The halt of EU-China Investment Agreement: Huge chances for Vietnam

21/11/2021
With the suspension of the EU-China Comprehensive Agreement on Investment, Vietnam emerges as the most benefited.
The halt of EU-China Investment Agreement: Huge chances for Vietnam
In May 2021, the European Parliament passed a resolution to freeze ratification of the Comprehensive Agreement on Investment (CAI) in response to Chinese sanctions on European human rights advocates. The CAI was supposed to enhance protection of EU investments in China and vice versa, thus boosting the bilateral investment flows and improve access to the Chinese market. Nevertheless, albeit its long journey of seven years in the making, the worsening relations of EU and China has put its future in jeopardy.

With that being said, Vietnam is definitely in a very well position to benefit as EU businesses look to diversify production and investments.
vietnam uk 1591603925269256780320 crop 159160396413933683086
Asia is still a much desirable land and Vietnam is a high contender for investment by EU businesses.
For starters, Vietnam’s economy was recording an average of seven percent GDP growth before the pandemic and remains one of the fastest-growing economies in Asia. Even during the pandemic, Vietnam was one of the few countries to record positive growth. 

Secondly, the signing of the EU-Vietnam free trade agreement (EVFTA) which took effect in August 2020, is one of the most significant for EU businesses. The FTA is expected to help increase Vietnam’s GDP by 4.6 percent and its exports to the EU by 42.7 percent by 2025. While the European Commission has forecast the EU’s GDP to increase by US$29.5 billion by 2035. At the regional level, Vietnam is now the EU’s second most important trading partner among all ASEAN members – surpassing regional rivals Indonesia and Thailand, in recent years. The growing trade between the EU and Vietnam also helps to solidify ASEAN’s position as the EU’s third-largest trading partner.

Thirdly, being a neighboring country of China also makes Vietnam a suitable replacement for investors to look at alternative production sites when they have to move away from China. In addition, if the CAI with China is ratified, businesses can likely use Vietnam as a China plus one location while planning investments in China. In addition, many factories in Vietnam are foreign-owned with investments from China, Taiwan, and South Korea. This makes transitioning out of China into Vietnam smoother, making it easier to transfer existing checklists, specifications, or other product information.
 
Chinaplusone
Vietnam’s close proximity to China is also a favorable factor.
Finally, Vietnam has a relatively stable government that provides strategic direction and decides on all major policy issues. According to the Doing Business report by the World Bank, Vietnam's goverment worked to improve business policies and labor laws; while continues to prioritize infrastructure investment and does not shy away from looking at countries outside ASEAN to fuel its growth.

While Vietnam is an ideal location, it cannot absorb all production from China or compete with it in terms of infrastructure and supply chains. It still has its limitations and investors must do their due diligence depending on the industry, location, and type of business to see if Vietnam suits their business needs. Vietnam’s challenge will be to manage its growth responsibly, increase vaccination rates while keeping the pandemic under control. Nevertheless, Vietnam is likely to have an edge with the EVFTA in force and as EU businesses look to expand investment.

Older articles

The spark of the future: Vietnam’s Electric Vehicle Market

The spark of the future: Vietnam’s Electric Vehicle Market

Still in its infancy, but Vietnam's electric vehicle market is likely to grow...

Vietnam Outsourcing is looking for Senior Mechanical Engineer

Vietnam Outsourcing is looking for Senior Mechanical Engineer

Vietnam Outsourcing Pte Ltd is looking for Senior Mechanical Engineer ! Apply...

Container logjam intesifies at two busiest U.S. ports

Container logjam intesifies at two busiest U.S. ports

Huge backlog of containers at Los Angeles and Long Beach ports as the number of...

Reach to the sky - CNC machining and Aerospace industry

Reach to the sky - CNC machining and Aerospace industry

Worth over $800 billion, the global aerospace industry is ripe with innovation...

Sign up to download the profile

Complete your information in the form below

You did not use the site, Click here to remain logged. Timeout: 60 second