The trade and investment relationship between Vietnam and the UK has grown significantly a year after the UK-Vietnam Free Trade Agreement (UKVFTA) came into effect. Vietnam News spoke to Chairman of the British Chamber of Commerce Vietnam Kenneth Atkinson about the effectiveness of the trade deal as well as opportunities for further cooperation between the two countries.
Chairman of the British Chamber of Commerce Vietnam Kenneth Atkinson.
The trade and investment relationship between Vietnam and the UK has grown significantly a year after the UK-Vietnam Free Trade Agreement (UKVFTA) came into effect. Vienam News spoke to Chairman of the British Chamber of Commerce Vietnam Kenneth Atkinson about the effectiveness of the trade deal as well as opportunities for further cooperation between the two countries.
How do you assess improvements in trade and investment between Vietnam and the UK a year after implementing the UKVFTA?
The UK-Vietnam FTA came into effect on May 1, 2021, but with retroactive benefits starting January 1, 2021. This was one of the speediest negotiations of any FTA, largely due to the strong strategic partnership established by the Governments of Vietnam and the UK. The Strategic Partnership has been in place for 10 years and is stated as being at its strongest ever.
The UK is the European country that has maintained the most active and frequent exchanges of high-level delegations. With the coming into effect of the UKVFTA, the UK has become the 3rd largest European trade partner and the top European investor in Vietnam. Trade volumes increased 17 percent in 2020 and a further 11 percent in 2021 with the balance very much in Vietnam’s favor with the reduction in tariffs on many items such as footwear, clothing, and food products.
Education cooperation through the 12,000 Vietnamese students studying in the UK and the growing number of schools and higher education institutions beating a path to Vietnam’s door, is a bright highlight for both countries.
In addition to the traditional sectors such as financial and professional services and insurance, bilateral ties have been expanded and now cover technology, digital transformation, climate change response, and green growth.
Ministerial visits and business delegations, such as the recent visit of Vietnam’s chairman of the National Assembly Vuong Đinh Hue will serve to highlight the strength and attractions of Vietnam as a trade and investment destination.
How have British businesses been doing in Vietnam recently? What sectors are the UK’s investors keen on in Vietnam?
British companies have been doing relatively well in recent times, with the exception of the impact of COVID-19 and those particularly involved in the tourism and hospitality sector. I believe most British companies are recovering well from the negative impact of the pandemic and have a very positive view of the next few years in Vietnam.
These businesses include those companies engaged in banking, finance, professional services, and manufacturing as well as architects and project management firms. As many of these companies work through foreign-invested subsidiaries, it is important to note that their figures do not contribute directly to the trade figures and we also need to remember that some of the investments are channeled through offshore jurisdictions such as the British Virgin Islands, Singapore, and Hong Kong.
As Vietnam develops and is looking for more technologically advanced investment and services, more opportunities are opening up for UK companies. However, opportunities are not without their challenges and the regulatory environment and business administration in particular still leave room for improvement. Whilst the central government seems well aware of this, there are still disconnects at a local and provincial level, which cause considerable delays in areas such as licensing and often a lack of transparency in other administrative regions.
Will the ongoing Russia-Ukraine crisis affect trade and investment between the two countries in the near future? What should Vietnamese enterprises do to capture opportunities to expand trade in the UK?
It is difficult to see any major direct impact arising from the Russia-Ukraine crisis on the trade and investment environment between our two countries, however, the crisis is having a global impact on trade and especially on agricultural produce and energy costs. Sanctions are still being ramped up and the knock-on effect of this is to add to the inflationary pressure already created by the increase in energy costs and also the increase in interest rates around the world. All this creates a climate of uncertainty which could well have an impact on trade and investment between our countries particularly on long-term investment plans.
For Vietnamese companies looking to invest or open offices in the UK, the regulations are very transparent and easy to navigate but of course, good professional assistance is always recommended.
The environment in the UK is highly transparent and penalties for non-compliance can be quite severe so familiarity with rules and regulations is paramount.
Frozen shrimp at Minh Phú-Hậu Giang Seafood Corp’s factory in Hậu Giang Province. Trade volumes between Vietnam and the UK have grown significantly with the reduction in tariffs on many items such as footwear, clothing, and food products. — VNA/VNS Photo
How do you evaluate the competitiveness and development of Vietnamese enterprises? What can UK businesses do to help Vietnamese firms to join the global supply chain?
Vietnamese companies by and large have made significant development progress during my 30-plus years in Vietnam and more so over the last 10-15 years.
Now Vietnam is moving from low-cost manufacturing to more technologically advanced investment, however, not to the exclusion of the former. For Vietnam to build its presence in the global supply chain, investment in technology and improved governance and transparency will be required as audits of supply chains become more common and the development of collaborative relationships that benefit both partners is clearly a win-win approach.
By partnering with UK companies and vice versa, companies can help each other access the local market and develop export markets, building long-term mutually beneficial partnerships.
What should the two governments do to boost bilateral trade and investment relations through the implementation of the UKVFTA?
As mentioned earlier, bilateral relations have never seemed stronger and there is clearly a commitment on both sides to maintain and grow this. Vietnam has also supported the UK’s application to join the CPTPP which is now under consideration.
One can only emphasize the importance of regular high-level government exchanges and also trade dialogue to iron out any challenges being experienced under the UKVFTA.
These exchanges also serve to raise awareness of the business to the opportunities on both sides and promote trade and investment for mutual benefit. — VNS