Ms. Nicola Connolly, Former Chairwoman of EuroCham, tells VET about the performance of European businesses in Vietnam and how Vietnam can improve its business and investment environments.
What are your thoughts on the role foreign-invested enterprises (FIEs) in general and Eurocham Vietnam’s members in particular have played in the growth and development of Vietnam’s economy over recent years?
The EU is one of the largest foreign investors in Vietnam. Foreign direct investment (FDI) from the EU recovered in 2015 after declining following the global recession. In 2015 the EU was Vietnam’s second-largest export market, trailing the US closely. It was also Vietnam’s second-largest trade partner, after China, and is its fifth-largest foreign investor (cumulative by end 2015 and third in 2015), and has rapidly moved up over recent years, with total investment of $10.9 billion.
EuroCham now represents more than 900 European businesses in Vietnam, counting among its supporters many of the world’s leading enterprises. Its mission is to represent the common voice of the European community in Vietnam and to improve the business environment in Vietnam. EuroCham also aims at helping Vietnamese enterprises to successfully meet the many challenges posed by the country’s ongoing global economic integration.
Do members have any plans to expand their investment activities in Vietnam in 2016 in the context of the country further integrating into the global economy by signing FTAs, including the EU - Vietnam FTA?
Vietnam entered 2016 with a platform promising significant changes, starting with the implementation of important legislation at the national level, along with the completion of negotiations over the free trade agreement with the EU (EVFTA), the TPP, and the ASEAN Economic Community (AEC), and is about to deploy Vietnam - South Korea FTA.
For EuroCham members in particular and Vietnam’s relations with the EU in general, the formal completion of negotiations over the EVFTA is an important step for the future and will bring a range of new opportunities.
What are the greatest opportunities and challenges facing EuroCham Vietnam’s members in their business operation in Vietnam during 2016?
2015 was important for Vietnam and its further opening up to international markets, with various trade agreements signed. Mirroring this trend, domestically Vietnam has seen key regulatory changes for foreign investors. Starting with the new Law on Investment and the new Law on Enterprises, which replace old laws from 2005, foreign investors now have more favorable conditions for their investment as well as improved protection of their interests.
Additionally, the new Law on Real Estate Business and the new Law on Housing have also triggered some changes for foreigners in Vietnam, as they are now allowed to buy property in the country.
Nonetheless, some obstacles for European businesses remain and EuroCham members wish to work with the government to develop an efficient legal framework and a positive business environment for the benefit of Vietnam, Vietnamese citizens and European businesses.
What would you recommend the Vietnamese Government and policy makers do to improve Vietnam’s business and investment environments in 2016 and the next two to three years?
The numerous changes attached to the EVFTA will not only facilitate trade but will also allow for an improvement in safety and quality standards in Vietnam. Increased FDI from the EU will also bring new skills and a transfer of knowledge and technology, helping Vietnam avoid the so-called “middle income trap”. Furthermore, in addition to the EVFTA, the EU will continue to promote development in and cooperation with Vietnam.
Although the training of Vietnam’s workforce is increasing every year and improvements are being made, Vietnam still lacks a skilled workforce in primary industries and in sectors that are key to achieving rapid growth. With the completion of the AEC and the other integration activities in which Vietnam is participating, further reform is necessary.
Among other things, Vietnam needs to prioritize the protection of Intellectual Property Rights (IPR) to encourage foreign investment in Vietnam. Even though it has improved its legal framework and the enforcement of IPR in recent years, infringements and the enforcement of IPR laws remain a concern for European and Vietnamese businesses alike.
As Vietnam moves into more capital-intensive industries to increase local content, the government could focus its industrial policy on completing the supply chain and increasing local content with processes that are environmentally-friendly or have adequate recycling facilities, as Vietnam is one of the countries most exposed to global climate change and where pollution is directly proportional to economic growth. Furthermore, imports of fuel from abroad will create major pressure on logistics as well as on the country’s balance of payments.
Vietnam has planted the seeds for continued and successful development. However, it is also important to highlight that the implementation of FTAs also calls for a significant effort in terms of legal framework, transparency and the removal of protectionist measures. From a logistical point of view, increased trade will also call for new infrastructure projects involving public-private partnerships and international and regional transport hubs as a result of the intense activities between the two regions.