Global Britain puts Vietnam at forefront of trade priorities

February 26, 2020 | 08:00
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Upon the UK leaving the EU, trade and investment ties between the British and the Vietnamese are expected to witness alterations. Vietnamese Ambassador to the UK Tran Ngoc An talked with VIR’s Thanh Tung about how the relationship will develop further, with a bilateral free trade agreement on the horizon.
global britain puts vietnam at forefront of trade priorities
British investors are seeing Vietnam as a lucrative market to extend their businesses Photo: Le Toan

The UK officially left the EU last month and has embarked upon a transition period until the end of the year. If the EU-Vietnam Free Trade Agreement (EVFTA) is adopted by the European Council and Vietnam this summer, Vietnam-UK trade activities will still be able to benefit from the agreement’s tax incentives for several months. What is your vision on both nations’ trade ties during this transition period?

global britain puts vietnam at forefront of trade priorities
Vietnamese Ambassador to the UK Tran Ngoc An

The recent ratification of the EVFTA and the EU-Vietnam Investment Protection Agreement (EVIPA) by the European Parliament and their upcoming adoption by the Vietnamese National Assembly in May is of historic significance in the trade and investment relations between Vietnam – one of the most sustained and fastest-growing economies in the world – and the EU, the second-largest economic entity.

The ratification of these two agreements is a clear manifestation of the great importance the EU attaches to doing business with Vietnam given the fact that so far the EU has concluded similar agreements with very few countries in Asia-Pacific.

Together with the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), the EVFTA has been considered as a new-generation and high-standard agreement which is expected to facilitate vigorous growth in many areas – including goods and services from both sides through the elimination of over 99 per cent tariff lines and the significant reduction of tariff barriers. For Vietnam, the EVFTA and the EVIPA will create more advantages for more Vietnamese goods to enter the EU market, especially in areas where we have great strength and potential and enjoy preferential tariffs including textiles, footwear, agricultural, and aquatic products. Among these sectors, garments and textiles will be one of the biggest beneficiaries of the EVFTA following its ratification with expected increase of 81 per cent of turnover to the EU.

For the EU, more manufactured goods, pharmaceuticals, and services from the bloc’s member states will be seen in Vietnam. The two agreements will also facilitate the flows of high-quality investment from the EU into Vietnam, especially in advanced technology and news areas of digital economy such as 5G, AI, and renewable energy.

Even though the UK has officially left the EU, the transitional period will last until December 31, during which the EVFTA and the EVIPA will have the same effect on the UK as with EU members.

Therefore I am confident that bilateral trade and investment ties between Vietnam and the UK in 2020 will continue to be on an upward trend, and be further boosted thanks to preferential treatments and new opportunities offered by these two agreements and owing also to the momentum already gained in recent years in the Vietnam-UK relations.

However, as the EVFTA is expected to take effect in May, the direct positive impacts of the EVFTA on the Vietnam- UK bilateral relationship will not be big.

Do you think that the lack of a bilateral FTA between both nations will reduce the economic attractiveness of the Vietnamese and UK economies, especially now Vietnam is boosting its investment climate and the country is seen as an attractive investment destination in the region?

The steady and rapid growth in bilateral trade in recent years, based on World Trade Organization rules, has proved that the two countries have great potential and a strong foundation. There are high complementarities of the two economies, and a shared belief in free trade, multilateralism, and the rule of law, among other things.

Beyond doubt, with or without a bilateral FTA, trade and investment between the two countries will continue to develop. However, an advanced bilateral FTA, similar to the EVFTA will definitely have a very positive effect on our economic relations.

Fully aware of the importance of such a bilateral FTA, Vietnam and UK have been active working on this, fundamentally based on the multilateral EVFTA. In the context of Brexit, early conclusion of FTAs with non-EU countries is of high priority to the UK’s post-Brexit trade strategy.

Given that Vietnam and the UK have a lot in common and there are many complimentary factors in our economies as well as the existence of our strong common desire to ensure no disruption of the flow of bilateral trade and investment after Brexit, I strongly believe that the bilateral FTA will be concluded this year, on the occasion of the 10th anniversary of the Vietnam-UK Strategic Partnership.

Thus, there will need to be an FTA between Vietnam and the UK after Brexit. If so, what will the benefit be to the two economies?

A next-generation, top-quality bilateral FTA similar to the EVFTA will have very positive effects on boosting our trade and economy. Products that are Vietnam’s strength such as electronics, shoes, textiles, furniture, aqua products, and agricultural products, as well as items that are in major demand in the UK, will see a significant increase in the middle and long term.

On the other hand, there would be greater opportunities for British companies in the areas of services, finance and banking, insurance, consultancy, high-tech and renewable energy, pharmaceuticals, and British products like luxury cars and whisky to strengthen their foothold in Vietnam.

The UK wants to join the CPTPP, of which Vietnam is a member. How is that plan looking today, and if the UK succeeds in access to the CPTPP, how will this impact on Vietnam-UK investment and trade ties in the future?

The CPTPP is an open agreement. It does not require parties to be Pacific nations. However, accession would require support of all of the existing CPTTP members. At the moment, as I understand, the UK is still considering of pros and cons of joining the CPTPP and has yet to make up its mind whether or not to apply for CPTTPP membership.

The bilateral FTA we are discussing with the UK is fundamentally based on the EVFTA, in substance that shares many similarities with the CPTPP. So if ever the UK becomes involved with the CPTPP, there is a strong possibility that our bilateral FTA will already be in place. Therefore, I don’t think the UK joining the CPTTP would have major effects on bilateral Vietnam-UK trade.

Minister of Planning and Investment Nguyen Chi Dung is set to pay a working visit to the UK this week. How will this visit be important to the trade relationship, and what can you expect from British investment flows into Vietnam in the time to come, especially in the financial world?

At present, the UK ranks 15th among the largest foreign investors to Vietnam with total capital of $3.7 billion. However, there is still big room for further improvement given the fact that the UK is in the world’s top five biggest investors and its huge financial resources available for investment and strong demand for boosting export as a priority of its “Global Britain” strategy.

In recent years, Vietnam has become an attractive destination for UK investors in Asia-Pacific due to its sizeable market, rapid growth rate, socio-political stability, a big pool of skilled labour force, and the accessibility to other markets thanks to its FTAs with partners.

The upcoming visit to the UK by Minister Dung and his entourage, with high-level talks planned with relevant UK ministries and agencies, and a series of meetings with leading companies and scientists, will create new momentum for further boosting bilateral trade and attracting high-quality investment from the UK to Vietnam.

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