Vietnam-UK trade bond underway

After nearly two years of entry into force, the UK-Vietnam Free Trade Agreement, in addition to Vietnam’s improved investment and business climate, have facilitated both nations to increase trade and investment.

After one click on the website of Longdan Company based in the UK, also the biggest importer of Vietnamese food in the UK, one can see that a Vietnamese red-flesh pomelo is sold at £5 ($6) per unit, or 7.5 times higher than the average price now found in the Vietnamese market. Along with pomelo, thousands of Vietnamese speciality products are also sold in the Longdan supermarket chain, serving millions of customers every year, both at stores and online.

Since last month, Longdan has imported over 16 tonnes of pomelo planted in Vietnam’s northern province of Hoa Binh.

Over recent days, Cao Phong oranges from the northern province of Hoa Binh have also been officially put up for sale at Longdan supermarkets. The nearly seven tonnes of orange, exported via RYB JSC, meet stringent quality, food safety, and origin standards, including passing the testing for nearly 900 chemical elements in plant protection products.

Currently, Vietnam and the UK are working to continue facilitating the exports of more Vietnamese and British products to their respective markets, to capitalise on advantages and benefits offered by the UK-Vietnam Free Trade Agreement (UVFTA).

Despite global economic volatility, both nations are trading with each other more than ever. Total bilateral trade in goods and services in 2022 stood at £5.9 billion ($7.09 billion), up over 12 per cent on-year.

“This strong trade relationship is supported by both sides’ efforts to facilitate trade and remove market access barriers, importantly, through the annual UK-Vietnam Joint Economic Trade Committee and our bilateral FTA,” said Emily Hamblin, British Consul General in Ho Chi Minh City and director of Trade and Investment in Vietnam. “The FTA represents a significant step forward in our economic and trade ties. It removes 99 per cent of tariffs by full implementation, but the benefits are much broader than that. Both sides are able to use the FTA and its provisions to advance business interests and remove barriers to market access.”

As part of the UVFTA, 85.6 per cent of tariff lines for goods imported by the UK from Vietnam were eliminated in January 2021, and 99.2 per cent will be removed by 2027, according to the UK’s Department for International Trade (DIT).

Continued missions

After nearly two years of official entry into force, Vietnamese businesses have been able to access preferential tariff rates across a whole range of sectors, including those such as footwear, textiles, and agricultural products that have seen particularly high export growth rates.

Meanwhile, British businesses are benefiting too, including in some of the UK’s most important export categories. For example, British exports in medicinal and pharmaceutical products have enjoyed particularly strong growth, growing at over 40 per cent on-year in the first nine months of 2022.

“Under the FTA, UK pharma companies can benefit from significantly lower tariffs, but the benefits are much broader than that. It allows for increased access to the public procurement market for pharma products, as well as increased protection and enforcement of intellectual property rights, and it helps to deliver regulatory changes that allow British companies to obtain foreign-invested-enterprise status in Vietnam,” Hamblin said.

Kenneth Atkinson, chairman of the British Chamber of Commerce Vietnam (BritCham), is expecting continued growth in bilateral trade relationship and investments and the UK will continue with the process to accede to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, which will be another major boost to UK-Vietnam trade. This will likely lead to high level bilateral visits both to Vietnam and the UK.

“I expect to see continued visits by trade missions looking at sectors favoured by UK companies like energy, smart cities, education, healthcare, pharma, and fintech,” Atkinson said. “We expect a particularly exciting time for growth in renewable energy and sustainability linked trade too, following the agreement of the Just Energy Transition Partnership (JETP) with Vietnam.”

Two weeks ago, a delegation of nine British companies came to Hanoi and Ho Chi Minh City as part of the Energy Catalyst visit, organised by Innovate UK and BritCham Vietnam. Through various meetings and site visits, the delegation met with key partners to learn about the big picture of Vietnam’s energy sector as well as business opportunities here.

“This delegation is one among many UK trade missions with a focus on sustainable development that we are welcoming to Vietnam this year. Building on Vietnam’s commitment to net-zero emissions and the recent signing of the JETP, this is also a reinforcement of the UK government’s commitment as a vital partner in Vietnam’s clean growth ambitions,” said the British Embassy to Vietnam.

Fresh developments

Vietnam’s Ministry of Planning and Investment reported that accumulatively as of February 20, the UK’s total registered investment capital in Vietnam was $4.25 billion for 511 valid projects, including $1.2 million for the January-February period.

In August 2022, Shire Oak International, a division of developer of tidal power and solar power Shire Oak Energy, signed an MoU with Vietnamese design and construction company Reecons Engineering to cooperate in developing rooftop solar systems for a customer in the commercial and industrial sectors here.

The month previously, Shire Oak International also inked an MoU with Vietnam’s Bao Minh Industrial Park Infrastructure Investment to cooperate in developing rooftop solar projects at Bao Minh Industrial Park in the northern province of Nam Dinh.

“Our team has developed over $2 billion of renewable energy projects worldwide. In Vietnam, we are developing a broad portfolio of solar energy projects. By working with corporates and educational establishments across the region, we are currently deploying about $450 million of equity funding to build out 650MW of Vietnamese rooftop solar installations,” said Son Bui, director of Marketing and PR at Shire Oak International.

Currently, many British companies and brand names are operating effectively in Vietnam, such as Prudential, Standard Chartered, Pacific Land, Pearson Chris Cuddihy, Enterprize Energy, and Mothercare.

In an example, Michele Wee, CEO of Standard Chartered Bank Vietnam, once told VIR that the bank highly values the Vietnamese market, where it has many opportunities. In November 2021, Standard Chartered Bank Vietnam committed MoUs worth up to $8.5 billion in sustainable financing for three Vietnamese businesses – T&T Group, Geleximco Group, and Van Lang Investment and Education Management Corporation.

“Investments like these will help Vietnam in its sustainable development journey and secure its prosperity. We remain committed to Vietnam’s recovery and future sustainable growth and look forward to working closely with the Vietnamese government, our clients and partners to support Vietnam’s sustainable development, economic recovery and ambitious net-zero targets.”

According to the DIT, Vietnam is a large consumer market with high potential. “Vietnam is an attractive investment destination. Today, legal frameworks and corporate government rules are in place to promote private interests more effectively than ever before. Vietnam maintains investment protection for foreign investors through bilateral agreements, non-discrimination laws, and limitations on unreasonable government intervention,” the DIT said.

Vietnam Investment Review