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Since 2010, EU enterprises have increased their investment in Vietnam despite the fact that the United Kingdom (UK) left the bloc.
Though the European-Vietnam Investment Protection Agreement and the EU-Vietnam Free Trade Agreement have helped the country attract foreign direct investment, the treaties have also posed several challenges to luring capital from EU businesses, especially amid the pandemic-induced uncertainties and geopolitical and economic instability, a recent report said.
The number of EU partners investing in Vietnam seems to be rising over the years. In 2020, 26 out of 27 countries in this bloc registered to invest in the country. By August, the EU had a total of 2,378 valid projects in Vietnam, worth $27.59 billion, according to the report released at a workshop on ‘FDI flows from the EU to Vietnam in the context of EVFTA and EVIPA’.
EU businesses have recently shown interest in service industries, clean energy, supporting industries, food processing, high-tech agriculture and pharmaceuticals.
EVFTA and EVIPA have raised the scale of FDI from EU member countries and and other nations as well due to commitments on tariff reductions and creating competitive advantages for countries, the report was cited as saying by a news agency.
The primary competitors of Vietnam in the region do not have FTAs with the EU, barring Singapore. However, this advantage may be short-term, as the orientation of both ASEAN and the EU is to sign an FTA between the two region, it noted.
The agreements also contribute to the re-organisation of the EU’s investment in Vietnam by sectors and assist in creating a favourable environment through changes to the institutional and legislative framework, it added.
The digital transformation process may narrow the EU’s investment flows into Vietnam, especially those investing in high-value sectors, due to the change in investment objectives of multinational corporations.
“Foreign investors tend to choose Vietnam for its cheap labour or natural resources, but in Industry 4.0, their goal is to find knowledge and technology. Unfortunately, this is not an advantage of the country because it still has many limitations in terms of skilled workforce and technological and financial capacity, while the quality of infrastructure for high-tech industries is still underdeveloped,” noted Nguyen Thi Thanh Mai, co-author of the report.
The EU’s FDI also brings with it high corporate social responsibility standards in protecting and training workers as well as respecting and protecting the environment. Therefore, the implementation of EVIPA requires continuously improving the competitiveness of the Vietnamese economy and its readiness to take advantage of opportunities from the agreement.
Hence, Vietnam risks becoming a destination for low-quality FDI projects due to resource limitations, the report pointed out.
Fibre2Fashion News Desk (DS)
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Read More: EVFTA, EVIPA pose several challenges to luring capital from EU: Report
