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Listed businesses may struggle to meet EVFTA standards

Jul '19
Pic: Shutter Stock
Pic: Shutter Stock
Vietnam’s benchmark VN-Index has risen since the ratification of the European Union (EU)- Vietnam trade agreement on the back of listed firms whose exports would boost by the deal. Securities firms have, however, warned their increased share prices may not be sustained as those companies face some internal challenges in meeting EU requirements.

Logistics and industrial property are two economic sectors that would benefit from the transfer of capital from the EU to Vietnam as the free trade agreement has opened the door for more foreign investors, according to a report in a Vietnamese newspaper.

According to Viet Dragon Securities Co (VDSC), Vietnam may become a new manufacturing hub as US-China trade tensions could shift global manufacturers from China to the country.

With the signing of the EVFTA, shipments to Vietnam will increase as foreign companies will import machines and equipment to establish their plants.

However, VDSC warns as Vietnam is becoming highly dependent on foreign direct investment (FDI), the logistics sector will dive if FDI firms underperform. A large number of logistics companies have not maximised their potential and improved their competitiveness.

If Vietnamese textile and garment companies want tax cuts for their exports, they have to meet the strict EU requirements on the origin of input materials, according to a report by B?o Vi?t Securities Co (BVSC) released in June.

Few Vietnamese textile and garment firms meet those requirements as local companies are only capable of production, while input materials must be imported from China and Taiwan – which are not bound by any trade deals with the EU, BVSC said.

Concerns about the lack of producing raw materials among textile and garment companies caused their shares to underperform or record modest gains. (DS)

Fibre2Fashion News Desk – India

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