Vietnam counts down the days to Euro deal

Nicolas Audier, chairman of the European Chamber of Commerce in Vietnam

EU investment remained modest in 2019, although the Vietnamese government has made a number of bold moves to improve the business climate. What highlights in EU investment have you witnessed in Vietnam this year?

It is true that the Vietnamese government has continued to improve the trade and investment environment in 2019. Our members welcome these reforms, and remain dedicated to supporting the government to go further and faster in the future.

European funding remains modest when compared to other large partners of foreign direct investment (FDI) in Vietnam. One of the main reasons for this is that, at the moment, some sectors such as government procurement remain closed to European investors. Meanwhile, the tariffs on our products are higher than those coming from countries with which Vietnam has active free trade agreements.

EuroCham now has over 1,000 members in Vietnam. According to statistics from Vietnam’s Ministry of Planning and Investment, investors from 23 EU member states have registered about $25 million into more than 2,200 projects over the past 28 years. Among EU member countries, Vietnam sees most investment from the Netherlands, France, Luxemburg, and Germany.

Without a doubt, the highlight of EU-Vietnam trade and investment in 2019 was the official signing of the EU-Vietnam Free Trade Agreement (EVFTA) and EU-Vietnam Investment Protection Agreement (EVIPA) in Hanoi in June.

The presence of the Vietnamese prime minister and the EU’s trade commissioner signing these historic agreements represented a major step in EU-Vietnam relations, and a new chapter for trade and investment between both sides.

Vietnam is working on a new FDI attraction strategy, with a focus on technology application. What is the trend of EU investment in tech-related sectors in Vietnam, and will there be any new movements from European businesses in terms of finance, telecoms, transport, and distribution services?

European enterprises have a long and positive record of investment in these areas in Vietnam. Ever since the first Law on Foreign Investment, Europe has helped to build the country’s communications infrastructure, both through finance and knowledge transfer.

Now, with the government’s welcome embrace of the Fourth Industrial Revolution and the digitalisation of all sectors and industries, European companies are keen to be reliable and innovative partners for this next phase of Vietnam’s economic development. In particular, once ratified and implemented, the EVFTA will open up access to some of these sectors for European investors and businesses.

For instance, five years after it has entered into force, economic needs tests will be eliminated for retail services. Meanwhile, for financial services, the threshold for EU investment in certain joint-stock commercial banks will rise from 30 to 49 per cent, and EU financiers will be able to establish themselves as health insurance providers.

In telecommunications, EU investors will be able to provide advanced services, in most cases through joint ventures with local partners. Together, these provisions should help to increase funding from Europe and make Vietnam an even more attractive trade and investment environment.

The Vietnamese and EU business communities are awaiting enforcement of this historic deal. How is the ratification process of the EU Parliament taking shape, and is it possible for the agreement to take effect in early 2020?

Before it can enter into force, the EVFTA needs to pass two crucial votes: the first in the European Parliament and the second in Vietnam’s National Assembly. EuroCham advocates for the EVFTA whenever possible. Just last month we led our fourth delegation of business leaders to Brussels to engage with parliament members (MEPs) and other important stakeholders to impress upon them the benefits of this deal for both sides.

From our meetings with the EU’s new trade commissioner and over 30 MEPs from all groups and political parties, it is clear that the economic benefits of the EVFTA are undisputed.

In order to get the deal over the line, the MEPs need some reassurance that Vietnam is serious about wider issues such as ratification of the outstanding core International Labour Organization (ILO) conventions. EuroCham was pleased to update a hearing of the European Parliament’s International Trade Committee about Vietnam’s new Labour Code, which represents a major milestone in Vietnam’s efforts to incorporate the core principles of labour rights under the ILO conventions into its legal framework.

Together with the EVFTA, the Vietnamese government is working on new solutions to increase its attraction to EU investors. Will they change the investment picture there?

Our members welcome the Vietnamese government’s efforts to improve the business climate, as well as their open and constructive relationship with European business leaders.

Our members have been pleased to have the chance to share their insights and recommendations with ministries at a number of events throughout 2019, including customs dialogues, the Vietnam Business Forum, and the Advisory Council for Administrative Procedure Reform.

The government’s recent reforms continue to be a step in the right direction. However, looking ahead, we believe that addressing a number of other issues facing our members will help to unlock further investment from European enterprises.

Some of the most pressing issues include proposed reforms to the special consumption tax, lot-by-lot homologation for automobiles, and widening the definition of “internal transfers” for foreign workers.

On top of this, European investors want a reliable, predictable, and transparent legal framework in which to do business. So continued reforms of Vietnam’s legislative environment to bring it further into line with international standards would be a positive incentive to attract further FDI from Europe in the future.

The EU investment picture in Vietnam is set to change once the EVFTA is ratified. Once the agreement enters into force, European enterprises will have greater access to Vietnam’s fast-growing market and, in particular, its service sector.

This should open the floodgates to a new wave of investment from European enterprises into the Vietnamese market.

This signing of the EVFTA takes us one step closer to ratification, ahead of crucial votes in the European Parliament and National Assembly of Vietnam in 2020.

Once ratified and entered into force, the EVFTA will give Vietnamese companies privileged access to a European market of over 500 million consumers.

Meanwhile, Vietnamese people will be able to get greater access to high-quality European goods from pharmaceuticals to automobiles and wines and spirits to high-tech electronic products.