Vietnam and the UK are moving closer together as bilateral trade and investment relations take on fresh significance.
Reciprocal visits by leaders from Vietnam and the UK over the last five years have brought the well-established relations between the two to a new height. The strategic partnership agreement signed last year has been hailed by both sides.
"The UK and Vietnam are enjoying expanded trade and investment relations after the signing of the strategic partnership agreement last year," said Mr Tim Brownbill, British Consul General in Ho Chi Minh City and Director of UK Trade & Investment.
Cheery mood
There are plenty of reasons for the celebratory mood as the agreement will spur large UK companies to make efforts to invest in Vietnam. By joining with the UK, Vietnam also hopes to export more products into one of the world's largest markets. Its exports to the UK increased by $750 million between 2005 and 2010 while the UK's exports to Vietnam increased by nearly $300 million.
Admittedly, bilateral trade is not on par with the potential of the two countries as the UK is only ranked the 17th largest investor in Vietnam. There is, though, enormous potential for the two countries' businesses to tap into the other's market. The two sides have set a target to achieve $3 billion in bilateral trade by 2013 and $4 billion before 2014.
Understanding between the two countries was greatly enhanced and strengthened by the official visit to the UK by the Chairman of the National Assembly, Nguyen Sinh Hung, early this month. The group of businesspeople accompanying Mr Hung hope to make a great deal out of the flourishing commercial ties, seeking better business links and higher value exports.
There are, however, some hurdles to overcome. In general, the UK market itself doesn't set up too many burdensome trade barriers for export products. As a member of the EU the UK's barriers are primarily adopted based on EU regulations.
Nonetheless, Vietnamese enterprises must learn that UK still has trade barriers on products originating outside of the EU. UK businesspeople, meanwhile, often complain about difficulties in obtaining an investment licence and urge Vietnam to improve transparency and fairness during the investment process.
Clearly it is still necessary for both countries to deepen their mutual understanding to make bilateral business links even stronger in the future.
As for foreign direct investment (FDI), as at July 2011 the UK had registered 142 projects in Vietnam with total investment capital of $2.547 billion and chartered capital of $1.613 billion. During the ten months of this year it had eight projects with total capital of $329.8 million. The UK is a leading investor in the financial services sector and British businesses are also interested in the infrastructure, retail, and education sectors.
Mr Brownbill suggested that Vietnam apply the public-private partnership (PPP) model, particularly in infrastructure and clean water supply projects, as the UK stands ready to share its PPP experience. "In the coming years the UK will promote cooperation with Vietnam in the infrastructure sector under the PPP model in a sustainable manner for the benefit of both countries," he said. "We will hold further ministerial-level discussions soon to finalise the details of development cooperation over the next five years."
Success says it all
The achievements of UK companies in Vietnam over the years have proved that they chose the right time to arrive in the country. There are around 200 UK companies now in Vietnam, including major players such as HSBC, Standard Chartered, Prudential, BP, Rolls-Royce, Grant Thornton, Ernst & Young, and Freshfields. Vietnam's rapid economic growth and improved business environment have been acknowledged as the main factors behind the increasing UK investment.
"Given what is happening in the rest of the world, the economy in Vietnam in the first ten months has been doing quite well," said Mr Sumit Dutta, CEO of HSBC Vietnam.
He also believes that Vietnam has created a more open investment attraction policy to become more attractive to foreign investors. "The business and investment environment in Vietnam has been improving towards equality and non-discrimination to create a 'level playing field' for all investment forms and all economic sectors," he said. "Gaps in business and investment terms such as those relating to market integration, input and output factors and enterprise management carried out by domestic and foreign-invested enterprises have narrowed significantly."
Meanwhile, Mr Patrick Regis, President of Rolls-Royce Vietnam and also Chairman of the British Business Group Vietnam (BBGV), said that the continuous improvements in cooperation between UK companies and their Vietnamese partners are very important for the BBGV. "The BBVG has developed from a social network, an organisation that supports local charities, to a foreign business group that is focusing on commercial and investment promotion," he explained. "We also contribute to the administrative reform process and promote improvements in the investment environment."
In order to improve the investment environment and attract more foreign investors to Vietnam, Mr Regis suggests the country implement its WTO commitments on schedule, as any further delays may negatively impact investor confidence. "The BBGV would like to see Vietnam make clear progress in the retail sector and telecommunications," he said. "The UK is willing to support Vietnam to resolve one of its problems: inadequate infrastructure. For example, we can provide experience in applying the PPP model."
For his part, Mr Louis Taylor, CEO of Standard Chartered Bank, believes that the opportunities are huge for UK investors looking to invest in Vietnam. "Infrastructure needs for the coming decade are huge and will need private capital," he said. "Manufacturing is likely to remain very competitive in Vietnam and investment in higher value-added production will be the key to continued competitiveness. Agriculture and aquaculture have considerable potential. Tourism and leisure (domestic and foreign) have some way to go, and banking and financial services development still lags behind."
While there seems to be little improvement in Vietnam's economy in 2011, Mr Taylor is upbeat over its future prospects. "Although 2011 won't be remembered as the easiest of years economically, I have a strong hope that it will be looked upon as the point at which the authorities gave investors and companies what they want - an economy that has price and currency stability to a degree that will allow strong and sustainable growth for the whole economy," he said. For this reason he is also confident that there will be more investors from the UK coming to Vietnam.
Looking to future, most executives at UK companies agree that the bilateral relationship will be even better in the future than over the last five years. "Vietnam is a great investment destination for UK businesses," said Mr Dutta. "It has a young, educated and hard-working population, enjoys social and political stability, and is rich in natural resources.
Ties between Vietnam and the UK are increasing and this will help improve all areas of business relations. The governments have established a strategic partnership in trade and investment in some important fields, such as telecommunications, energy, real estate and information technology."
"Commitment to free trade and open markets plays an increasingly important part in ensuring continued global development and further intensification of the UK-Vietnam relationship for mutual benefit. The UK continues to support Vietnam in enhancing economic and trade ties with the EU. This should ensure that there will be more investors from the UK coming to Vietnam."
Mr Louis Taylor, CEO, Standard Chartered Bank Vietnam
Source from VN Economy News
