Viet Nam’s upcoming free trade agreement with the European Union (EVFTA) is expected to make Viet Nam the most promising business destination for European companies in Southeast Asia.
The statement was made by Michael Behrens, Chairman of the European Chamber of Commerce in Viet Nam (EuroCham), at a conference on the 2017 Whitebook in Ha Noi on Thursday.
The Whitebook, annually published by EuroCham, provides a concise view of key concerns affecting European businesses in Viet Nam in regards to trade, investment, growth and employment. This is the 9th edition of EuroCham’s annual advocacy publication on trade and investment.
Parts of this year’s Whitebook were dedicated to the EVFTA, its implementation and its impact on business. Behrens said the first estimates of EVFTA’s impact show clear gains for Viet Nam’s growth and welfare, as well as for overall trade between the EU and Viet Nam.
The country will be the bridge linking more than 500 million people in Southeast Asia and more than 500 million Europeans - "a fantastic prospect", Behrens said.
Attending the event, Deputy Minister of Industry and Trade Hoang Quoc Vuong said the Whitebook was an effective tool for the Ministry of Industry and Trade (MoIT) to review policies and devise better solutions to improve the efficiency of management systems.
Vuong said the European Union is one of Viet Nam’s most important trading partners, adding that in 2016, the EU was Viet Nam’s second largest exporter with a total export turnover of nearly US$34 billion, accounting for over 19 per cent of the country’s total export turnover.
In the context of the upcoming bilateral trade treaty, expected to be implemented in 2018, MoIT will endeavor to enhance internal resources and improve the business environment, meeting the legitimate needs of local and European firms operating in Viet Nam.
Attractive FDI destination
According to the Whitebook, with the expansion of market access for foreign investors, Viet Nam is expected to witness a strong wave of foreign direct investment (FDI).
In addition to the numerous legal changes it has made in accordance with the treaty, Viet Nam has fundamental elements that contribute to its continued growth.
Viet Nam is in a demographic golden age, with 25 per cent of its 90 million population between 10 and 24 years old. GDP per capita is increasing dramatically and Viet Nam has the fastest-growing middle class in Southeast Asia (12.9 per cent per annum over the period 2012-2020).
With its high literacy rate and education levels, comparatively low wages, connectivity and a central location within ASEAN, more and more foreign investors are choosing Viet Nam as their hub to service the Mekong region and beyond, the book said.
Viet Nam’s attractive profile is reflected in its welcoming approach to foreign direct investment (FDI) in manufacturing activities. The gradual opening of most service sectors under Viet Nam’s World Trade Organisation (WTO) commitments schedule that began in 2007 was completed in 2015.
Domestic law has expanded market access in some sectors beyond those included in Viet Nam’s WTO commitments. For example, foreign shareholding in public companies was previously capped at 49 per cent but is now generally open for up to 100 per cent foreign ownership.
Viet Nam also grants investment incentives, including tax breaks, in areas such as high-tech, environmental technology, and agriculture, where European businesses are global leaders.
Viet Nam’s development and its strong appeal to foreign investors are undeniable, the book said, but noted that the licensing process for foreign investment projects is sometimes unclear.
Many foreign investors also still face significant challenges when dealing with Viet Nam’s bureaucracy. Tax filling, customs clearance, business registration and licencing and other administrative procedures are often delayed. Businesses find themselves spending resources on administration that they would prefer to invest to expand their core activities. — VNS