firms need to consider carefully before giving the decision due to the complicated situation, when the EU’s companies also meet difficulties, hence the consequences from affecting the national economy. Not only that, since FDIs have reduced, jobs are limited, and individuals find it hard to find a job and this will affect the unemployment rate of Vietnam, when the people’s income will also decrease and thereby reduce people’s living standard. Thus COVID-19 pandemic will also affect the risks of economic stability globally and nationality, and Vietnam will also face challenges in implementing macroeconomic policies. If Vietnam is not trying its best in order to change and prove it, globalisation will be the effect of raising awareness when Vietnam meets more difficulties.
Compared to the past, the integration to the international market of Vietnam has developed significantly through its completion in improving policies. Not only that, but also open a door for Vietnam to expand the market, increase the competitiveness in exporting goods and services, therefore making an improvement for Vietnam’s economy. Nevertheless, Vietnam still creates a big challenge for itself when the policies still limited compared to international policies. In addition, during the COVID-19 outbreak, this becomes even harder when the borders are closed, thus restrict the exports and the competitiveness of Vietnam between countries are reduced. Hence, this has directly prevented the FDI’s inflow, Vietnam’s trade of proving the quality of Vietnam’s goods and services.
Vietnam is known as the country with the copious labour resources. However, the skills still need further improvement so Vietnam’s production is able to produce efficiently. Not only that, but also the management agencies need to work on their strength, in order to meet the successful and able to reform the administration. Due to the COVID-19 pandemic, the unemployment rate has risen, making the progress to be slow down and the labour market is becoming stagnant. Individuals meet difficulties during the COVID-19 pandemic when most of the companies are shut down, and the quality of goods and services can be lower since people are staying home due to the quarantine. On the other hand, individuals need to transform the disadvantage to become advantageous when they need to develop their skills and when the situation becomes normal again, EVFTA will be a leverage of Vietnam’s economy when it will create jobs for Vietnamese, therefore the employment rate and people’s living standard can ameliorate and globalisation then become an advantage to Vietnam.
Although there are some specific challenges in front of Vietnam and the EVFTA that need to survive through, there are still some solutions that can help Vietnam to improve along with the EVFTA during the COVID-19 pandemic.
1. Converting disadvantage becomes an advantage
It is important to keep optimistic in managing the national economy during the COVID-19 after the global economy went down dramatically due to the severe outbreak. In this situation, I think Vietnam should make a complicated situation to become an opportunity in order to develop. Vietnam is known as a safe country during the effect that coronavirus has brought. Therefore, Vietnam can take COVID-19’s scenario to demonstrate that Vietnam is a worth-invest country. In addition, Vietnam should also focus on online services and application such as commercials or e-transactions (Kim Chung, 2020). Therefore, this will make goods and services from Vietnam to be attractive and importers from other countries will consider buying resources which have a competitive price, thus this is the advantage of Vietnam as well
2. Enterprises and businesses
The EU is known as the country that wouldn’t let other countries enter the market easily. So the EVFTA is a chance for Vietnam to show its economy and the opportunity of competitiveness is better than ever, especially during the COVID-19 pandemic. One of the factors which leads to the successful of Vietnam is national enterprises and businesses. According to Kim Chung, it is necessary for Vietnam to fully understand the FTA policies in order to improve, both individually and nationality. Not only having the long-term plan for their business, but they also need to be conscious in protect their company from illegal activities. Not only that, but businesses and firms should also upgrade their process in labour resource investment, which become a motivation for individual to create more competitiveness and encourage people to improve their technical skills. This is the chance for Vietnam to ameliorate their unemployment rate since the outbreak has made it to be worse again when more and more businesses have been suspended and most of the labour resource found the difficulties during this hard circumstance
3. Interaction between Vietnam and European countries
EVFTA has come to Vietnam and promises to bring various perks and advantages. Hence Vietnam should keep in touch with European countríe in order to maintain a good environment between countries. However, COVID-19 pandemic has disrupted this and make this to be harder than ever. So it is important to do something else instead of travelling from country to country, which is unsafe. One way that government can do is to create the Government website and contact online with the partner. This is the safest way to protect individual’s health during the pandemic, Vietnam and the EU still can connect with other safely. This will make the progress to be faster and make the economy to be develop as usual, in individually, nationality and globally perspective.
