EU-Vietnam Free Trade Agreement implementation kicks into higher gear

Bernd Lange, chairman of the European Parliament’s (EP) Committee on International Trade, last week came to Vietnam for the sixth time in four years in order to oversee the country’s deployment of the EU-Vietnam Free Trade Agreement (EVFTA) and evaluate the operations of local organisations in charge of supervising the implementation of FTAs and Vietnam’s related policies.

EU-Vietnam Free Trade Agreement implementation kicks into higher gear

“Vietnam is the EU’s most important partner in the ASEAN. The impressive trade growth backed by the EVFTA reflects their huge potential for development cooperation. The EVFTA has had positive effects on both sides, with larger trade and investment flows recorded,” Lange told VIR, confirming that the EP will continue supporting Vietnam in EVFTA deployment.

He said that since the EVFTA took effect in August 2020, bilateral trade between Vietnam and the EU soared by 20 per cent, with Vietnam having increased its exports to the EU.

“About 71 per cent of tariff lines for Vietnamese exports to the EU have been removed so far, while 65 per cent of tariff lines for EU goods exported to Vietnam have also been liberalised,” Lange said.

Julien Guerrier, Ambassador and Head of the European Delegation to Vietnam, told VIR that the EVFTA has contributed to improving Vietnam’s attractiveness in the eyes of EU and non-EU investors. The EU is the sixth-biggest foreign direct investment partner of Vietnam out of 144 countries and territories.

“Despite the global nearshoring trend where investors tend to reduce their geographically distant investments and bring them back closer to their home countries, EU investors continued to pour an additional $810 million into Vietnam during January-September 2023,” Guerrier said.

“The EVFTA enforcement has also been successful in creating spill-over effects, turning Vietnam into a regional production hub by attracting a large number of investors from non-EU countries,” he continued.

“Based on this factual trade and investment development, we can predict a stable growing trend for the bilateral EU-Vietnam trade and investment flows in the coming years, even if we could witness a deceleration in growth or even some minor decreases after the miraculous expansion over the past few years,” he continued.

Data from the Ministry of Planning and Investment indicates that the EU has a total stock of investment of approximately $28.3 billion, with around 2,450 projects. Total trade between Vietnam and the EU is estimated to hit $59.1 billion last year, with the country’s export and import turnover of $44.1 billion and $15 billion, respectively.

Confidence among European businesses operating in Vietnam is showing signs of resilience as the latest Business Confidence Index, released two weeks ago by the European Chamber of Commerce in Vietnam (EuroCham) and conducted by Decision Lab, reached 46.3 in Q4 of 2023.

In Q4 2023, Vietnam’s investment hotspot status increased significantly. An impressive 62 per cent of those surveyed ranked Vietnam among their top 10 global investment destinations, with 17 per cent placing it at the very top. This strong endorsement is matched by 53 per cent of respondents anticipating increased foreign investment in Vietnam by the end of Q4.

The survey also highlights Vietnam’s strategic position in the ASEAN region. While only 2 per cent consider it an “industry leader”, 29 per cent rank it among the “top competitive countries” in ASEAN. The majority (45 per cent) view Vietnam as a competitor, albeit acknowledging certain challenges.

“This perspective emphasises Vietnam’s growing influence and potential for further advancement within the ASEAN economic landscape,” a EuroCham report said.

Marko Walde, chief representative of AHK in Vietnam, Myanmar, Cambodia, and Laos, said that Vietnam has emerged as a dynamic destination for foreign investors, and German companies are increasingly recognising the vast opportunities it offers.

“For example, mergers and acquisitions have become a prominent strategy for German businesses seeking to enter and expand in the Vietnamese market,” Walde told VIR.

In a specific case, he cited STADA, a German pharmaceutical manufacturer, which has been strategically investing in Pymerphaco since 2008, assisting in the development of technology and the application of EU GMP standards.

“By 2021, STADA acquired the second-largest pharmaceutical company on the Vietnam stock exchange. With this transition, STADA is among the top three German companies investing in Vietnam,” Walde said.

Cumulatively, as of December 20, Germany had 464 valid projects in Vietnam registered at $2.68 billion. The sectors that attract German businesses most often include industrial production, machinery, and equipment.

“Numerous experts assert that Vietnam’s economic growth outpaces that of any other Asian nation. This signifies that German companies investing here present an advantageous prospect not only for the Vietnamese economy but also for German businesses seeking an appealing and secure location for their expansion endeavours,” Walde said.

More support forthcoming thanks to Polish interest Poland and Vietnam continue to enjoy a thriving trade and investment partnership in light of the EU-Vietnam Free Trade Agreement. Piotr Harasimowicz, chief representative officer at the Polish Investment and Trade Agency, discussed with VIR’s Thanh Van about the trends of Polish-Vietnam trade ties.