Vietnam-UK trade bond underway

March 16, 2023 | 09:43
(0) user say
After nearly two years of entry into force, the UK-Vietnam Free Trade Agreement, in addition to Vietnam’s improved investment and business climate, have facilitated both nations to increase trade and investment.
Vietnam-UK trade bond underway
Many businesses and brand names like Mothercare have carved a firm niche in the Vietnamese market, Photo: Le Toan

After one click on the website of Longdan Company based in the UK, also the biggest importer of Vietnamese food in the UK, one can see that a Vietnamese red-flesh pomelo is sold at £5 ($6) per unit, or 7.5 times higher than the average price now found in the Vietnamese market. Along with pomelo, thousands of Vietnamese speciality products are also sold in the Longdan supermarket chain, serving millions of customers every year, both at stores and online.

Since last month, Longdan has imported over 16 tonnes of pomelo planted in Vietnam’s northern province of Hoa Binh.

Over recent days, Cao Phong oranges from the northern province of Hoa Binh have also been officially put up for sale at Longdan supermarkets. The nearly seven tonnes of orange, exported via RYB JSC, meet stringent quality, food safety, and origin standards, including passing the testing for nearly 900 chemical elements in plant protection products.

Currently, Vietnam and the UK are working to continue facilitating the exports of more Vietnamese and British products to their respective markets, to capitalise on advantages and benefits offered by the UK-Vietnam Free Trade Agreement (UVFTA).

Despite global economic volatility, both nations are trading with each other more than ever. Total bilateral trade in goods and services in 2022 stood at £5.9 billion ($7.09 billion), up over 12 per cent on-year.

“This strong trade relationship is supported by both sides’ efforts to facilitate trade and remove market access barriers, importantly, through the annual UK-Vietnam Joint Economic Trade Committee and our bilateral FTA,” said Emily Hamblin, British Consul General in Ho Chi Minh City and director of Trade and Investment in Vietnam. “The FTA represents a significant step forward in our economic and trade ties. It removes 99 per cent of tariffs by full implementation, but the benefits are much broader than that. Both sides are able to use the FTA and its provisions to advance business interests and remove barriers to market access.”

As part of the UVFTA, 85.6 per cent of tariff lines for goods imported by the UK from Vietnam were eliminated in January 2021, and 99.2 per cent will be removed by 2027, according to the UK’s Department for International Trade (DIT).

Continued missions

After nearly two years of official entry into force, Vietnamese businesses have been able to access preferential tariff rates across a whole range of sectors, including those such as footwear, textiles, and agricultural products that have seen particularly high export growth rates.

Meanwhile, British businesses are benefiting too, including in some of the UK’s most important export categories. For example, British exports in medicinal and pharmaceutical products have enjoyed particularly strong growth, growing at over 40 per cent on-year in the first nine months of 2022.

“Under the FTA, UK pharma companies can benefit from significantly lower tariffs, but the benefits are much broader than that. It allows for increased access to the public procurement market for pharma products, as well as increased protection and enforcement of intellectual property rights, and it helps to deliver regulatory changes that allow British companies to obtain foreign-invested-enterprise status in Vietnam,” Hamblin said.

Kenneth Atkinson, chairman of the British Chamber of Commerce Vietnam (BritCham), is expecting continued growth in bilateral trade relationship and investments and the UK will continue with the process to accede to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, which will be another major boost to UK-Vietnam trade. This will likely lead to high level bilateral visits both to Vietnam and the UK.

“I expect to see continued visits by trade missions looking at sectors favoured by UK companies like energy, smart cities, education, healthcare, pharma, and fintech,” Atkinson said. “We expect a particularly exciting time for growth in renewable energy and sustainability linked trade too, following the agreement of the Just Energy Transition Partnership (JETP) with Vietnam.”

Two weeks ago, a delegation of nine British companies came to Hanoi and Ho Chi Minh City as part of the Energy Catalyst visit, organised by Innovate UK and BritCham Vietnam. Through various meetings and site visits, the delegation met with key partners to learn about the big picture of Vietnam’s energy sector as well as business opportunities here.

“This delegation is one among many UK trade missions with a focus on sustainable development that we are welcoming to Vietnam this year. Building on Vietnam’s commitment to net-zero emissions and the recent signing of the JETP, this is also a reinforcement of the UK government’s commitment as a vital partner in Vietnam’s clean growth ambitions,” said the British Embassy to Vietnam.

Fresh developments

Vietnam’s Ministry of Planning and Investment reported that accumulatively as of February 20, the UK’s total registered investment capital in Vietnam was $4.25 billion for 511 valid projects, including $1.2 million for the January-February period.

In August 2022, Shire Oak International, a division of developer of tidal power and solar power Shire Oak Energy, signed an MoU with Vietnamese design and construction company Reecons Engineering to cooperate in developing rooftop solar systems for a customer in the commercial and industrial sectors here.

The month previously, Shire Oak International also inked an MoU with Vietnam’s Bao Minh Industrial Park Infrastructure Investment to cooperate in developing rooftop solar projects at Bao Minh Industrial Park in the northern province of Nam Dinh.

“Our team has developed over $2 billion of renewable energy projects worldwide. In Vietnam, we are developing a broad portfolio of solar energy projects. By working with corporates and educational establishments across the region, we are currently deploying about $450 million of equity funding to build out 650MW of Vietnamese rooftop solar installations,” said Son Bui, director of Marketing and PR at Shire Oak International.

