Workers in Vinh Yen Footwear JSC process shoes for export. Enterprises specialising in garment and textile, footwear, farm produce and seafood will see opportunities from the tax cuts afforded by the free trade agreement between Viet Nam and the Eurasian Economic Union. — VNA/VNS Photo Tran Viet

This is the first FTA of the union, which consists of Russia, Belarus, Kazakhstan, Armenia and Kyrgystan, with another country.

The related countries have ratified the agreement after signing it in Kazakhstan on May 29, 2015. They expect it to take effect in September 2016.

Dang Hoang Hai, head of the Ministry of Industry and Trade's European  Market Department, said Viet Nam, as the first FTA partner of the union, will have big advantages in improving the competitiveness of its export goods.

The agreement covers a market that has nearly 183 million people and accounts for 3.2 per cent of the global gross domestic product.

Viet Nam and the union will cut about 90 per cent of their lines of tariff, meaning they will open the market for around 90 per cent of goods in bilateral trade.

They will slash the rate for nearly 60 per cent of tariff lines to zero per cent immediately after the agreement becomes effective.

Hai said Viet Nam's major exports such as garment and textile, footwear, farm produce and seafood will especially see opportunities from the tax cuts.

He said the EAEU-Viet Nam FTA is "quite a comprehensive agreement", covering many fields from the quality of goods, sustained development to intellectual property rights. Public procurement contents can be supplemented in the future.

Domestic enterprises must study rules carefully to take full advantage of the agreement, he said.

For example, the agreement requires the seafood sector to use materials originating from member countries. However, Viet Nam is allowed to use imported materials to process shrimp and tuna for exports, provided that it assures the domestic content in these products of more than 40 per cent.

Nguyen Khanh Ngoc, deputy director of the department, said geographical distance is a disadvantage for Vietnamese enterprises reaching EAEU countries.

Some Vietnamese firms have exported garment and textile to Russia through Netherlands, with small quantities of goods. Now that export volumes and values are likely to increase in light of the FTA, a fact meaning much higher logistics costs, these companies must seek measures to avoid such a "roundabout route", she said.

The Viet Nam Tax Consultants' Association (VTCA) said on its website recently, citing Ministry of Finance sources, that the agreement was likely to affect national budget revenues of member countries.

Assuming that Viet Nam's import growth within the framework of the EAEU-Viet Nam FTA is 15 per cent per year, and the ratio of enterprises using certificates of origin in a form issued for this agreement reaching 20 per cent, the country's budget revenues would fall on average by US$1 million per year.

For the union, the revenue declines were expected to triple Viet Nam's level.

According to VTCA, goods such as petroleum, automobile and component, fertiliser, and machinery and equipment would significantly impact on Viet Nam's budget revenues.

These products were imported in large values from the EAEU, and tariffs for some sub-products would be eliminated immediately after the agreement becomes effective, the association said. — VNS