EVFTA Agreement Promotes Investment Attracting from EU to Vietnam

With many tariff incentives and removal of market access restrictions in many sectors, the EU-Vietnam Free Trade Agreement (EVFTA) has opened the door for EU investors to access and expand investment in Vietnam.

"Unlock" investment capital flow

According to the implementation roadmap of the EVFTA, Vietnam commits to eliminating import taxes from the EU as soon as the Agreement comes into effect for 48.5% of tax lines (equivalent to 64.5% of import turnover from the EU). The tax rate will continue to decrease, especially sharply from the third year onwards. From 2022 to 2027, the special preferential import tax will decrease from 10.2% to about 1%.

The proportion of registered capital from EU investors will increase from about 5% of total registered capital on average in the period 2016 - 2020 to 8.9% in 2022 and 9.2% in 2023. The Netherlands, France, Luxembourg, Germany, Denmark, and Belgium are the top 6 EU investors in Vietnam, respectively.

EVFTA helps EU investors pay more attention to the Vietnamese market. Photo: Duc Dat

EVFTA has contributed to the EU's position as the 6th largest FDI investor in Vietnam with 2,450 projects and a total investment capital of more than 28 billion euros. In the context of the global FDI trend, EU "eagles" still believe in Vietnam's potential and "pour" more than 800 million euros into Vietnam in 2023.

The EU's investment trend is still mainly focused on high-tech industries, however, recently there has been a tendency to develop more focused on service industries (post and telecommunications, finance, office for rent, retail), clean energy, supporting industries, food processing, high-tech agriculture, pharmaceuticals, etc. It is forecasted that the flow of FDI from the EU to Vietnam in the medium and long term will increase significantly with many high-quality and valuable projects.

According to Mr. Ngo Chung Khanh - Deputy Director of the Multilateral Trade Policy Department (Ministry of Industry and Trade), in the current complex geopolitical context, the EU's diversification of markets and supply chains is inevitable. The EU tends to shift investment to markets with stable political environments, favorable business and investment environments, and advantages in accessing markets around the world. Vietnam will also benefit from this trend.

A notable point in this trend is that the implementation of the EVFTA not only attracts investment from EU enterprises but also attracts non-European enterprises to invest in Vietnam to produce in order to take advantage of tax incentives under the EVFTA to export goods to Europe.

Recently, many coffee producers not only from Europe but also from the US or Asia-Pacific countries such as Singapore, India... have invested in Vietnam to have Made in Vietnam products exported to Europe, benefiting greatly from tax reduction under EVFTA.

Perfecting policies, making the most of opportunities from EVFTA

According to Mr. Dominik Meichle - Chairman of the European Chamber of Commerce in Vietnam (EuroCham), EVFTA has created new opportunities for European businesses in the Vietnamese market. However, for this agreement to be more effective and help investors feel more secure when doing business in Vietnam, the destination needs to solve many problems, especially those related to legal procedures and tax policies.

Eurocham’s Business Confidence Index (BCI) survey shows that there are many challenges that European businesses face in order to make the most of the EVFTA. These include unclear legal status, lengthy procedures and some unfair tax policies between domestic and foreign investors.

Mr. Dominik Meichle - Chairman of the European Chamber of Commerce in Vietnam

Specifically, with legal challenges, there are quite vague regulations, interpreted in many different ways... making it difficult for investors to obtain licenses to implement projects. Along with that are other difficulties due to the parties involved not understanding the agreement clearly, customs clearance procedures are not transparent, complicating commercial activities and technical barriers, especially in the field of product certification and testing.

Emphasizing that the EVFTA has certainly created new opportunities for European businesses in Vietnam, Mr. Dominik Meichle said that as we enter the fifth year of the agreement, it is important to continue efforts to simplify procedures, unify standards and ensure understanding of how the EVFTA works.

Mr. Meichle also affirmed that he will continue to work closely with Vietnamese authorities to address remaining challenges and ensure that both Vietnamese and European businesses can take full advantage of the opportunities brought by this landmark agreement.

In addition, EuroCham Vietnam is actively supporting the full ratification of the EU-Vietnam Investment Protection Agreement (EVIPA) as an important step to “unlock” the full potential of the EVFTA to attract foreign direct investment. Although approved by EU institutions, the EVIPA still requires individual ratification by all 27 EU member states, with 18 member states having ratified the agreement.

Sharing the same view, Ms. Dao Thu Trang - Head of Market Development Strategy Consulting Department, German Chamber of Industry and Commerce in Vietnam, EVFTA is a highlight attracting investment from the EU; including investment from Germany to Vietnam.

According to Ms. Trang, to increase EU trade and investment in Vietnam, management agencies need to increase the effectiveness of the agreement implementation, develop and amend relevant legal documents. At the same time, to improve the competitiveness of local enterprises, Vietnamese enterprises should prioritize the development of reputable and sustainable supply chains.

In addition, the Vietnamese Government has strategies and policies for developing skilled human resources to help German businesses, German investors and European investors feel secure in long-term and sustainable development in the Vietnamese market...

In particular, promote the development of green energy, industries, and environmentally friendly, energy-efficient technologies to meet the needs and regulations set forth by Europe for exports from Vietnam.

Source: https://congthuong.vn/hiep-dinh-evfta-thuc-day-thu-hut-dau-tu-tu-eu-vao-viet-nam-340490.html