Vietnamese and French Firms Look for New Ways to Increase Free Trade

Posted by Reading Time: 4 minutes

Speaking on Monday during a conference in Paris, the Trade Counsellor of the Vietnamese Embassy in France, Nguyen Canh Cuong, said Vietnamese and French companies need to take advantage of the business opportunities presented by the Vietnam-European Union Free Trade Agreement (VEFTA).

French experts present at the same event agreed that both Vietnam and France will benefit from the FTA, which would cut most taxes and tariffs. However, they cautioned that Vietnamese companies need to invest more in improving the quality of their products in order to increase their competitiveness in the market.

Vietnam-France Trade

Over the past couple of years, Vietnam’s exports to France have seen an annual growth of five to seven percent to reach 2 to 2.5 billion euros per annum. Meanwhile, imports from France have reached one billion euros.

In terms of FDI, French companies have invested US$28 million into 14 projects in Vietnam during the first eight months of the year. Though that figure places France on 23rd on the list of companies investing in Vietnam, that number is only expected to increase after the VEFTA is implemented. 

Related Link IconRELATED: Vietnam and EU Reach Agreement in Principle on FTA
Vietnam EU FTA (VEFTA)

Last month, Vietnam and the European Union reached an agreement in principle of free trade that would remove most tariffs on goods, among other benefits. Given that is the first agreement of its kind that the EU has concluded with a developing country such as Vietnam, the importance of this agreement cannot be overlooked.

Some of the specifics of the agreement include: elimination of tariffs on over 99 percent of all items, removal of all import duties within a ten year period, liberalization of EU investment and increased protection of Vietnamese GIs.

Long Term Outlook

VEFTA is just one of the recent moves Vietnam has made in recent months to attract further investment. This has been due to increased confidence on the performance of the Vietnamese market.  Dun & Bradstreet’s Business Optimism Index, a leading economic indicator report, highlights the boost the ASEAN economy has had in many sectors.

Dun & Bradstreet’s report shows that Vietnam has seen a big increase in business optimism. In Q3 the overall business optimism rose 16 percentage points from 27 percent to 43 percent. The report also mentions that almost half of those polled (46 percent) anticipated better business conditions in Q4, and most of the remaining respondents (49 percent) expected no change.

An article from Bloomberg published earlier this year mentions that Vietnam is poised to take advantage of its growing population and crucial shipping routes to become one of the most important economic players in the region. This prediction looks more likely to become a reality as the country takes advantage of outside investment. According to the optimism report, in the first 6 months, total FDI figures reached US$3.6 billion, representing a 9.6 percent year on year growth. And even though the country did experience some trade deficit, the export momentum is expected to increase with the implementation of trade agreements, such as Vietnam-EU FTA and the Transpacific Partnership (TTP).

Business Optimism IndexThe Business Optimism Index, released every quarter by Dun & Bradstreet, is considered a leading economic indicator for turning points in business activity and measuring business sentiment. The Index captures business expectations for the quarter ahead based on six parameters: sales volume, net profit, selling price, new orders, inventory, and employment. Sampling in the Index represents key business sectors including manufacturing, construction, wholesale, transportation, services, finance, mining and agriculture, according to their GDP contribution in each nation.

The ASEAN Business Optimism Index for Q3 2015 is out now and available as a complimentary download in the Asia Briefing Bookstore.

Related Reading Icon-VB

Import and Export: A Guide to Trade in Vietnam
In this issue of Vietnam Briefing Magazine, we provide you with a clear understanding of the current business trends related to trade in Vietnam, as well as explaining how to set up your trading business in the country. We also attempt to give perspective on what will be Vietnam’s place in the Association of Southeast Asian Nations (ASEAN) in 2015, and look at some of the country’s key import and export regulations.

Using Vietnam’s Free Trade & Double Tax Agreements
In this issue of Vietnam Briefing we explore how Vietnam’s Free Trade Agreements – and especially those via its membership in ASEAN – will affect foreign investment into Vietnam. We also go a step further and examine the specific, bilateral Double Tax Agreements that Vietnam has enacted, and how these can be further used to minimize profits and withholding taxes that would otherwise be levied upon foreign investors.

Developing Your Sourcing Strategy for Vietnam
In this issue of Vietnam Briefing Magazine, we outline the various sourcing models available for foreign investors – representative offices, service companies and trading companies – and discuss how to decide which structure best suits the sourcing needs of your business.