What will the Vietnamese masterbatch industry be like when the Free Trade Agreement (EVFTA) is signed? What opportunities and challenges will the masterbatch industry receive in the near future, especially in trading with European Union (EU) countries? Join us in reviewing the hottest news related to the future of Vietnam masterbatches industry after this agreement is signed.
What is the EVFTA Free Trade Agreement? Can Vietnamese masterbatch enterprises join this agreement?
The Free Trade Agreement between Vietnam and the European Union (EVFTA) is one of the most ambitious agreements that the EU has signed with a developing country. In ASEAN, Vietnam is the second country after Singapore which has signed a trade agreement with such giant size and stature with the EU in which the trade value that this agreement is estimated up to nearly 50 billion euros (equivalent to 56 billion USD). So what will Vietnamese businesses, more specifically the masterbatch manufacturers, change when these agreements are put into practice?
What contents of EVFTA affect masterbatch businesses like EuP?
Since the agreement was signed on June 30, 2019 and officially takes effects in the period from the end of 2019 to the early months of 2020, more than 99% of tariffs on goods (including many items ranging from household appliances to industrial products such as masterbatch, plastic additves, etc.) supplied by both sides (Vietnam and EU) will be removed in various import and export activities. To be precise, in the near future, 65% of import duties on goods from the EU will be removed by Vietnam government, the remaining tariffs will be removed in the next decade.
In parallel with the signing of EVFTA, another agreement which is the Investment Protection Agreement (EVIPA) has also been signed between the Government of Vietnam and the European Union. In addition to providing important economic opportunities, these trading agreements will also ensure that trading activities, investment and sustainable development are always pursued on both sides, by setting the highest standards on labor protection, environmental protection and ensuring consumers safety.
What is the advantage that plastic resins can achieve after EVFTA and EVIPA?
Regarding to the advantages for Vietnamese masterbatch manufacturing companies after 2 agreements EVFTA and EVIPA, we are greatly benefited in terms of importing high technology and technical products such as industrial machinery, equipment and tools. For a business that applied almost 100% of machinery and equipment imported from Germany in every stages of our production procedure like EuP, this is such a good new because when there is no import tax, the cost of the machines is reduced which consequently cause the production cost of masterbatch products also to be more competitive. This not only brings practical benefits to our domestic customers but also expands the opportunities for Vietnamese masterbatches producers to penetrate the international market.
What challenges is masterbatch industry in particular and Vietnamese enterprises in general going to face?
After EVFTA is implemented with the market-opening commitments on both sides, the young and potential industries like masterbatch industry must take into account the competitive pressure, especially when the enterprises are willing to intend to reach the European market. First of all, if manufacturers want to export their products to the Europe, they must ensure the origin. This can become a big obstacle to many businesses as their input materials are mainly imported from China and other ASEAN countries. However, this is not a problem that we, EuP – the top 5 masterbatches producer in the world, are concerning about because our raw materials come from the precious resources of Vietnam – the limestone mountains with abundant reveres and world-class quality.
Other obstacles for Vietnamese masterbatch manufacturing companies when signing EVFTA
The second disadvantage for Vietnamese masterbatch enterprises is the legal issues of intellectual property. This is one of the aspects that the EU attaches great importance to and they even require more than the WTO. Meanwhile, not too many Vietnamese businesses are interested in this issue. In addition, Vietnam’s intellectual protection law is still lax, leading to the fact that even if the businesses want to meet the requirements of the EU, they are still not supported.
In addition to the above challenges, the EVFTA agreement also sets out for Vietnamese enterprises and masterbatches producers in particular these following issues:
- EVFTA requires Vietnamese manufactureres to meet environmental protection. Meanwhile Vietnam does not have enough resources and experience to manage these issues.
- Concerns about labor rights (health insurance, social insurance, female labor supports, etc.) and regulations on labor usage.
- Barriers on technical and quality problems when importing food and agricultural products because Vietnamese companies cannot ensure food hygiene and safety issues and residues of hazardous substances (e.g pesticides) in the process of breeding, cultivation and processing.
Masterbatch manufacturers are exposed with various opportunity to innovate
Speaking at the state of deep integration, Vietnamese enterprises related to the masterbatch production must identify these competitions as positive challenges, which means due to these competitions, each business is forced to shift to the direction in which their products must satisfy the international requirements on quality. Each enterprise itself needs to constantly restructure to meet continuous innovations. At the same time, the development and enhancement in capacity and productivity as well as the development in investment efficiency are also main targets that many businesses in the masterbatch industry should pay attention in.