The Vietnam – UK Free Trade Agreement (UKVFTA) was officially signed in London, United Kingdom (UK) on December 29, 2020, temporarily applied from January 1, 2021, and has officially taken effect from May 1, 2021.
According to preliminary data from the General Department of Customs, the bilateral turnover of Vietnam – the UK in 2021 reached 6.61 billion USD, up 17.24%. This turnover recovered to the level in 2019, after a year of deep decline due to the impact of the COVID-19.
Thanks to UKVFTA's incentives for UK investors in Vietnam, opportunities are available across a variety of sectors. For example, the UK is one of the largest foreign investors in Vietnam's education sector. Vietnam's growing middle class prefers private education to public schools, creating a large market for private institutions, English language training centers, and vocational schools.
In addition, the renewable energy sector in Vietnam continues to expand rapidly and presents great opportunities for UK investors.
65% of tariffs have been eliminated for Vietnam - UK trade. In the first 6 years after UKVFTA comes into force, the UK will eliminate tariffs on 99.2% of tariff lines related to Vietnamese imports. This number is higher than EVFTA (70.3%).
Vietnam also committed to eliminating 48.5% tariffs, in line with other EU countries within the framework of the EVFTA. Tax rates on bilateral trade in goods between the UK and Vietnam continue to apply as repeated from the EVFTA.
However, in some cases, the actual non-preferential tax rate may be lower due to changes in the UK's Most Favored Nation tariff schedule after leaving the European Union (EU).
Other prominent incentives from UKVFTA are:
In the seafood industry: As soon as the agreement comes into effect, the import tax on most types of raw shrimp to the UK is reduced from 10-20% to 0%
In the wood industry: Many wood products will have a tax rate of 0% in the next 5 years
For fruit exports: 94% of the total 547 tariff lines are eliminated
UKVFTA has maintained the commitments between the EU and Vietnam on liberalizing the public procurement market and ensuring effective market access. And Vietnam has committed to eliminating the Economic Needs Test (ENT) applied to secondary retailers and subsequent retailers within five years of its entry into force.
The UK Government has actively implemented the Global Britain trade strategy to promote exports. They are also ready to open the domestic market reciprocally with foreign partners through FTAs.
At the same time, the UK promotes the negotiation of FTAs with 19 countries or the Union of Nations, with priority given to major trading partners such as the EU, the US, Japan, and India.
In addition, the UK is also determined to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). That means they are ready to open the market for products of the 11 member countries participating in the agreement in return for preferential market access for the export products of British companies.
At that point, many Vietnamese products in the UK market will have to compete with strong competitors from CPTPP countries. Therefore, Vietnamese companies need to quickly take advantage of the opportunities brought by UKVFTA.
In particular, Vietnamese enterprises' production should be by British and European standards. In addition, they should actively build and develop customer relationships with large distribution groups such as Tesco, Sainsbury, Whole Foods, Waitrose, Mark & Spencers, Liddle, Cosco, Aldi, Strada, Westmill.
In 2022, the two countries' trade is considered to have more prospects when taking advantage of great opportunities from the bilateral FTA, creating strong changes in investment cooperation in many fields.
The UK is currently Vietnam's third-largest trading partner in Europe and Vietnam's ninth-largest export market. British enterprises have 428 investment projects in Vietnam with a total capital of about 4 billion USD, ranking 15th among 140 countries with investment projects in Vietnam.
Compiled by VietnamCredit