Regulations on ensuring transparent administration in new-generation free trade agreements will help Vietnam satisfy strict requirements of quality foreign investors, encouraging them to pour into the country, experts said.
Vietnam has attracted only nearly US$24 billion from European investors
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Data from the Ministry of Planning and Investment (MPI) showed that despite the EU’s strong will of fostering investments in Vietnam, the inflow from the bloc is still leaving much to be desired. Over the past decade, Vietnam has attracted only around US$24 billion from the EU, who poured US$334 billion abroad last year.
Nguyen Van Toan, vice chairman of the Vietnam Association of Foreign Invested Enterprises, attributed the modest investment to the low transparency and unhealthy competition which are what European investors don’t expect from a business environment.
Echoing Toan, Nguyen Quang Bao, deputy general director of Viet Capital Securities JSC, said that European investors are very interested in Vietnam but demands for high transparency and cultural differences make them hesitate to pour money into the market.
While Asians understand the Vietnamese and they can be ‘flexible’ when doing business with Vietnamese and ‘patient’ when working with Vietnamese agencies, Europeans and Americans only ‘act in accordance with the rules’. They want everything to be predictable and transparent.
Minister of Planning and Investment Nguyen Chi Dung also admitted that the prospect of attracting more FDI from the EU depends on Vietnam’s efforts to meet the investors' requirements for an open, transparent and predictable legal system besides effective regulations on intellectual property, anti-corruption and law enforcement.
According to experts, until now Vietnam’s FDI attraction policy relied heavily on tax breaks, concessional rates, and import duty exemptions. Many investors have come to Vietnam because of the incentives and low labor costs. Attracting innovative, technologically-advanced FDI requires a more sophisticated policy and tools.
Therefore, Vietnam should continue working towards removing existing trade and investment barriers and improving the business climate. In this context, transparency is key for investors to know the regulations and procedures to follow. A fair, transparent, stable, and predictable business climate tops EU businesses’ priorities when they mull over investment plans.
Changes to meet commitments
Most of the shortcomings are expected to be removed after Vietnam joins new-generation free trade agreements, including the EU-Vietnam Free Trade Agreement (EVFTA) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
Vietnam is forced to solve the shortcomings to implement its commitments under the deals, experts noted.
Ambassador Bruno Angelet, head of the European Union Delegation to Vietnam, told local media that the EVFTA will strengthen transparency about regulations in Vietnam.
“The EVFTA will create a stable legal framework for trade and investment relations between the EU and Vietnam that will enable us to co-operate and achieve a win-win solution,” Angelet said.
He added that it will undoubtedly create new opportunities for European investors as they will benefit not only from increased market access, but also from the new investment protection provisions that are now an integral part of the EU’s trade policy. Vietnam and the EU have agreed to high-level protection standards and to a reformed dispute resolution mechanism.
According to Bruno, the deal covers trade in goods and services, government procurement, and allows a high level of protection of intellectual property rights (IPR). Meanwhile, the existence and proper enforcement of IPR protection laws is indispensable for attracting FDI from Europe.
“It will increase IPR protection beyond the standards of the World Trade Organization (WTO): EU innovations, artworks, and brands will be better protected against being unlawfully copied, including through stronger enforcement provisions,” he said.
