The gradual opening of Vietnamese public procurement

Representing nearly 39% of its gross domestic product (GDP), Vietnamese public procurement represent a significant share of activity and a major source of wealth for the country. 

Although Vietnam has never ratified the World Trade Organization (WTO) Agreement on Government Procurement, it has committed, through the EVFTA, to gradually open its public procurement to European companies. 

Indeed, Chapter 9 of the EVFTA is exclusively focused on the partie’s public procurement opening to each other’s companies. 

Consequently, with a public investment/GDP ratio among the highest in the world and an alignment with international standards (1), Vietnam thanks to the EVFTA makes its public procurement attractive to companies from the Old Continent (2).

An opening of public procurement in line with international standards

In recent years, Vietnam has been multiplying free trade agreements (FTAs) with third countries, demonstrating its willingness to fully integrate into the global economy. This integration shall necessarily be carried out through an alignment with international standards. Therefore, the ratification of trade agreements appears to be the main means to achieve this end. 

After twelve years of negotiations, the entry into force of the EVFTA and its application into the public procurement sector is a perfect illustration of this process.

Indeed, although Vietnam is not a party to the WTO Government Procurement Agreement, it has agreed to open up its public procurement on the basis of compliance with international principles governing these contracts. 

Article 9.21 of the EVFTA highlights the common interest of the parties to "promote the international liberalization of government procurement". This liberalization requires (but not only) the application of the principles of transparency, impartiality and non-discrimination throughout the process. 

First, the principle of non-discrimination allows European companies to be entitled to the same treatment as Vietnamese companies during the entire procurement process. This equivalence of treatment enables fair competition between the parties  and creates a favorable and attractive environment for the development of European business in Vietnam and for the import of european know-how. 

Then, the principles of transparency and impartiality complement and reinforce each other. The transparency of the process allows parties to ensure free and informed access to each other's businesses. 

For example, this involves making available certain information considered as essential (e.g. price; nature of the market, etc.) to ensure undistorted competition. However, transparency in the procurement process also helps to avoid conflicts of interest or frauds. In this regard, each party is invited to strengthen its national legal arsenal in this area or at least to apply it effectively. 

In addition to these three essential principles, the EVFTA stipulations promote the use of electronic means to disseminate notices and calls for tenders as well as any documentation relevant to public procurement. 

The aim of this modernization is to reduce administrative procedures and, with them, the financial and time costs. While Vietnam must make efforts to use electronic means, in particular by setting up a single platform free of charge, the European Union intends to support Vietnam in this transformation. Indeed, the EVFTA states that "the Union is providing Vietnam with technical and financial assistance for the development, implementation and maintenance of an automatic system for translating and publishing summary notices in English". 

Thus, the compliance with the above-mentioned principles, backed by the digitisation of this sector, will allow fair and equal access to Vietnamese public procurement for European and Vietnamese candidates.

The extent of the opening of Vietnamese public procurement: an attractive offer

In terms of public procurement, the EVFTA differs from other trade agreements to which Vietnam is a party. 

Indeed, by ratifying the EVFTA, Vietnam committed itself to opening access to the public procurement of its 21 ministries and other central government entities as well as those issued by sub-central government entities located in Hanoi and Ho Chi Minh City. This also applies to the public contracts of two key national companies (Electricity of Vietnam and Vietnam Railways), two major universities, two major research institutes and 34 public hospitals. 

Therefore, this scale will attract European companies in many fields, both in construction (e.g. hospitals; ports; roads) and in the services and goods sector. 

However, if the number of Vietnamese players authorized to open their public markets to European companies is significant, all sectors are not concerned by this opening. Indeed, EVFTA makes a distinction between goods and services markets. 

Concerning the market of goods, they are all open to European companies, except certain goods such as rice, newspapers or petroleum oils. Conversely, the list of service contracts that can be opened to European companies is limited to 24 services. Furthermore, Vietnam has clearly excluded the opening of public utility service contracts and service markets related to the management and operation of public facilities and all private facilities used for public purposes. 

Despite these limitations, Vietnam's public procurement sector remains largely open to European companies. 

Also, it should be noted that the development gap between the parties was taken into consideration during the EVFTA negotiations. Consequently, access to Vietnamese public procurement markets will be gradual. 

To this end, transitional measures have been adopted and the Vietnamese government has set thresholds that European companies will have to reach in order to apply for Vietnamese government procurement. In other words, below these thresholds, these companies will not be able to apply for the contracts concerned.

Finally, while the digitization of the procurement process is a challenge for Vietnam, the opening up of its public procurement and their alignment with international standards is a means to renew the socio-economic orientation of Vietnam towards internationalization and modernization. In the context of the Industrial Revolution 4.0, the ratification of new-generation trade agreements is the main tool used by Vietnam to become a key player in international trade and an attractive land for foreign investments.

© Article written by the France-Vietnam Chamber of Commerce and Industry (CCIFV). Reproduction rights reserved.

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