UK can blossom in Vietnam to celebrate 50 years of trade

What are the highlights in the performance of British companies in Vietnam in 2022?

From my perspective, generally British companies and British-owned companies in Vietnam have coped very well in the post-pandemic period, with most sectors showing growth from pre-pandemic levels.

However, some sectors in the country have not performed too well, particularly in the furniture manufacturing sector, and some others are starting to feel strong headwinds with many expecting reduced orders for the first quarter and possibly the second quarter of 2023, for example footwear and garments.

Headline statistics from the UK-Vietnam bilateral trade in the first nine months of 2022 improved significantly (14.5 per cent on-year) with exports to Vietnam increasing by 17 per cent on-year. There were great results across a wide variety of sectors – medicinal and pharmaceutical product exports to Vietnam increased 43.8 per cent on-year in this nine-month period, for example.

Exports of whisky also massively increased (123.4 per cent on-year). Vietnamese exports to the UK increased, particularly in garments, footwear, seafood, and agricultural products.

Financial services and banks have also performed well with accounting firms, legal firms, and investment funds showing good rates of growth. There is also optimism in energy projects, particularly renewable energy as well as green loans and bonds.

A shining example of education collaboration between the two nations, meanwhile, is the 12,000 Vietnamese students studying in the UK and the increasing number of schools and higher education institutions beating a path to Vietnam’s door.

Bilateral relations have grown to include technology, digital transformation, climate change response, and green growth in addition to more conventional industries like finance, professional services, and insurance.

The UK-Vietnam Free Trade Agreement (UVFTA) has been in effect for one year. How has it contributed to strengthening trade between the two countries?

It is clear that the UVFTA has contributed to growth in trade and also acted as a base for increased investment.

Two-way trade increased at double-digit rates of growth over the first nine months of 2022 compared to last year. This is directly supported by the UVFTA.

For example, the pharma sector has really benefitted from the FTA. Vietnam revised the Law on Pharmacy to ensure legislation would comply with commitments made in the FTA, and this allowed British pharma companies to obtain foreign-invested enterprise status in Vietnam.

This allows them to sell to wholesalers in the country, build their own warehousing facilities, and hire health experts to carry out marketing activities.

Under the agreement, British pharma companies have also been benefiting from significantly lower tariffs, and been able to reclaim tax based on these lower tariff rates as well.

The UVFTA allows for increased access to the public procurement market for pharmaceutical products, as well as increased protection and enforcement of intellectual property rights, especially of pharma patents.

Meanwhile, when it comes to a product like whisky, under the UVFTA the 45 per cent import tariff is being gradually reduced, and Scotch whisky is protected as a geographical indicator.

Vietnamese businesses are, of course, benefitting too. Growth is impressive in percentage terms but still modest in absolute in numbers for live poultry, frozen fish and aquatic products, handbags and travel goods, surveying and navigating instruments, dairy products like cheese, and tea.

Both sides can use the FTA and its provisions to advance business interests and remove barriers to market access, with negotiations hopefully being finalised for market access for meat products from the UK.

What will be the possible trends in British business and investment in Vietnam in 2023?

The major event for British business and the British community in Vietnam will be the celebration of 50 years of diplomatic relations, which will be a key pillar of the celebrations alongside education and sustainability.

I expect continued growth in our 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 of course likely lead to high level bilateral visits both to Vietnam and the UK.

I expect to see continued visits by trade missions looking at the sectors which are favoured by UK companies like energy, smart cities, education, healthcare, pharma, and fintech.

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 with Vietnam.

The Vietnamese government took a number of actions to create a more enabling environment for foreign businesses and investors. How many issues facing British businesses have been looked at, and what are the expectations for 2023?

Stability, predictability, and transparency are critical for businesses and for attracting investment. The UK business community very much appreciate the government’s efforts to create a more enabling environment and the drive for transparency and governance, which will be crucial for Vietnam’s development and drive to ensure it will not be caught in the middle-income trap.

The early opening of Vietnam’s borders was vital, in enabling companies generally recover from 2020 and 2021. Whilst the UK appreciates the visa waiver granted to the UK together with four other European countries, we would really like to see the exemption extended to 30 or even 45 days with a right to return to Vietnam in that period.

However, a greater issue for British and other investors currently is the strict application of the rules concerning visas, work permits, and temporary residence cards for workers and investors alike. This is really causing a loss of confidence on the part of investors in Vietnam’s commitment to encourage foreign funding and facilitating the entry of non-nationals employed by British companies.

We are pleased that we are making progress with key access issues in different sectors, from food and drink to healthcare. We look forward to seeing more progresses in legislative change in these sectors – for example, the upcoming revision of Law on Pharmacy – to bring Vietnam regulation more in line with international practices.

Furthermore, we also need to see a development of the capital markets with stronger regulations and a diversification of products.

Many British investors are seeking investment opportunities in Vietnam in the hope of cashing in on free trade agreements (FTAs) that Vietnam has signed with the UK and other economies worldwide.

The BUV Scholarship and Financial Aid Fund offers prestigious scholarships, helping talented students benefit from a British education environment of international standards to pave the foundation for a successful career in the future.

A new programme providing support for innovative low-carbon projects to help increase their chances of finding investment has been launched by the British embassy in Hanoi, with a call for proposals open until January 15, 2023.