Interest broadening for Swiss groups in Vietnam

Switzerland is now negotiating a free trade agreement with Vietnam. How is the progress coming along?

Swiss Ambassador to Vietnam Ivo Sieber

Negotiations for a comprehensive free trade agreement have been ongoing for a while. The two parties are Vietnam and the European Free Trade Association (EFTA), which includes Switzerland. In many areas, good progress is being achieved, with several chapters already finalised.

Nevertheless, further work remains to be accomplished in different areas to reach a comprehensive agreement. The EFTA countries and Switzerland are confident and committed that the few outstanding issues will be resolved soon and that an ambitious FTA beneficial to both sides can be concluded soon.

Our objective is – and I believe the Vietnamese side shares this ambition – to create a win-win situation. The seminal FTA accomplished between Vietnam and the EU (EVFTA) is an excellent example to follow here. The EFTA countries, which also include Norway, Liechtenstein, and Iceland, aspire to a comparable level of ambition with similar solutions in conformity with existing Vietnamese legislation.

As FTAs establish rules-based predictable frameworks for trade and investment, the EVFTA comes at a crucial time for businesses and investors faced with coronavirus-induced economic uncertainty and global trade disruptions. The rapid conclusion of an EFTA-Vietnam FTA would complement and further enhance the parameters for trade and investment flows between Vietnam and Europe.

With a combined GDP of close to $1 trillion and a total trade volume of equal size, the EFTA is an economic actor to be reckoned with. And I’m convinced that an EFTA-Vietnam FTA would not just increase trade flows and strengthen supply chains. It would also spur additional and high-quality Swiss direct investments and support the country in its ambitious digital transformation process.

What are the most appealing sectors in Vietnam for Swiss investors and how do your corporations currently operate in Vietnam?

Despite its relatively small population, Switzerland’s economic prowess generated a GDP of $715 billion in 2019, with trade amounting to 120 per cent of GDP. Similarly the country’s foreign direct investment (FDI) is substantial. Switzerland is, for example, the seventh most important foreign investor in the US and ranks 10th among foreign investors in ASEAN, with a total of more than $40 billion of Swiss investment in the bloc.

Moreover, Switzerland’s top position in the World Economic Forum’s global skills ranking illustrates that Swiss investment comes with quality know-how and skills transfers.

Here in Vietnam, Switzerland ranks 22nd among foreign investors. By the end of 2019, the total investment volume amounted to roughly $2 billion, making Switzerland one of the largest European investors in the country. Clearly, there is still room for improvement.

Currently over 100 Swiss firms are established in Vietnam, ranging from multinational companies to small- and medium-sized enterprises that actively operate in different sectors, including pharmaceuticals, construction, food processing, machinery, IT, logistics, and trading.

There are probably as many reasons for why Swiss companies choose to invest in Vietnam as there are such companies. A common trait is that they see Vietnam as a good place to do business, taking advantage of its sizable domestic market, young labour force and integration into regional and global supply chains, as well as the country’s growth potential.

In addition, they are all committed to the country and its economy, whether they serve the domestic market, use Vietnam as a production base, or operate with a combination thereof. The compelling way in which the Vietnamese government and private sector are dealing with the fallout of the pandemic further serves to strengthen Swiss companies’ commitment to Vietnam.

This said, there is a broader range of sectors, including in infrastructure and services, where Swiss firms have competitive expertise and the potential to contribute to the modernisation and further development of Vietnam. Sectors like finance and insurance, transport, energy, water and waste management, social and commercial infrastructure, and engineering services come to mind.

Another fascinating field with high potential is the digital economy with all kinds of applications that can revolutionise the way we live and work, and with a potential to develop and harness innovation and increase productivity.

In Switzerland, collaboration between universities and the private sector, including startups, is an important catalyst for change and innovation. Based on an open, secure, and rules-based framework and a vibrant and free public discourse, research and innovation are key drivers for such development.

What challenges await Swiss investors in Vietnam?

To attract FDI, a favourable and predictable business environment is key. The Vietnamese government’s efforts to equitise state-owned enterprises, ease foreign ownership restrictions, modernise the public-private partnership law, upgrade infrastructure, and to lift the skills level of the workforce are important reform projects.

The country’s significant improvement in the World Bank’s “Doing Business” ranking is indicative of this development. There is of course still room to further improve the business environment, including in such aspects as clarification of land rights and streamlining administrative procedures, including the introduction of e-procedures throughout.

Swiss firms are mostly engaged in the provision of high-quality goods and services. To do that successfully and reliably, they need to be sure that their intellectual property rights are protected and that this protection – like all business-related laws – can be fairly and reliably enforced.

In addition, access to transparent public procurement in line with international standards is a critical factor. All these elements contribute to remove barriers to business and create a level playing field.

What should Vietnam do to encourage Swiss corporations to expand their business here?

As outlined, the Vietnamese government’s economic policy is making big strides to consolidate and improve Vietnam’s business location reputation. The government’s commitment to improve and streamline the regulatory framework, simplify investment and business conditions, enhance the investment protection and IPR enforcement, and ensure laws and regulations are in compliance with international practices. The country’s commitment under international and FTA rules are welcomed not only by the Swiss business community.

The signing of a mutually beneficial EFTA-Vietnam FTA would further consolidate Vietnam’s place on the Southeast Asian map where Swiss and other EFTA member businesses can strategically invest and expand their activities in one of the most dynamic economic regions of the world.

Furthermore, it would strongly support the increased strengthening of economic ties between Switzerland and Vietnam and constitute one of the best possible ways to celebrate next year’s 50th anniversary of Swiss-Vietnamese diplomatic relations.