Electric motorbikes manufactured by Vinfast. Many UK businesses are looking into electric mobility industry in Vietnamwhich is expected to grow by double digits in the next few years. (Photo: VNA) The UK-Vietnam Free Trade Agreement (UKVFTA), which officially took effect inMay 2021, was one of the first trade deals inked by the UK after it left theEuropean Union by the end of 2020, which reflected the importance of Vietnam inthe UK’s trade policy.
Bilateral trade and investment between the two economies have grownsignificantly with a growth rate of 17% last year.
Data of the Foreign Investment Agency under the Ministry of Planning andInvestment showed as of October 20, 2021, the UK had 439 valid projectsamounting to nearly 4 billion USD in registered capital in Vietnam.
Many big companies in many industries such as Dragon Capital, StandardChartered, Diageo, Prudential, AstraZeneca, HSBC, Unilever and Jardines haveestablished their operations in Vietnam and played important roles indeveloping certain sectors of the economy including finance, medicine,education, fashion and cosmetics.
Now, besides large companies, many UK small and medium-sized enterprises (SMEs)stand to gain significantly from the UKVFTA and other 14 FTAs that Vietnam hassigned with more than 50 countries around the world.
“We see there was a spike of interest (from UK businesses) from March onwards,in conjunction with (Vietnam’s) opening up of borders, which made it mucheasier for investors to come to the country,” said Maria Kotova, a GobalBusiness Development Manager and senior advisor from Dezan Shira &Associates, a professional services firm that provides FDI services forinvestors worldwide.
Kotova said there are several reasons why Vietnam attracts British investors.
They include it being a fast growing middle income country with a population ofalmost 100 million and GDP recorded last year at about 362.6 billion USD; acheap and skilled workforce which has increased productivity and competitivenessover time; and attractive tax incentives, for example, corporate income tax of10% if a company invests in technology for 15 years, compared to thetraditional 20% on the market.
According to data from the National Wages and Productivity Commission, whilenot the lowest in Southeast Asia, Vietnam’s average monthly wage is aroundone-third lower than wages in the ASEAN-4 nations (including Thailand,Malaysia, the Philippines and Indonesia) and around half of those in China.
However, most notably is broad and easy trade access to the entire regionthanks to wide-ranging FTAs that Vietnam has signed with differentblocs/countries which enable low tariff rates, Maria said.
She noted a lot of companies are either staging or establishing productionfacilities in Vietnam. They are producing and exporting products to manycountries at zero tax rates or very low tax rates, or they export products to Vietnamand further process here to achieve a certain percentage of labour to bequalified as made-in-Vietnam products and then export those products to almostevery country with which Vietnam has signed FTAs.
Vietnam is playing an important role in many UK companies’ diversificationstrategies as it is considered a major trade and investment hub in theAsia-Pacific region by being a party of the Regional Comprehensive EconomicPartnership (RCEP) and Comprehensive and Progressive Agreement forTrans-Pacific Partnership (CPTPP) which the UK is seeking to join.
Kotova named three sectors that British companies may consider investing in,including renewable energy, automotive and mobility industry and medicaldevices.
“I think a lot of our clients are looking into automotive and mobility industryin general, especially electric mobility which will be growing in double digitsin the next few years,” Maria said, adding a lot of opportunities are presentedto those who are working in the supporting industries.
Regarding the renewable energy industry, this is at the centre of theVietnamese Government's development strategy in the coming years, focusing onwind and solar energy and biomass. So UK businesses may participate in some biginfrastructure development projects.
Last, about medical devices, currently, 90% of medical devices in Vietnam areimported. As demand for medical supplies and equipment is high given lowdomestic production capacity, the Vietnamese Government encourages the importsof foreign medical devices and offers low input and restrictions.
However, as only businesses registered in Vietnam with import licenses candistribute medical devices, Kotova said it's very important for UK companies toestablish a local office or appoint a local distributor to work with.
Vietnam welcomes UK investors
Vietnamese Government leaders have reaffirmed Vietnam is willing to createfavourable conditions for investors of the UK to invest in Vietnam as well asoperate in Southeast Asian countries.
In early June, Vietnam issued Decision No.667/QD-TTg approving a nationalstrategy for foreign investment cooperation for the 2021-30 period. Thestrategy targets to increase the share of registered foreign investment capitalfrom Asia, Europe and the US so that the capital placed by them represents morethan 70% of the total disbursed in Vietnam by 2025 and 75% by 2030.
Besides top investors such as Singapore, the Republic of Korea, Japan, mainlandChina and Taiwan, the strategy also aims to boost investment from EU partners,the UK and Russia.
Vietnam is now actively positioning itself to attract “green FDI” and pursuinggrowth being aligned with global sustainability and climate change goals. Thecountry is driving the economy towards green growth, sustainability and lowergreenhouse gas emissions through the National Green Growth Strategy 2021-30.
According to chairman of the British Chamber of Commerce Vietnam KennethAtkinson, Vietnam’s commitment to higher international standards, such asinternational labour standards and sustainability, will also help to attracthigh-quality British investors, especially those committed to the UN’s SocialDevelopment Goals in their supply chain.
“However, opportunities are not without their challenges and the regulatoryenvironment and business administration in particular still leave room forimprovement. Whilst central Government seems well aware of this, there arestill disconnects at a local and provincial level, which cause considerabledelays in areas such as licensing and often a lack of transparency in otheradministrative areas,” Atkinson said./.
VNA