Currently, many British companies and brand names are operating effectively in Vietnam, such as Prudential, Standard Chartered, Pacific Land, Pearson Chris Cuddihy, Enterprize Energy, and Mothercare.

In an example, Michele Wee, CEO of Standard Chartered Bank Vietnam, once told VIR that the bank highly values the Vietnamese market, where it has many opportunities. In November 2021, Standard Chartered Bank Vietnam committed MoUs worth up to $8.5 billion in sustainable financing for three Vietnamese businesses – T&T Group, Geleximco Group, and Van Lang Investment and Education Management Corporation.

“Investments like these will help Vietnam in its sustainable development journey and secure its prosperity. We remain committed to Vietnam’s recovery and future sustainable growth and look forward to working closely with the Vietnamese government, our clients and partners to support Vietnam’s sustainable development, economic recovery and ambitious net-zero targets.”

According to the DIT, Vietnam is a large consumer market with high potential. “Vietnam is an attractive investment destination. Today, legal frameworks and corporate government rules are in place to promote private interests more effectively than ever before. Vietnam maintains investment protection for foreign investors through bilateral agreements, non-discrimination laws, and limitations on unreasonable government intervention,” the DIT said.

Various commitments under UKVFTA

Tariff elimination

The deal locks in the 65 per cent of all tariffs that have been eliminated since the EU-Vietnam FTA entered into force. This will increase to 99 per cent of tariffs after a schedule of between 6-9 years. This secures import tariff elimination for products such as clothing, fabric and footwear – meaning customers and businesses may benefit from lower prices on these products. Tariffs will be reduced per a schedule that stipulates equal annual reductions from entry into force of the agreement.

With such commitments, the UK exporters to Vietnam and the UK importers from Vietnam stand to benefit. Specifically:

For goods exported by UK exporters to Vietnam:

48.5 per cent of tariffs lines were eliminated in 2021; 91.8 per cent of tariff lines will be eliminated by 2027; 98.3 per cent of tariff lines will be eliminated by 2029; 1.7 per cent of tariff lines are partially liberalised through tariff rate quotas (the quota volumes are consistent with Vietnam’s international commitments and duties within quotas will be removed by 2031) or not entitled to preferential treatment

For goods imported by the UK importers from Vietnam:

85.6 per cent of tariff lines were eliminated in 2021; 99.2 per cent of tariff lines will be eliminated by 2027; 0.8 per cent of tariff lines are partially liberalised through tariff rate quotas (with preferential tariffs for in quota products of 0 per cent)

Non-tariff barriers

To facilitate trade, the UKVFTA contains commitments to reduce non-tariff barriers that unreasonably hinder the flow of trade, increasing transparency, and furthering the parties’ ability to quickly and effectively handle non-tariff barriers to trade.

Public procurement

Vietnam commits to opening its public procurement market to the UK, allowing UK suppliers access to procurement at the central level and in Vietnam’s two largest cities, Hanoi and Ho Chi Minh City.

UK suppliers are covered by the deal’s rules when bidding for tenders above the threshold laid out in the agreement, and where those tenders are advertised by covered procuring entities. The UKVFTA will gradually increase access to Vietnam’s procurement market for UK suppliers.

Vietnam commits to allowing UK suppliers a wide range of goods procurements (with exceptions for sensitive goods) and a selection of services procurements, including accounting, market research, and taxation services.Source: UK Department for International Trade

Vietnam, UK to develop strategic partnership to higher level: officials Vietnam, UK to develop strategic partnership to higher level: officials

Vietnamese Deputy Prime Minister and Foreign Minister Pham Binh Minh held talks with UK Secretary of State for Foreign, Commonwealth and Development Affairs and First Secretary of State Dominic Raab in Hanoi on September 30, during which they agreed on joint efforts towards a higher level of the bilateral strategic partnership.

Negotiations on Vietnam-UK FTA expected to be completed late this year Negotiations on Vietnam-UK FTA expected to be completed late this year

Vietnam and the United Kingdom are speeding up negotiations on a new-generation free trade agreement between the two sides, which is expected to be completed at the end of this year.

Vietnam-UK trade relations elevating to new altitudes Vietnam-UK trade relations elevating to new altitudes

The UK-Vietnam Free Trade Agreement was settled last week and will take effect from January 1, in which 99 per cent of tariffs between two countries will be eliminated – and full implementation is set to further boost UK-Vietnam bilateral trade, which has already tripled in the past decade.

Vietnam-UK strategic partnership Vietnam-UK strategic partnership

The Vietnam-UK strategic partnership has, over the recent past, developed strongly and positively.

NA Chairman Vuong Dinh Hue meets with Prudential’s leaders during UK visit NA Chairman Vuong Dinh Hue meets with Prudential’s leaders during UK visit

During his recent visit to the United Kingdom to participate in the Vietnam-UK High-level Forum on Economy and Trade, National Assembly Chairman Vuong Dinh Hue and a high-level delegation met with Prudential PLC to discuss the Vietnamese government’s priorities as well as how insurers can increase financial inclusion. The diplomatic meeting aimed to strengthen relationships and restate Prudential’s commitment to Vietnam.

By Thanh Dat

What the stars mean:

★ Poor ★ ★ Promising ★★★ Good ★★★★ Very good ★★★★★ Exceptional