Vietnam's attractiveness increases thanks to the EVFTA.

The EVFTA has been contributing to strengthening Vietnam's position as an attractive destination for European investment, placing the European Union (EU) sixth among the largest FDI investors in Vietnam.

In 2020, Vietnam became the first developing country in the world to sign a Free Trade Agreement (FTA) with the EU (EVFTA). The agreement commits to eliminating or reducing tariffs on most goods and services between Vietnam and the EU, creating significant opportunities for Vietnamese businesses to access the EU market and boost exports.

Dominik Meichle, President of the European Chamber of Commerce in Vietnam (EuroCham), had a conversation with the World and Vietnam newspaper to commemorate the fourth anniversary of the EVFTA Agreement coming into effect (August 1, 2020 - August 1, 2024).

EuroCham Vietnam President Dominik Meichle. (Photo: Provided by the interviewee)

How would you assess the results of nearly four years of implementing the EVFTA for businesses on both sides and the Vietnamese economy ?

The EVFTA, which came into effect in August 2020, has had a significant impact on Vietnam. The agreement makes Vietnam one of only two ASEAN countries (along with Singapore) to have an FTA with the EU, giving it a competitive advantage over other ASEAN countries still negotiating with Europe.

The biggest impact can be seen in Vietnam's exports to the EU, which increased from around 35 billion euros in 2019 to over 48 billion euros in 2023. Electronics, textiles, footwear, agriculture , and seafood all experienced strong growth.

However, conversely, EU exports to Vietnam grew at a slower pace (only slightly increasing from €11 billion to €11.4 billion during the same period). Around a quarter of EuroCham Vietnam's members benefited significantly or moderately from the agreement, particularly through tariff reductions and improved market access. Clearly, there is still considerable potential for EU businesses to access a market of 100 million people.

Attracting foreign direct investment (FDI) from the EU to Vietnam is also one of the outstanding highlights. What are your thoughts on this issue?

The EVFTA has enhanced Vietnam's attractiveness to EU investors. The EU, currently the sixth largest foreign direct investor in Vietnam, has invested €28 billion in 2,450 projects across the country. In 2023, despite a global downturn in FDI, EU "eagles" added €800 million to the Vietnamese market in the first nine months, demonstrating confidence in the country's potential.

However, to fully exploit the potential for attracting more FDI thanks to the EVFTA, the Vietnam-EU Investment Protection Agreement (EVIPA) needs to be ratified. EVIPA requires individual consent from all 27 EU member states. To date, 18 member states have ratified EVIPA, and securing the approval of the remaining members is essential.

EuroCham Vietnam continues to actively advocate for the ratification of the EVIPA among the relevant parties in the EU. This agreement is expected to significantly boost investor confidence and pave the way for increased investment by EU businesses in Vietnam.

What difficulties do EU businesses face when implementing the EVFTA?

Undeniably, the EVFTA opens opportunities for EU businesses in Vietnam. However, EuroCham's Q2/2024 Business Confidence Index (BCI) survey has highlighted key ongoing challenges. Specifically, these are:

Complex regulations: Many companies find Vietnamese regulations difficult to apply.

Lack of recognition of international standards: Local authorities sometimes do not accept international standards, which can cause delays and increase costs for European businesses, especially in sectors such as medicine and high-tech manufacturing.

Lack of understanding: Not everyone fully understands how the EVFTA works, which can lead to missed opportunities and unintended mistakes.

Customs issues: Differing interpretations of customs regulations can cause delays and increased costs for EU businesses exporting goods to Vietnam, especially those with complex supply chains or expensive products.

Despite the challenges, we remain optimistic about the potential of the EVFTA. Going forward, EuroCham is committed to working with the Vietnamese Government to address these challenges and ensure the EVFTA fully realizes its potential for both sides. Through open dialogue and mutual understanding, EuroCham can create a more transparent and predictable business environment, fostering win-win outcomes for businesses.

The Lego factory (from Denmark) is under construction in Binh Duong province. This is one of the largest FDI projects in Binh Duong and also one of the largest Danish investments in Vietnam. (Source: Investment Newspaper)

Looking ahead, what should businesses from both sides do to take advantage of the benefits from this historic agreement, sir?

Firstly, investing in training programs on the EVFTA will help businesses understand the terms of the agreement. This includes learning about tariff reductions, rules of origin, customs procedures, and specific industry regulations. As a result, businesses can maximize the benefits the agreement offers.

Secondly, active engagement with governments and business associations like EuroCham is crucial. EuroCham can share experiences and concerns, helping businesses identify and address challenges, thereby enabling a smoother and more effective implementation of the EVFTA.

Furthermore, businesses on both sides should prioritize innovation and adaptation to meet the increasingly sophisticated standards of both markets. This may involve upgrading production processes, improving product quality, or implementing sustainable practices. By adhering to international standards, businesses can ensure compliance with EVFTA regulations and enhance their competitiveness in both markets.

Given the EU's adoption of more green standards, what recommendations do you have for Vietnamese businesses to improve their capacity and export competitiveness?

The EU market holds enormous potential for Vietnamese businesses, but to succeed, they must meet the sustainability standards of the European Green Deal. This agreement includes rules on areas such as carbon emissions, deforestation, responsible business practices, and requires significant investment in skilled workers, technology, and resources.

Instead of viewing these requirements as obstacles, Vietnamese businesses should see them as opportunities for strategic investment and increased competitiveness. Vietnamese businesses need to train their employees in sustainable practices and the use of green technologies to meet EU standards. This will help businesses reduce costs, work more efficiently, and turn compliance with the European Green Deal into a competitive advantage.

To support businesses in their green transition, EuroCham Vietnam is committed to providing additional training opportunities and resources focused on understanding and implementing green regulations. These initiatives will equip businesses with the necessary tools and knowledge to adapt to the sustainable development landscape and thrive in the EU market.

To encourage collaboration and promote concrete action towards a greener future, EuroCham is organizing the Green Economy Forum & Exhibition (GEFE) 2024. Following the success of previous events, GEFE 2024 will take place in Ho Chi Minh City from October 21-23, featuring in-depth conference sessions, exhibitions showcasing green innovations from hundreds of companies, and high-level policy dialogues from Vietnam and Europe.

This important event will bring together key industry players, government officials, academics, and small and medium-sized enterprises (SMEs). Together, we will explore solutions to meet the requirements of the European Green Deal, helping Vietnamese businesses prepare for success in a sustainable global market.

Source: https://baoquocte.vn/viet-nam-tang-suc-hap-dan-nho-evfta-280914.html