The UK and Vietnam have a strong and growing bilateral trade relationship and share a strategic commitment to global trade and the free flow of capital and investment.
In defiance of the raging global health crisis affecting trade and investment flows, a bilateral free trade agreement between Vietnam and the United Kingdom has helped advance trade relations and investment from both countries over the past 12 months.
After being appointed Vietnam’s Ambassador to the UK for the 2020-2023 term, Nguyen Hoang Long immediately rolled up his sleeves to help connect the Vietnamese and British business communities.
Last week, he met Vincent Keaveny, Lord Mayor of London, as the two sides discussed solutions to strengthen financial cooperation between the financial capital and Vietnamese companies and organisations.
“Financial cooperation is always a central sector in the economic relations between the United Kingdom and Vietnam, because many financial, banking and insurance groups of the former have been present for a very long time in the latter. The UK is Vietnam’s No. 1 partner in this sector,” Long said.
“The UK-Vietnam Free Trade Agreement (UVFTA) acts as an important driver for trade and investment cooperation between the two economies,” he said. “It is expected that in 2022 and beyond, this cooperation will continue to flourish.”
According to the UK Department for International Trade, the UK and Vietnam have a strong and growing bilateral trade relationship and share a strategic commitment to global trade and the free flow of capital and investment. Between 2011 and 2020, Vietnam’s share of total UK trade has doubled.
The UVFTA, which temporarily came into effect in early 2021 and became fully valid on May 1, covers £4.8 billion ($6.52 billion) in 2020 in trade and provides a platform for further develop trade and investment. It also provides certainty for British and Vietnamese businesses, with trade in goods – ranging from clothing and footwear to pharmaceuticals and seafood – continuing uninterrupted after the end of the transition period.
The UVFTA is broad and covers market liberalization of goods, services and investments. It also contains chapters on public procurement, public enterprises and market competition. In addition, the agreement contains commitments regarding trade and sustainable development, including labour, environment and social responsibility.
With a population of nearly 100 million and a per capita income of about $3,700 last year, Vietnam is considered a large consumer market with great potential. It has a young and vibrant population, with around 57% of its population under the age of 36. The proportion of middle-income households in the country is also increasing, representing 13% in 2020.
“Vietnam has gradually liberalized its economy since the introduction of sweeping reforms in the 1980s. Today, legal frameworks and corporate governance rules are in place to promote private interests more effectively than ever before,” said a report recently released by the Department of International Trade. “Vietnam maintains investment protection for foreign investors through bilateral agreements, non-discrimination laws and limitations on unreasonable government intervention. British investors are protected by the UK-Vietnam Bilateral Investment Treaty of 2002. Between 2007 and 2020, Vietnam climbed 34 places to 70th in the World Bank’s Doing Business ranking .
This great potential is fueled by the UVFTA. The agreement created a comprehensive framework for economic and trade cooperation between the two countries. Over the past year, according to the British Embassy in Vietnam, total bilateral trade between the UK and Vietnam reached £3.81 billion ($5.18 billion). Total British imports from Vietnam amounted to £3.36 billion ($4.56 billion), an increase of 16% and total British exports to Vietnam amounted to £457.6 million ($622.1 million), an increase of 15.4% on the same period of 2020.
In the coming times, the agreement is expected to help increase the competitiveness of many Vietnamese products such as agricultural products and textiles in the British market, and at the same time, open up many opportunities for British companies in Vietnam, said the embassy.
British Ambassador to Vietnam Gareth Ward once told VIR that the script for UK-Vietnam trade was written by consumers in both countries.
“Britain exports a lot of high-tech machinery to Vietnam – the wings and engines of many aircraft flown in Vietnam are built in Britain, and I see an increasing number of British-made cars on the streets here,” Ward said.
“We also export pharmaceuticals to help Vietnamese stay healthier as the population ages and there is an increase in diseases such as cancer and diabetes. In the UK, my fellow Brits know that many of the clothes and shoes they wear are made in Vietnam. What they don’t realize is that many of their cell phones were also made in the country,” he continued. “With the growing popularity of Vietnamese cuisine, most Brits now know what a bowl of pho noodle soup is, but they probably don’t know that the prawns they eat and the pepper they sprinkle on their food come from Vietnam.”
In 2022, Vietnamese Ambassador Long plans to meet with many other companies, organizations and authorized agencies in Britain to continue to seek opportunities for those from both countries to further strengthen their ties, with a focus on l ‘investment.
“The potential for Vietnam to attract more investment from the UK remains significant, and many British investors are planning to come to Vietnam,” Long said.
During a November 2021 dialogue with Standard Chartered Bank and its reception for its President José Vinals in the United Kingdom, Prime Minister Pham Minh Chinh reiterated that the Vietnamese government and agencies will continue to create favorable conditions for foreign investors do business successfully in the country, in the spirit of harmonizing interests and sharing risks.
According to Standard Chartered’s Opportunity 2030 research, the combined private sector investment opportunities in Vietnam through 2030 for drinking water, clean energy, industry, innovation and infrastructure are estimated at 45, $8 billion.
“As part of this global effort, we are committed to investing in Vietnam to finance the country’s sustainable development and ensure its prosperity. I am delighted that today you are witnessing combined funding commitments worth $8 billion for various sustainable projects across Vietnam,” Vinals said.
Over the past few weeks, ministries and companies in Vietnam and the UK have signed up to 26 cooperation agreements, which cover a wide range of sectors from trade, agriculture and energy to education, training, environmental protection and sport.
The 26 agreements include a letter of intent to join the Coalition to Reduce Emissions in Accelerating Forest Financing; a cooperation agreement to develop an action plan to strengthen ties between higher education institutions in the two countries; a memorandum of understanding on strengthening cooperation in the field of education through the exchange of experiences and the best strategic aspects; and a cooperation agreement to develop human resource training programs for the Ministry of Planning and Investment and support startups in Vietnam.
Notably, Vietjet Air and Rolls-Royce Group signed an agreement to provide engines and related services for the wide-body aircraft fleet worth a total of $400 million. SOVICO Group and the University of Oxford have signed a memorandum of understanding to cooperate and fund education research and development investments worth a total of $212 million, while Affinity Investment Fund and HDBank have secured a $300 million grant for a sustainability and climate change program.
“There could be more British projects in Vietnam thanks to the application of the UVFTA and a better business environment,” added British Ambassador Ward.
The agreement locks in 65% of all customs duties that have been eliminated since the entry into force of the EU-Vietnam FTA. This will increase to 99% of tariffs after a 6-9 year timeline. This ensures the elimination of import duties for products such as clothing, fabrics and footwear, which means that customers and businesses can benefit from lower prices on these products. The tariffs will be reduced according to a timetable which stipulates equal annual reductions from the entry into force of the agreement.
With such commitments, British exporters to Vietnam and British importers from Vietnam stand to benefit.
– For goods exported by UK exporters to Vietnam:
+ 48.5% of tariff lines were eliminated in January 2021;
+ 91.8% of tariff lines will be eliminated by January 2027;
+ 98.3% of tariff lines will be eliminated in January 2029;
+ 1.7% of tariff lines are partially liberalized through TRQs (quota volumes are in line with Vietnam’s commitments in the World Trade Organization and in-quota duties will be removed from 2031) or are not entitled to preferential treatment.
– For goods imported by British importers from Vietnam:
+ 85.6% of tariff lines were eliminated in January 2021;
+ 99.2% of tariff lines will be eliminated by January 2027;
+ 0.8 percent of tariff lines are partially liberalized through TRQs, with preferential tariffs for in-quota products of zero percent.