Vietnam and the European Community Relations
Viet Nam and the European Community established diplomatic relations in November 1990. On 17 July 1995, the two sides signed a Framework Cooperation Agreement. In January 1996, the European Commission (EC) set up its Delegation to Viet Nam and assigned its Ambassador – Head of the Delegation.
Partnership and Cooperation Agreement (PCA): On the sidelines of the ASEM Foreign Ministers meeting in Hamburg on 28 May 2007, Commissioner for External Relations and European Neighbourhood Policy Benita Ferrero-Waldner and Deputy Prime Minister Pham Gia Khiem agreed to launch negotiations on a new Parnership and Cooperation Agreement between the EU and Viet Nam replacing the 1995 cooperation agreement.
Viet Nam – EU Master Plan: On 14 June 2005, Viet Nam’s Government approved a Master Plan on Viet Nam – European Union relations and the government’s action program for development of Viet Nam – European Union relations till 2010 and orientations towards 2015. Viet Nam is the first country in Southeast Asia to have the Master Plan with EU and EU is the only partner that Viet Nam has such a cooperation strategy. So far, there have been two meetings on the implementation of the Plan between leaders of Vietnamese Ministries and agencies and EU countries’ Ambassadors in Hanoi.
Development and Cooperation: On 29 March 2007, the European Commission adopted the new EC’s Country Strategy Paper for Viet Nam 2007 – 2013 with the allocation of euro 304 million. EC’s support will focus on two areas, namely Viet Nam’s Socio-Economic Development Plan (SEDP) and the health sector. Also included in the Paper are EC’s assistance in the field of Trade-Related Assistance and support to the EC-Viet Nam Strategic Dialogue.
At the Consultative Group meeting in December 2006, EU pledged euro 720 million for 2007, showing increased commitment to Viet Nam.
Over view Vietnam – EU Trade and Investment Relations:
Since 1995, Viet Nam’s trade relations with EU member countries on average increased 15-20% per annum. EU is Viet Nam’s biggest trading partner, accounting for 17% of its total two-way trade (followed by the US: 14%, Japan: 13% and China: 11%).
Viet Nam – EU trade relations continued to grow in 2006 despite some disputes (e.g. the EU imposed anti-dumping duty on leather cap shoes from VN). Two-way trade value increased 22.2% to reach US$ 9.9 billion (compared to US$ 8.2 billion in 2005), of which export rose 25% (reaching US$ 6.9 billion) and import rose 16% (reaching US$ 3 billion).
In the first 5 months of 2007, total trade value reached US$ 18 billion. Viet Nam’s export to the EU accounts for 20% of the total, equivalent to US$ 3.6 billion. The main exports are: footwear, coffee, garment and textile, wood-products and seafood. Viet Nam’s total import from the world in the first 5 months of 2007 is approximately US$ 21.3 billion, of which US$ 1.9 billion is from EU countries. Viet Nam enjoys a surplus in the bilateral trade with the EU.
In 2006, seafood export amounted to US$ 731 million, a 67.7% increase from 2005. These products also met some difficulties when entering the EU markets due to tough food safety standards.
Viet Nam’s export value of footwear stood at US$ 1.9 billion (7.5% rise), ranking second behind China. Textile export in 2006 scored US$ 1.2 billion, and 37% year on yearly growth. This spectacular rate of expansion is partly due to the scraping of the quota system in the Viet Nam – EU Market Approach Agreement 2004.
Regarding import: Viet Nam imports from almost all the EU members. The biggest exporters to Viet Nam are Germany and France with total annual average value of between US$ 500-800 million. The next biggest exporters to Viet Nam are Italia, UK and the Netherlands with an average value of 200-300 million/year. Main exports from the EU are machineries and equipment, technology, leather materials, medicines, chemical and chemical products and vehicle.
EU new preferential tariffs: The European Council on 27th June 2005 passed the new GSP, which came into force from 1 January, 2006 and will stay valid until 31 December, 2008. Accordingly, goods from Viet Nam continues to enjoy GSP as before and no products, including footwear, can be excluded from the new GSP.
Up to September 2007, most of EU member countries have invested in Viet Nam with 640 projects and US$ 8.35 billion in registered capital (total invested capital is US$ 4.8 billion).
EU investors are present in all major sectors of Viet Nam’s economy with focus on Industry and construction (280 projects with a total capital of US$ 4.18 billion, accounting for 54.8% projects and 59.8% total capital). Of which heavy industries attracted 118 projects (US$ 1.97 billion), followed by oil exploration projects with 6 projects valued at US$ 1.32 billion. In the service sector, EU has 181 projects and US$ 2.34 billion (accounting for 35.4% projects and 34.6% capital). There are 50 projects in agriculture amounting to US$ 457.6 million in capital.
The EU countries contribute an important part to Viet Nam’s socio-economic development process after committed to increasing 30% ODA to Viet Nam to 2013 in order to improve health care service and fight poverty.
On the whole, investors from the EU has advantages on technology and capital, hence they have helped Viet Nam create some new business and products with high technological content. The big EU corporations are operating successfully in Viet Nam include BP, Shell Group, Total Elf Fina, Daimler Chrysler, Siemen, Alcatel and Comvik. Investment from the EU continues to concentrate on hi-tech sector. However, there is a growing trend of investing more in the service sector (postal and telecommunication, finance, office for rent, retail...).
Economic and Trade Agreement between the EC and Vietnam:
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