Scaling up new funding activities from Europe

February 11, 2024 | 21:49
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Vietnam has stood strong in a challenging global economy, showing impressive growth and attracting significant foreign direct investment in 2023. Despite global uncertainties, Vietnam saw a 62 per cent increase in foreign investment capital in 2023 and a 57 per cent rise in new projects, indicating its success in drawing in funding, particularly under the EU-Vietnam Free Trade Agreement (EVFTA) framework.
Scaling up new funding activities from Europe
Gabor Fluit, chairman, European Chamber of Commerce in Vietnam

One notable improvement in 2023 that has contributed to this positive trend is the improvement of visitor visa policies. Vietnam extended the e-visa validity to a 90-day period, allowing multiple entries and exits from August 15. Additionally, the temporary residence period for citizens from countries exempt from visas was extended to 45 days.

These changes have made it considerably easier for travellers to explore Vietnam, and for businesses and investors to examine the market and manage their operations more effectively. While the European Chamber of Commerce in Vietnam (EuroCham) advocates for the full inclusion of all EU member states in the visa exemption programme, we acknowledge and appreciate the progress made in 2023 in easing travel restrictions.

Another significant development in 2023 was the acceleration of key infrastructure projects, notably the substantial completion of large segments of the North-South Expressway. This progress in infrastructure is critical for supporting continued economic growth and attracting further overseas funding.

Besides the improvements, European businesses still face the challenges in Vietnam as shown in EuroCham Vietnam’s 2024 Whitebook, titled “Boosting Investment for a Greener and More Sustainable Economy.”

Covering a wide range of sectors across 24 chapters, including digitalisation, sustainability, healthcare, agriculture, construction, and more, the Whitebook highlights the areas drawing the most attention and concern among EuroCham members. It offers actionable recommendations, such as increasing supply chain transparency, fostering public-private partnerships for better manufacturing, and updating pharmaceutical regulations for improved medicine access.

In energy, for example, the Whitebook outlines strategies to encourage private investment in efficiency upgrades, supporting Vietnam’s national energy goals. It details plans for integrating renewable energy into the national grid and proposes changes in recycling policies and sustainable material usage.

To maintain investor confidence and draw more foreign investment in 2024, Vietnam should quicken the pace of administrative, legal, and infrastructure reforms. Workforce development is a crucial area, as EuroCham’s Business Climate Index found that the majority of the European business community in Vietnam perceive Vietnam’s workforce as only moderately proficient and available. Enhancing skills through training and attracting foreign expertise, especially in high-tech sectors, is essential for boosting Vietnam’s competitiveness in the ASEAN region.

EuroCham has also been actively advocating for more accessible entry of skilled foreign professionals to aid Vietnam’s high-tech development. Continuing these efforts and focusing on business-friendly reforms will help Vietnam achieve its socioeconomic objectives in 2024, maintaining its status as an attractive destination for foreign investment.

An emerging trend in Vietnam is the shift towards green financing, particularly in renewable energy infrastructure and eco-friendly agriculture. This movement aligns with global environmental goals, presenting fresh investment opportunities in Vietnam’s green transition.

Specifically, the renewable energy sector is poised for substantial growth, especially with the signing of the Power Development Plan VIII and the Just Energy Transition Partnership. These initiatives are set to revolutionise Vietnam’s energy landscape, emphasising the necessary shift towards clean sources.

The significant interest and achievements of EuroCham’s events like the Green Economy Forum & Exhibition (GEFE) and Green Economy Forum strongly highlight this broad green trend. As we build on these successes, the upcoming GEFE 2024, scheduled for October 21-23 in Ho Chi Minh City, represents an even greater opportunity to scale up these efforts. The forum aims to bring together leaders from diverse sectors and governments for meaningful dialogue, conference sessions, and an exhibition.

Since its launch in 2020, the EVFTA has largely met the expectations of EuroCham member companies, but there is room for further improvement. The agreement has significantly boosted trade, evidenced by the rise in import-export turnover between Vietnam and the EU - from $54.9 billion in the first year to $61.4 billion in the second year, an annual increase of 11.9 per cent. This growth is a clear indicator of the EVFTA’s positive impact on the economy.

However, the agreement also presents challenges. A significant number of businesses report hurdles, primarily due to a lack of comprehensive understanding of the agreement’s details and the complexities of its procedural aspects. This indicates a need for more effective communication and education regarding the EVFTA to help businesses fully capitalise on its offerings.

Recognising these challenges, EuroCham and our sector committees are actively engaging with the EU Delegation and Vietnamese regulatory authorities. Our focus is on improving regulatory cooperation to facilitate a more efficient implementation of the EVFTA. By addressing the obstacles outlined in the Whitebook, there’s potential to further increase the positive impacts of the agreement.

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By Gabor Fluit

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