HANOI: Vietnam expects to sign a long-anticipated free trade agreement with the European Union before the end of June, the Southeast Asian country's foreign ministry said.

Vietnam, which has one of the region's fastest-growing economies, backed by robust exports and foreign investment, has already signed around a dozen free trade pacts to scrap, or cut, taxes on several imports and exports.

"The two sides have agreed to make joint efforts for the Vietnam-EU free trade agreement (EVFTA) to be signed before the end of June and to be ratified as soon as possible," the ministry said in a statement on its website late on Thursday.

The EU is Vietnam's second-largest export market after the United States, with key exports including garment and footwear products. The EVFTA is the EU's first comprehensive open markets deals with a developing Asian country.

The trade deal would eliminate 99 percent of all tariffs, although some would be implemented over a time period and some, notably agricultural products, limited by quotas.

Vietnam, for example, would cut its duty on EU car imports from 78 percent to zero over 10 years and for wines and spirits, from around 50 percent, over seven years. EU companies would also be able to bid for Vietnamese public contracts.

BUDGET PRESSURE

Tax revenue accounts for most of Vietnam's state budget, which is under pressure from a centrally-mandate debt ceiling.

In a response to a question from Reuters about Vietnam's trade deals, Finance Minister Dinh Tien Dung said on Friday that the free trade agreements Vietnam has signed have significantly helped it boost exports and attract more foreign investment.

"However, free trade agreements are putting pressure on state budget revenue," Dung told Reuters in a written statement, referring to the loss of revenue caused by the cutting of import and export taxes.

The proportion of import and export tax revenue fell to 17.59 percent of Vietnam's total tax revenue last year, down from 31 percent in 2007, Dung said.

He said the free trade agreements will result in faster economic growth and boost revenue from other sources to compensate for the decline in import and export tax revenue.

Vietnam's exports rose 5.3 percent year-on-year in the first quarter to $58.86 billion, while imports were up 8.0 percent to $57.45 billion, resulting in a trade surplus of $1.41 billion.