New FTAs facilitate Vietnam’s FDI attraction

Anh Hong 10:47, 2019/08/21

The EVFTA will help Vietnam improve the quality of foreign investment, attracting more capital in a number of industries in which the EU is strong such as processing and manufacturing, hi-tech applications, clean energy and financial services.

New free trade deals, especially the Europe-Vietnam Free Trade Agreement (EVFTA) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), are creating new impetus for attracting foreign investment in Vietnam, experts said.

Investors in Vietnam enjoy huge benefits given by free trade deals.

Vietnam is becoming more appealing to foreign investors, given by benefits of both the international market and domestic preferential policies Vietnam is offering through its commitments to many trade pacts signed with other countries.
According to Nguyen Van Toan, vice chairman of the Vietnam's Association of Foreign Invested Enterprises, CPTPP and EVFTA have a strong impact as foreign investors in Vietnam will meet requirements of origin to export not only to ASEAN countries, but also to European and CPTPP member nations.
Strict rules of origin in the two agreements will encourage increased investment in Vietnam to take advantage of the country’s access to the EU and CPTPP’s member markets, Toan said.
When pouring money in Vietnam, investors originating from European and CPTPP’s member countries will enjoy the full range of incentives, especially in terms of investment conditions, while those that are from the non-member countries also enjoy a great opportunity from the agreements, including tax incentives that Vietnam has agreed upon under the terms of the trade deals, said Hoang Van Cuong, vice president of the National Economics University.
Besides, the Vietnam-EU Investment Protection Agreement (EVIPA) also promises to bring a lot of advantages for investment flows from the EU into Vietnam, experts said.
According to Luong Van Khoi, deputy director of the National Center for Socio-Economic Information and Forecast, the EU-Vietnam Investment Protection Agreement (EVIPA) opens the market at a higher level than the World Trade Organization and EU investors will receive the same treatment as domestic enterprises.
In addition, Vietnam is committed to protecting the interests of EU investors with such measures as forbidding the illegal nationalization of EU investors’ assets. This agreement also allows foreign contractors to bid for projects that use state capital.
With such strict regulations, EVIPA will have a positive impact on attracting investment in Vietnam – not only from the EU but also other countries – to take advantage of tax incentives when exporting to the EU market, Khoi said.
Fresh investment inflow
The attraction of FDI inflow from the EU is expected as investment of the bloc in Vietnam has so far remained modest, Toan said, adding after more than 30 years of open door policy, 28 countries of the EU invested in Vietnam US$25 billion by the end of last year, compared with US$62 billion of South Korea and US$57 billion of Japan. Meanwhile, Germany and France invest overseas about US$60 billion and US$50 billion yearly on average, respectively.
Nguyen Dinh Cung, director of the Central Institute for Economic Management, said that the EVFTA will help Vietnam improve the quality of foreign investment, attracting more capital in a number of industries in which the EU is strong such as processing and manufacturing, hi-tech applications, clean energy and financial services.
According to Toan, the government is taking measures to lure high-tech investment after three decades of FDI attraction, however, several hindrances still should be removed to optimize the fresh investment inflow.
“The government should continue to improve business and investment framework transparency and safeguard intellectual property rights because investors from developed countries, including the US, often demand a transparent and consistent investment and legal environment,” Toan said.
“It is also necessary to put investment protection regulations in the laws since multinationals with high-tech projects are very interested in this. They must be assured that their legitimate rights will be protected,” he suggested.
Besides, Toan also urged the government to focus on training to make the country more attractive to foreign high-tech investors as skills of the country’s workforce remain limited.

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