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Prospects for European Companies in Vietnam

Prospects for European Companies in Vietnam

Tuesday 08, 06 2021
With a trade turnover of about $41.3 billion, the EU is currently one of Vietnam's largest trading partners.

According to the European Commission, Vietnam is the 16th largest trading partner of the EU and the second-largest trading partner if only ASEAN countries are counted. On the other hand, ASEAN is also the EU's third-largest trading partner outside of Europe (after the US and China).

According to the Ministry of Industry and Trade, Vietnam's exports in the first quarter of 2021 to Europe reached nearly 10 billion USD, up 28% over the same period last year. The number of shipments from European Union (EU) countries such as Denmark, Belgium, Portugal, and Italy increased by an average of 20-25%. The EU's main exports to Vietnam today are high-tech products, including machinery, electrical equipment, aircraft, vehicles, and pharmaceuticals. Meanwhile, Vietnam's main products exported to the EU are phones, electronic products, footwear, textiles, coffee, rice, seafood, and furniture.

Vietnam Export

An excellent business outlook

The European Chamber of Commerce in Vietnam (EuroCham) has just announced the results of the Business Climate Index (BCI) assessment of Vietnam in the first quarter of 2021, reaching 73.9%. This is the highest score recorded since the third quarter of 2019 before the COVID-19 pandemic hit the global trading and investment system.

Eurocham

The survey result showed that European company leaders are still optimistic about the business environment in Vietnam, especially in Vietnam’s investment and trading environment. This is proved by the confidence of European businesses when asked about the outlook for Vietnam's business environment in the next quarter. 67% of the surveyed businesses chose an "excellent" or "good" outlook, which increased by 12% compared to the previous quarter.

As for the companies' business outlook, 68% of EuroCham members also stated that their orders and revenue will "maintain or increase" in the next three months. The rate is predicted to be increasing quite high compared to the fourth quarter of 2020.

EuroCham President Alain Cany said that the result was achieved because Vietnam confirmed to continue to open up the economy. Also, Vietnam has shown that businesses operating in the country could continue to operate normally with not much disruption, especially in the context of the complicated developments of the COVID-19 epidemic in many countries. According to Mr. Alain Cany, those factors are helping to promote economic growth and instilling confidence in European business leaders. He also stated that Vietnam was on the right track to achieve the parallel goal of fighting the epidemic and promoting the growth of the economy.

EVFTA and its advantages

The EVFTA coming into force has increased the competitiveness between the EU and Vietnam markets. Foreign products can enjoy tariff advantages due to the abolition of import duties. That will create significant competition for domestic products.

The ratification of the EU-Vietnam Investment Protection Agreement (EVIPA) has made it easier for EU companies to invest in previously restricted sectors. For example, the maximum ratio of foreign ownership in commercial banks has increased from 30% to 49%. In addition, EU companies can also benefit from the non-economic provisions of the EVFTA, such as ensuring human rights and environmental standards.

Business leaders also see the benefits of the EVFTA, with more than 60% benefiting from the agreement. However, the survey also noted that administrative procedures are the biggest challenge to take advantage of the EVFTA.

According to ScandAsia magazine, high economic growth and heavily invested infrastructure are among the reasons why Nordic businesses consider investing in Vietnam. Sweden's exports to Vietnam are up nearly 6% in 2020 despite the pandemic. These figures highlight the potential and the growing importance of Vietnam in Southeast Asia.

EVFTA

The EVFTA means that tariffs are reduced, trade and business relationships are deepened. That is a great opportunity for EU companies. The agreement opens up much access to an emerging market of nearly 100 million people, including about 55 million workers. In addition, the agreement also opens up opportunities for partnerships, dialogues, cooperation, and stronger relationships with Southeast Asia.

In the coming years, with the advantages provided by the EVFTA, and with Vietnam’s improvement of policies and facilities, European companies will have more chances to invest in Vietnam and developing their already existing business in the country.

 

Compiled by VietnamCredit

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