Finding ways to play with "giants"

In over 30 years since Vietnam opened its doors to foreign direct investment (FDI), no EU country has so far entered the top 10 countries with a high level of investment in Vietnam. In this context, the EU-Vietnam Investment Protection Agreement (EVIPA) is expected to be a push for Vietnam to receive large investment waves from Europe right as FDI flows are relocated after the COVID- 19 pandemic.

At the signing ceremony for EVFTA and EVIPA in Hanoi on June 30, 2019.
At the signing ceremony for EVFTA and EVIPA in Hanoi on June 30, 2019.

Waiting for high quality capital flow

According to Minister of Planning and Investment Nguyen Chi Dung, the EU-Vietnam Free Trade Agreement (EVFTA) together with EVIPA will help affirm the important geopolitical role and position of Vietnam in Southeast Asia as well as in the Asia – Pacific region. At the same time, the two agreements will contribute to enhancing the position of Vietnam in ASEAN as well as in the international arena.

The implementation of commitments under EVIPA will be the driving force for Vietnam to continue perfecting its institutional system and policies in order to improve its investment and business environment towards increasing convenience, equality, safety and transparency to investors across all economic sectors.

The implementation of the agreement will also create a favourable environment for Vietnam to promote its investment attraction in a number of sectors that the EU has potential and strength such as high-tech manufacturing, clean energy, renewable energy, high-quality services as well as the financial and banking industries.

Through their production cooperation with EU-invested enterprises, domestic enterprises will have the opportunity to participate in both the EU and global and value chain in addition to acquiring technology transfer and skills, thereby receiving a spillover effect in technology, productivity and quality in addition to increasing the competitiveness and efficiency of the economy.

Notably, in the context of many countries and foreign investors are tending to relocate their investment to reduce dependence on a single market, the EVIPA will contribute to increasing the attractiveness of the investment environment in Vietnam and limiting the decline of FDI capital following the global general trend.

Currently, the exact figure on the increase of FDI capital when implementing EVFTA and EVIPA has not been calculated due to many factors. However, all studies show that broad and deep commitments regarding investment in the agreements will help Vietnam continue to renew its economic structure, improve its institution and business environment, and facilitate EU investors.

In addition, increasing commitments on investment facilitation and the liberalisation of Vietnam's services for EU service providers are expected to boost FDI inflows from the EU into Vietnam in the future. Under the EVFTA, investment from partners in developed countries is anticipated to rise as Vietnam will promote its market opening for the goods and services of EU businesses. This will create new impetus for FDI inflows to Vietnam.

Proactively participating in a big playground

According to data from the Ministry of Planning and Investment, EU enterprises have 2,375 valid investment projects in Vietnam with a total registered capital of over US$25 billion, accounting for nearly 8% of the total number projects in Vietnam and over 7% of the total registered capital of all countries with the top investors coming from the Netherlands, the UK and France.

EU investors have been present in almost all important economic sectors of Vietnam. EU investment projects have a high technology content, a high rate of technology transfer, and advanced management methods, making a significant contribution to Vietnam's economic growth.

However, this result remains modest compared to the investment and cooperation potential between Vietnam and EU countries. FDI inflows from EU countries to Vietnam have also grown slowly over the past few years and there has been no mutation, showing the cautions of EU enterprises about Vietnam's investment environment.

Therefore, the signing and ratification of the EVFTA and EVIPA have affirmed their great trust in Vietnam's investment environment in the new period and also showed Vietnam’s commitments to create a full and more effective legal framework for protecting investment activities of EU investors.

In particular, the Vietnamese National Assembly’s approval of both the EVFTA and EVIPA will contribute to consolidating enterprises' confidence regarding Vietnam’s determination in continuing to accelerate innovation, integration, and improvements to competitiveness of the investment and business environment.

Chairman of the European Business Association in Vietnam (EuroCham), Nicolas Audier affirmed that with the ratification of EVFTA and EVIPA, European businesses look forward to further strengthening trade relations between Vietnam and the EU. This historic agreement will stimulate Vietnam's trade with the large consumer market in Europe now more integrated as well as enhance its role in the international supply chain and attract new sources of investment.

Director of the Research Institute for Brand Strategy and Competition, Vo Tri Thanh, said that the world is changing fast and is increasingly unpredictable. Investment flows are shifting and Vietnam will not take advantage of this opportunity without a degree of proactiveness.

The Government decided to set up a special working group on FDI attraction, showing the activity of Vietnam in FDI attraction in a new context. With the signing and ratification of EVFTA and EVIPA, Vietnam is not only "making nests to welcome eagles" but is turning to a new status. It is the proactive status to participate in the big playground, seeking to play with the "giants" and improve ourselves to lure investors instead of just waiting for them.