Vietnam increasing in importance for British trade

June 02, 2024 | 13:00
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Despite global economic headwinds, Vietnam is one of the most rapidly growing economies in the Asia-Pacific region, with 5.7 per cent growth in Q1 and expected growth between 5 and 6 per cent this year.

Vietnam has rapidly grown over the last 20 years, averaging around 6 per cent growth per year, and the Vietnamese government has a stated ambition to reach high-income status by 2045, requiring 6 per cent growth each year to hit this target. However, a key question and ambition will be if Vietnam can become richer before it gets older, and move up the value chain.

Vietnam increasing in importance for British trade
Iain Frew, British Ambassador to Vietnam

I have seen first-hand the dynamism in the economy here since being British ambassador, with businesses growing and the economy growing with it. Tourism has rebounded helping in part to drive the economic growth in Vietnam, as has manufacturing and processing which has helped growth.

When people discuss emerging markets such as Vietnam, the focus is often on the headline growth figures; how GDP and incomes are accelerating. But what should not be lost in these stories is that rapid growth needs to be propelled by an equally strong investment in human capital, education, and professional capability. This is particularly true in services sectors like accounting and finance, where the technical expertise within the profession is constantly evolving.

Professional services including in the accountancy, finance, and audit sectors have helped to drive growth in Vietnam. I am an accountant by trade and have seen first-hand the value of the profession to the economy and to economic development.

Regarding Vietnam’s role in the Asia-Pacific region, the country has achieved impressive economic success over the past 20 years. International trade and the shift towards a manufacturing economy has in a large part made this possible.

Vietnam maintains impressive trade surpluses with the UK, US, and the EU, and has a diversified range of free trade agreements to support exporting sectors. Vietnam also has high ambitions to move up the value chain into higher tech manufacturing over time.

When it comes to the UK’s trade and economic strategy for the region, it is estimated that we trade £122 billion ($155.87 billion) with Asia-Pacific annually. The UK, like Vietnam, is therefore also committed to an international facing and integrationist approach and has found partners across the region to do free trade agreements with, including with Vietnam.

The UK-Vietnam Free Trade Agreement is the primary basis of our bilateral trade relationship and it has grown rapidly, doubling over the course of the last decade to £6 billion ($7.66 billion).

The UK has also now ratified our own accession to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), alongside Japan, Singapore, and Chile. I am optimistic that Vietnam will soon follow and that we will then be able to use the UK’s access to the CPTPP to trade with Vietnam by the end of this year.

The CPTPP aligns our economy with some of the fastest growing economies in the world in this region. Including the UK, it is almost 15 per cent of global GDP at over £12 trillion ($15.33 trillion).

And through the CPTPP, we will have free trade deals with Malaysia and Brunei for the first time, whose economies alone were worth $434 billion in 2023. There are also gains above our bilateral agreements bringing new opportunities, for example for certain agriculture products from the UK to Vietnam.

Indeed, the UK has tilted towards the Indo-Pacific region, as we see the vast majority of economic and trade growth coming from Asia-Pacific for the foreseeable future. As a result, we have signed over 70 agreements, including new ones with Australia and New Zealand, and a digital economy agreement with Singapore.

We are also engaging more with regional dynamics, including with ASEAN as the newest ASEAN dialogue partner. In 2021 alone, ASEAN was the fifth-largest economy in the world, and we expect this to grow over time.

A UK focus here will be supporting an economic integration scheme under our flagship $32 million UK-ASEAN Economic Integration Programme to support inclusive economic growth across the region.

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By Iain Frew

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