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EVIPA: New advantages and motivation for Vietnam

EVIPA: New advantages and motivation for Vietnam

Saturday 04, 07 2020
The implementation of the Vietnam - EU Investment Protection Agreement (EVIPA) will be an impetus for Vietnam to continue reforming and perfecting the institution to attract investment.
  • Current situation

The Ministry of Planning and Investment said that the implementation of commitments under the EVIPA Agreement, which was just approved at the 9th Session, National Assembly XIV, will be the driving force for Vietnam to continue improving the institutional system. The policy aims to improve the investment and business environment in the direction of increasing convenience, equality, safety, transparency, and friendliness for investors of all economic sectors.

Along with commitments on opening markets for goods, services, and investment under the EU-Vietnam Free Trade Agreement (EVFTA), the implementation of the EVIPA Agreement will create a favorable environment for Vietnam. Vietnam has stepped up investment attraction in some areas where the EU has potential and strengths because the degree of liberalization of EU investment in Vietnam will be increased, especially in some specialized service industries. financial services, telecommunications services, transportation services, distribution services, processing, and manufacturing industries using high technology, clean energy, and renewable energy.

In addition, investment from the EU in these areas can support the development of the domestic economic sector. Through production links with EU-invested enterprises, domestic enterprises will have the opportunity to participate in the EU and global value chains, supply chains, technology, and skills transfer through it will receive a spillover effect on technology, improve productivity and quality, contributing to increasing the competitiveness and efficiency of the economy.

According to the Ministry of Planning and Investment, the provisions of the EVIPA Agreement are elaborated, with clear criteria, recognizing each party's right to issue and implement policies. This will contribute to ensuring that the provisions of the EVIPA Agreement are understood and applied consistently, helping to minimize the possibility of disputes occurring. On the other hand, the establishment of a permanent dispute settlement mechanism under the EVIPA Agreement to resolve disputes between the state and investors of a party is considered a new step compared to the arbitration mechanism of dispute resolution. According to each case that Vietnam has applied under 66 bilateral agreements on investment encouragement and protection, signed for nearly 30 years.

With the above-mentioned advances, EVIPA Agreement provides a legal basis for Vietnam to implement its commitments under this Agreement and its laws in a fair, transparent, consistent, and effective manner.

However, the Ministry of Planning and Investment also said that Vietnam's institutions, policies, management mechanisms still have some limitations; infrastructure systems and human resources have not met the requirements of economic development in general and the needs of EU investors in particular. The implementation of the dispute settlement mechanism under the EVIPA Agreement also poses greater challenges in law formulation and enforcement, effective prevention, and settlement of disputes and problems with investors.

The above challenges require the State and business community to implement comprehensive and comprehensive solutions to maximize the benefits of EVIPA and EVFTA. Accordingly, specific solutions are to continue improving the legal and institutional system to implement the Agreement in the direction of transparency of market access conditions for people and businesses, including enterprises with capital. Foreign investment through the reduction of conditions for business investment in general and market access conditions of foreign investors in particular.

EVIPA: New advantages and motivation for Vietnam

  • What are the advantages of Vietnam?

Mr. Giorgio Aliberti - Ambassador of the European Union to Vietnam said that Vietnam can fully benefit both trade and investment when EVFTA and EVIPA come into effect.

Trade expansion and investment growth have complex interactions. So far, within ASEAN, Vietnam is the largest exporter of goods to the EU, nearly double that of the second-largest exporter, Singapore. However, Vietnam only buys a third of the goods from the EU, resulting in a large trade deficit. In terms of foreign direct investment (FDI), the EU is the largest investor in ASEAN, above Japan and China. However, the EU is only the fifth-largest FDI partner in Vietnam.

When put into effect, EVFTA will bring immediate positive effects to businesses in both Vietnam and Europe. Vietnam's exports to the EU are expected to increase by 15 billion euros, while EU exports are expected to increase by only half this figure. However, the numbers do not represent all the dynamic benefits that will bring to the economies and societies of both sides.

According to Giorgio Aliberti's analysis, FDI often follows strong trade relations. On the other hand, more FDI may potentially increase trade potential among partners. Therefore, in order to promote the EU's interest in investing in Vietnam, Vietnam needs to facilitate the trade of automobiles, pharmaceuticals, machinery, and electronics.

If there is an increase in EU trade in Vietnam, EVFTA is likely to trigger a new wave of FDI from the EU to Vietnam. Investment from the EU has top quality. European companies bring the world's leading skills, best organizational, and technology experience to Vietnam. European FDI comes with high standards of corporate social responsibility in protecting and training workers and employees, as well as respect and protects the environment.

It can be seen that both of these agreements provide Vietnam with the opportunity to become a regional production center. Compared to similar economies in the region, Vietnam has the advantage of its predecessor, which is 7-10 years of gold with the privilege to access the EU market. Only Singapore, which has signed and ratified FTA before Vietnam, is in a similar favorable position.

In addition, attracting and retaining more EU FDI requires reform and streamlining rules and procedures. Promoting digitalization and accessibility from outside Vietnam at the beginning and implementation of these procedures can help attract more small and medium-sized businesses globally - a large and almost untapped capital.

Opportunities for European investors in Vietnamese banks

Complied by Vietnam Credit


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