Vietnam to receive new generation of investors with free trade deal

A new generation of European investors, including those from Francophone countries, will enter Vietnam when the EU-Vietnam Free Trade Agreement (EVFTA) is approved.

Director of the Organization of La Francophonie’s Asia-Pacific office Eric-Normand Thibeault made the forecast at the first Asia Pacific economic forum for businesses of the Francophone held in Hanoi recently.

According to Thibeault, Vietnam plays an important role as a gateway to ASEAN, which is a very dynamic region in business and investment with a large market of around 600 million consumers. The country therefore will become the ideal bridge for European manufacturers to enter other ASEAN markets.

The European Chamber of Commerce (EuroCham) in Vietnam also said that higher engagement from EU investors can be expected when the EVFTA takes effect. Investors are waiting for more favorable conditions – in terms of the services market, investment protection, and other concerns – which may be brought about by the partnership as early as next year.

Vietnam is on the radar of EU investors, including those already in the country, which are open to expanding their operations given the right steps and measures, the chamber said.

Nguyen Quoc Toan from the Central Economic Commission said that an increasing number of European companies will choose Vietnam as an ideal investment destination in the manufacturing sector as Vietnamese companies often lack technology and capital, which are available in European companies with strong international potential.

Besides, Toan said, the EVFTA will also promote the EU’s FDI inflows into the high quality services sector that Vietnam’s economy desperately needs, such as finance-banking-insurance, energy, telecommunications, sea ports and maritime transport.

While some domestic banks are struggling with internal problems, such as restructuring and bad debt, foreign banks are backed by the powerful financial conglomerates around the world are seeking to enter and expand market share in Vietnam, Toan said, adding that foreign banks will have more advantages over domestic banks, if the EVFTA is officially put into effect with a commitment to open and incentives, surely this would be an attractive sector for strong investment from European investors.

Investments from outside Europe

According to experts, the EVFTA will not only increase the number of European companies to invest in Vietnam but also bring investments from other countries outside Europe as the deal creates an open investment environment, adopts more favorable provisions in the field of investment and tariffs. Countries without FTAs with the EU tend to invest in Vietnam to benefit from this agreement.

Besides, as the European single market is a large and attractive but demanding market in terms trade regulations, the EVFTA will create a gateway facilitating the access to this market for all manufacturing enterprises with production bases in Vietnam.

In the garment and textile industry, for example, Chairman of the Vietnam Textile and Apparel Association (VITAS) Vu Duc Giang said that the EVFTA will create great attraction to foreign investors in the industry.

The EVFTA is the driving force to help Vietnam emerge as one of the top spots in the world for investors in the garment and textile industry, Giang said, adding the industry lured US$2.8 billion of FDI capital in the first half of this year, bringing the total FDI in the sector to nearly US$17.5 billion.

Foreign investors are flocking to Vietnam’s textile and industry as the EVFTA will offer ample opportunities for Vietnamese textile and garment products to ship to the European market thanks to tariff preferences.

According to EU-MUTRAP team leader Claudio Dordi, only ‘EVFTA originating’ products will benefit from preferential tariffs for a maximum of seven years after entry into force. Investors from other countries thus wish to relocate sufficient stages of textile and garment manufacturing to Vietnam to benefit from market access offered by the EVFTA.


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