Vietnamese officials and businesses believe that once the Vietnam-EU Free Trade Agreement (FTA) is inked, the EU’s foreign direct investment (FDI) in Vietnam will increase.
The scenario has also been confirmed by Vietnam’s foreign partners, especially the EU.
Massimiliano Guelfo, Chair of the Italian Chamber of Commerce and Industry (ICham), spoke at the workshop on April 7 about the opportunities and challenges that the Vietnam-EU FTA can bring to Vietnam held in Hanoi and affirmed that the FTA would help increase the EU’s investment in Vietnam.
“European enterprises will increase their investments in Vietnam, because they see Vietnam as the jumping-off position to target the ASEAN market and neighboring countries, like Japan, China and India,” he said.
Statistics showed that by early March 2011, the EU had had 1079 FDI projects in Vietnam with a total investment capital of USD16 billion. The figure, according to Truong Dinh Tuyen, former Vietnamese Minister of Trade, is inadequate if compared with the technology, financial capability and strength of European enterprises.
“The EU’s enterprises now focus on inner-block investments, especially after the EU block has been enlarged with some member countries that are not as developed. The investment activities bring more benefits to them,” Tuyen explained.
However, Tuyen believes that in the time to come, the EU’s investment in Vietnam will increase once the Vietnam-EU FTA is signed.
However, Vietnamese enterprises expect more from the FTA, not only the investment increase. Nguyen Van Toan, Deputy Chair of the Vietnam Association of Foreign Invested Enterprises (VAFIE), said when doing business with the EU’s enterprises, Vietnamese enterprises would have the opportunity to access high technologies – the source technologies which are the big advantage of the EU’s enterprises.
However, Vietnamese businesses have also been warned that not only Vietnam, but the EU will also benefit from the FTA. “Win-win” is the principle of FTAs, and while Vietnam can attract more FDI from the EU or boost exports to the bloc thanks to the low tariffs, the EU’s products will also be able to more easily penetrate Vietnamese market. This also means that Vietnamese enterprises will have to compete fiercely with European rivals on the home market.
However, Mr Guelfo has reassured Vietnamese enterprises that they should not be too worried about that.
“Vietnam will be able to benefit from the imports high quality technologies and low cost materials from the EU,” he said. “The EU’s businesses will also export high quality services to Vietnam which will help Vietnamese enterprises improve their competitiveness in the long term”.
Tran Binh Phien, Deputy General Director of Ford Vietnam, Chair of the Vietnam Automobile Manufacturers’ Association (VAMA) has expressed his worry about a possible stiff competition to come when a series of FTAs take effect in the time to come.
According to Phien, when Vietnam’s automobile market opens widely to foreigners, imports from ASEAN countries will flock to Vietnam, thus triggering a stiff competition with the products made in Vietnam.
However, all the above facts remain just on paper.
According to Professor Dr Nguyen Mai, though the Vietnam-EU FTA would help push the two way trade and EU’s investments in Vietnam, it is necessary to choose a suitable time to kick off negotiations because Vietnam is now also conducting negotiations on Trans-Pacific Strategic Economic Partnership Agreement or TPP.
“It is necessary to do things in a way to ensure enough time and conditions to find solutions to the problems that have arisen in the Vietnam-EU FTA and to ensure Vietnam’s benefits when joining bilateral FTAs,” Mai said.