A wind farm in Cửu Long (Mekong) River Delta. British businesses have been actively investing in a number of sectors in Việt Nam, including manufacturing and processing, infrastructure development and renewable energy. — VNA/VNS Photo Tuấn Kiệt

HÀ NỘI — The UK–Việt Nam Free Trade Agreement (UKVFTA) has been providing a solid foundation for British businesses to expand investments in Việt Nam since the trade deal come into effect in 2021, Denzel Eades, Chairman of the British Chamber of Commerce (Britcham) has said.

According to the Ministry of Industry and Trade (MoIT), the attraction of foreign direct investment (FDI) from the UK has improved significantly since the UKVFTA came into effect in 2021, although this period was heavily affected by the COVID-19 pandemic.

Before the UKVFTA, the UK was the 20th largest investor in Việt Nam. Now, with 567 projects and a total registered capital of nearly US$4.5 billion, the UK ranks 15th among the 145 countries and territories that invest in Việt Nam.

Still, the UK’s investment in Việt Nam has not yet reflected its full potential, as the country is one of the world’s five largest overseas investors with around $300 billion invested abroad, the ministry said. The MoIT has urged further efforts to use the UKVFTA to attract FDI from the UK and the participation of UK businesses in leveraging Việt Nam’s position in the global value chain.

The UKVFTA has created a firm foundation to enhance investment cooperation between the two countries, especially in sectors that Việt Nam prioritises for investment and in which the UK has strength and expertise, according to Eades. This not only accelerates bilateral trade and investment but also creates significant opportunities to strengthen bilateral cooperation in the long run.

British businesses have been actively investing in a number of sectors in Việt Nam, he said, adding that the manufacturing and processing industry is a focus, driven by Việt Nam’s growing industrial base and skilled workforce. The UK is keen to tap into Việt Nam’s manufacturing industry potential, especially in areas such as electronics, machinery and consumer goods production.

In addition, with the global trend of energy transition towards sustainability, British companies are strengthening investments in renewable energy in Việt Nam, including solar, wind and clean energy projects, as well as infrastructure development such as transport, logistics and smart cities. These are important areas in which British companies are expecting to expand their presence in Việt Nam.

Other sectors of interest include financial services, which are developing rapidly in Việt Nam, pharmacy and healthcare services, and education.

As for the investment and business performance of British companies in Việt Nam, Eades said that the results are positive, especially in manufacturing, renewable energy, infrastructure, finance, healthcare and education.

“British companies have successfully taken advantage of Việt Nam’s rapidly growing economy, favourable investment environment and highly skilled workforce to expand operations,” he noted.

“The UKVFTA has further supported the UK’s investment in Việt Nam through the creation of an attractive environment for trade and investment with strong tariff liberalisation and easier market access."

He added that there are also significant opportunities for British companies to expand into retail, technology, consumer goods and education in Việt Nam, given the country’s rising middle class and improving income.

How to boost investment cooperation

Bến Lức - Long Thành Expressway. Improving the infrastructure system is an important factor to attract foreign investment into Việt Nam. — VNA/VNS Photo Hồng Đạt

Eades pointed out that Việt Nam possesses a number of advantages to attract foreign investment.

The Vietnamese economy is expanding stably at around 6-7 per cent per year, and is forecast to maintain the growth rate of around 6.6 per cent in the next decade, a very favourable macroeconomic environment that is critical for sustainable and long-term investment, he said.

The Vietnamese Government’s policies are also creating favourable conditions for a capital influx into the country. Việt Nam also owns advantages in terms of demographics, reasonable costs and a skilled workforce, making the country an attractive destination for UK investments in pharmacy, healthcare, education and renewable energy.

In the next decade, bilateral cooperation between the UK and Việt Nam is expected to focus on strategic areas, in line with socio-economic development orientations such as sustainable development, renewable energy and digitalisation.

“I expect to see stronger engagement of British companies in the areas which are not only developing rapidly in Việt Nam, but also to the UK’s advantage,” Eades stated.

However, there are challenges British investors face when investing in Việt Nam, which must be promptly tackled to unlock this potential, he pointed out.

Although Việt Nam has made significant improvements in the business climate, British investors still face complicated procedures that are delaying the progress of their projects and pushing up costs.

British investors are also concerned about the protection of intellectual property in Việt Nam, as well as power supply.

In a position paper at the Việt Nam Business Forum earlier this year, Britcham urged stronger moves to hasten administrative reform to better serve businesses and people, specifically removing the pre-approval requirement for advertising, transitioning to post-market control, strengthening e-government in managing promotion activities and notification, simplifying procedures and timelines for obtaining trading licences and consistency between central and local regulations.

To attract more FDI and technology transfer in life sciences in Việt Nam, Britcham highly recommends further regulatory harmonisation for faster approval of clinical trials, providing meaningful incentives for pharmaceutical R&D and manufacturing in drug registration and procurement as well as creating an enabling environment with effective IP protection.

“With regard to foreign investment in general, addressing regulatory challenges, such as foreign exchange controls, licensing delays, and the need for consistency and predictability, is crucial,” Eades said.

Việt Nam is currently implementing a number of bold reforms to create a more favourable environment for foreign investment, including the amended Law on Electricity, to maintain competitiveness against other countries in attracting foreign investment flow.

The trade agreements Việt Nam has with the UK, both through the UKVFTA and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), will leverage bilateral investment cooperation to a new height.

According to Eades, it is necessary for Việt Nam to design competitive investment support policies to compete in attracting foreign investment. A transparent legal framework and accelerating digitalisation are also important factors in drawing in investments.

Việt Nam also needs specific and appropriate support mechanisms for each type of investment, from ensuring the quality of workers to infrastructure and supply chain development. — VNS