EVFTA facilitates investment from EU to Vietnam

According to the roadmap for implementing the Vietnam - EU Free Trade Agreement (EVFTA), Vietnam commits to eliminating import tariffs from the EU as soon as the Agreement comes into effect for 48.5% of tariff lines (equivalent to 64.5% of import turnover from the EU). Tariffs will continue to decrease, especially sharply from the third year onwards. From 2022 to 2027, special preferential import tariffs will decrease from 10.2% to about 1%.

foreign investment fdi.jpg
Foreign investment still chooses Vietnam

Mr. Nguyen Van Toan, Vice President of the Association of Foreign Invested Enterprises (VAFIE), said: EVFTA has a chapter related to investment incentives, related to bilateral investment promotion to facilitate investment from the EU to Vietnam. However, investment from the EU to Vietnam is still only potential.

"Why do I say that?", Mr. Toan explained, "Because when we look at the EU, we see that there are many large countries investing abroad, for example, Germany invests about 60 billion USD abroad per year on average, France about 30 billion USD. However, if we look at the amount of registered capital and implemented capital of EU countries in Vietnam today, we see that the Netherlands is at the top, the Netherlands accounts for nearly half of the investment capital in Vietnam, while the Netherlands is a very small country. Meanwhile, they invest a lot in Vietnam and perhaps Dutch enterprises are more suitable for the investment environment in Vietnam. As for enterprises like France, Germany, Sweden, it seems that the investment environment in Vietnam is not suitable for them?

But recently, Mr. Toan also saw changes emerging. For example, Germany, in previous years, invested about 100 million USD in Vietnam, too little compared to the 60 billion USD they invested in the world. But there is a bright spot: in the first 9 months of 2023, Germany invested more than 200 million USD in Vietnam. At the end of last year, there was also a very large project from Denmark investing in Binh Duong with more than 1 billion USD.

"Those are the bright spots that we need to promote," Mr. Toan shared, "The remaining problem is the ball in our feet, how do we prepare to welcome them, how do we prepare the investment environment, how do we prepare businesses, how do we prepare human resources...".

Need to understand European business

Mr. Luong Van Tu, former Deputy Minister of Industry and Trade , former Head of the Government's economic and trade negotiation delegation to join the WTO and AEC shared: We all know that the EU is a capital and technology market, but the EU is different from investors in other countries, that is, they study an issue very carefully before deciding to invest. They study the way in and study what is effective and what the output is.

"As for Southeast Asian countries, they take care of input first, then operate and then worry about output. That is a characteristic that when we do business, we have to understand the way investors from different countries think," said Mr. Tu.

Mr. Phan Minh Thong, Chairman of the Board of Directors of Phuc Sinh Group, commented: The free trade agreement with Europe creates a lot of momentum. We assess that European businesses will invest in Vietnam, but that is not necessarily the case. We must also assess non-European businesses.

"When this agreement is in place, non-European businesses investing in Vietnam will take advantage of taxes to export products from Vietnam to Europe. Furthermore, many coffee factories are opened, not only invested by European businesses but also by businesses from other regions such as the US or Asia investing in Vietnam...", Mr. Thong listed.

According to Mr. Thong’s observation, in the past three years, a number of enterprises have come to Vietnam to open factories. That is also one of the big challenges for Vietnamese enterprises when they have to compete a lot in the same product line.

"However, it must be said that many European businesses have imported processed goods from Vietnam to export to Europe, because they take advantage of the tax reduction from 30% to 5%. This is a great tax rate for importing businesses in Europe," Mr. Thong assessed.

Luong Bang