The Vietnam-EU free trade agreement, which is likely to be closed in 2015, and the scrapping of a 49% foreign ownership cap across many listed firms, has foreign investors flocking to Vietnam.
Kenneth Atkinson, executive chairman of UK-owned audit and consultancy firm Grant Thornton Vietnam, believes both that the Vietnam-EU FTA, along with economic liberalization, may trigger a new inflow of both capital and skilled foreign labor to Vietnam.
Le Ky Anh, a trade and economic officer at the EU delegation to Vietnam, is equally optimistic. At the “Doing Business with the EU and Finland” conference in Ho Chi Minh City on July 3, he stated that once the deal is signed, the expected inflow of capital and skillful foreign workers and capital will take the economic development of Vietnam to new heights.
Anh added, “We are expecting to see a new wave of European investment after the trade pact is signed, with only top partners, like CEOs, going to Vietnam to run businesses alongside Vietnamese people in lower positions. There will be no unskilled Europeans traveling to Vietnam for work, as their salaries will be unable to cover their living expenses.”
It was also emphasized that it is not believed that EU goods will directly compete with Vietnamese counterparts, as the latter have much lower value added. The EU should rather be viewed as an economy complementary to Vietnam, not as a threat to Vietnamese enterprises.
Vietnam is also to join the Washington-led Trans-Pacific Partnership (TPP) trade pact, a proposed regional free trade agreement aimed at eliminating tariffs and lowering non-tariff barriers. It is hoped the deal will be finalized by the end of this year. The negotiation countries include the United States, Australia, Canada, Japan, Singapore, Vietnam, Brunei, Chile, Malaysia, Mexico, New Zealand and Peru.
Charles H. Rivkin, Assistant Secretary of State for Economic and Business Affairs stated, “The TPP is a high-standard and ambitious treaty that opens new markets for our entrepreneurs, new choices for consumers, sets new standards for workers, including the air we breathe, and [creates] economic means that will build a positive architecture of security throughout the region.”
Joining the TPP will allow Vietnam to tap into global supply chains and will also help the nation to establish itself as one of the leading economies in the Asia-Pacific region, he said.
The U.S.-based Peterson Institute for International Economics believes the TPP could increase Vietnam’s GDP by more than 30% within 10 years.