The EU-Vietnam Free Trade Agreement (EVFTA) contributes to attracting European businesses and financiers to Vietnam, thereby expanding investment and business ties while creating a wealth of opportunities for local firms to step up co-operation and absorb technology transfer, according to economic experts.
As the first FTA signed between the nation and the EU in terms of outward investment, there are high hopes for the EVFTA regarding trade and investment promotion moving forward.
The EVFTA outlines commitments on both trade and investment which will contribute to attracting European businesses and investors.
At a recent seminar on utilising benefits from EU imports and investments under the terms of the deal conducted by Industry and Trade Magazine, Nguyen Anh Duong, head of General Research Department under the Central Institute for Economic Management (CIEM) outlined that newly-registered investment from the EU into the Vietnamese market has increased significantly in recent times. As a result, this increase is reflected not only in the total capital but also in the average size of projects.
“The average capital size of newly registered projects from the EU has seen upward trend in recent years, around US$12 million /project higher than the general average and compared to the previous period before the enforcement of the EVFTA. EU countries investing in Vietnam share experience, skills and practices to create a relatively favorable, sustainable and predictable business investment environment in Vietnam,” Duong commented.
Sharing this perspective on the Vietnamese market, as well as future opportunities for trade investment co-operation between Germany and Vietnam, Dao Thu Trang, head of Market Development Strategy Consulting section of the German Chambers of Industry and Commerce in Vietnam, believes that the country has a strong potential investment environment due to its strategic geographical location, developed economy, stable political society, young dynamic, and flexible population.
Since March 15 there have been 12 large and small projects put forward by German enterprises that have applied for investment licenses in the nation.
“German investors have recognised the Government’s efforts to increase the competitiveness and transparency of the investment environment in Vietnam. The areas German businesses want to cooperate and do business in Vietnam are in the manufacturing, high-tech, green and renewable energy, IT fields as well as software development, food, food processing, beverage, electronics and especially the medical and healthcare sector. In particular, German investors always desires to cooperate with local businesses in promoting the localization content of products made in Vietnam, at not 4-5% but it must be over 30%,” Trang shared.
From a business perspective, Dinh Van Hien, president of the Board of Directors and general director of DKNEC Group Joint Stock Company, said that before the EVFTA, the import tax placed on CKD and IKD of enterprises from the EU was very high, from 5% to 10 %, with equipment up to 12% to 15%.
Since the enforcement of the trade deal, the import tax placed on equipment has been slashed from 10.2% to 1%. Currently, the modern machinery and equipment CKD import tax has been reduced to 0%, Hien assessed.
It is therefore hoped that through the benefits of the EVFTA, enterprises will both be provided with, as well as updated on applications and solutions to improve production efficiency, thereby lowering investment costs and improving domestic production capacity.
Moving forward, the implementation of the EVFTA will enter a new phase along with the multilateral co-operation policies of EU nations witnessing changes.
In order to strengthen linkages between both sides, as well as helping businesses to make full use of the potential that exists in terms of trade and investment co-operation with the EU, it is necessary for intervention and support from ministries and sectors.
Do Huu Hung of the Europe - America Market Department under the Ministry of Industry and Trade (MoIT) affirmed that the EU is a vital region, meaning that the Ministry of Industry and Trade will actively work with importers, as well as major distribution channels in Europe, to launch a wide range of events which promote Vietnamese goods to EU countries, especially Vietnam Week events.
“In order to take advantage of the resources of EU countries and increase the competitive advantage for Vietnamese goods, it is essential to have support in terms of proper investment and training from all stages. The MoIT will enhance the connection of EU buyers and Vietnamese manufacturing enterprises to organize training programs guided by experts directly from distribution channels,” Hung went on to say.
Furthermore, the MoIT will continue to co-ordinate with Vietnamese trade offices abroad in order to regularly update information about the EU market and widely introduce events to be held with a view to connecting EU buyers with Vietnamese manufacturing enterprises to the Vietnamese business community, Hung added.
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