Full implementation of EVFTA will be of benefit to both sides

What is your assessment of the EU-Vietnam Free Trade Agreement (EVFTA) impact on trade and investment?

The EVFTA has significantly deepened economic ties between Vietnam and the EU, making the EU one of Vietnam’s largest sources of foreign investment.

In 2024, Vietnam’s exports to the EU reached an estimated $51.7 billion, an on-year increase of 18.5 per cent. In the first 11 months of 2024, bilateral trade hit $62.6 billion, up 16.7 per cent, accounting for 8.7 per cent of Vietnam’s total trade turnover. The EU was Vietnam’s fourth-largest trading partner, after China, the United States, and South Korea.

In the first two months of 2025, the EU became Vietnam’s second-largest export market, with export value reaching $8.8 billion, a 13.3 per cent increase on-year.

The EVFTA has helped Vietnam diversify market access, reducing dependence on a few main export partners. It has also secured Vietnam’s integration into global value chains, allowing Vietnamese industries to move up the value ladder.

The positive point is that trade with the EU has not been affected by global trade tensions, as the EU has made no policy changes. However, European capital inflows into Vietnam remain modest. As a European, I am not satisfied with the current level of investment. Both sides need to work harder to increase European investment in Vietnam.

Amid turbulence on the global market, what's the sentiment from foreign investors regarding Vietnam’s investment environment?

I believe Vietnam is on the verge of entering a very promising period. That interest in Vietnam has grown significantly among European businesses. When I speak with regional directors of European companies based in Singapore or back in Europe, I notice they’re paying far more attention to Vietnam today than they did five years ago. There’s a genuine belief that the country is heading in the right direction.

Foreign investment in Vietnam has been largely driven by Asian investors, particularly from South Korea, Taiwan, and Japan. It’s a common perception in Asia, they’re investing within their own neighbourhood.

Companies from Japan, for instance, are facing challenges such as limited space, an ageing population, and high operational costs, making domestic expansion difficult. So naturally, they look abroad. Singapore faces similar constraints, while China is dealing with the repercussions of the trade war. As a result, Vietnam has become a favourable destination, more so than the Philippines at the moment.

As for European and American investors, the importance of a predictable and familiar business environment is crucial. What matters most to Western investors is that Vietnam’s regulatory and legal frameworks resemble those in their home markets.

How can we improve the effectiveness of the EVFTA, especially amid global political and economic turbulence?

To improve efficiency, it’s critical to fully implement the agreement, especially chapters on liberalisation, which remain critical, recognise the EU as the world’s largest and most dynamic consumer market, and make full use of its potential, maintain Vietnam’s attractiveness as an investment destination by eliminating remaining regulatory and market access barriers and prioritise market liberalisation for foreign enterprises engaged in global value chains.

In today’s volatile environment, where global value chains are shifting, it is more important than ever to protect and strengthen free trade agreements like the EVFTA.

What are the major challenges faced by EU businesses in Vietnam today?

There are several key challenges. Firstly, is the regulatory barriers and red tape remain a major concern. While recent decisions by the Vietnamese leadership are encouraging, consistent implementation is needed to turn them into improvements.

In pharmaceuticals, political will has led to faster approvals for market authorisations. However, there’s still a long way to go to ensure Vietnamese patients have timely access to international pharmaceutical products.

Other regulatory bottlenecks include work permits for foreign workers, prolonged VAT reimbursement delays, and cosmetics regulations, especially issues with certificates of free sale. The fact that cosmetics imported from markets attached to ASEAN and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership are exempted from such certification requirements is a clear discrimination against EU products, which are still subjected to it.

In addition, the main challenge remains the preservation of the multilateral framework for trade, as well as ensuring that EU businesses are treated on an absolutely equal footing with their competitors.

Another critical issue is whether Vietnam can successfully limit potential tariff increases on its exports to the US market. This is particularly important given that some other ASEAN suppliers appear to be receiving more favourable treatment, which could influence decisions and affect Vietnam’s overall attractiveness as a destination for foreign investment and manufacturing within global value chains.

What is the current status of EU-Vietnam Investment Protection Agreement (EVIPA) and how important is it for EU-Vietnam investment relations?

Although the EU institutions have ratified the EVIPA, nine EU member states have yet to do so. Unfortunately, these delays seem driven more by domestic political factors than by issues of their relations with Vietnam.

The EVIPA is crucial. It will improve both the quantity and quality of EU investment into Vietnam, guarantee national treatment for EU investors and offer robust protection mechanisms, including investor-state dispute settlement.

We urge the remaining Member States to swiftly ratify the EVIPA, particularly in light of today’s turbulence time. Doing so would demonstrate a strong commitment to the rules-based multilateral system.

2025 marks the fifth year since the EU-Vietnam Free Trade Agreement came into effect. Dr. Oliver Massmann, partner and general director of consulting firm Duane Morris Vietnam LLC, and also a senior advisor on the implementation of the deal, spoke with VIR’s Khoi Nguyen about how it has impacted the two economies.

Known as one of Vietnam’s most notable new-generation trade deals, the EU-Vietnam Free Trade Agreement (EVFTA) marks a significant milestone in the 30-year journey of cooperation and development between both sides. Over five years of implementation, it has left a profound impact on Vietnam’s economy and its pharmaceutical market in particular.