Vietnam-The Netherlands trading value expected to increase by 15% after EVFTA
Thuong Gia Magazine
1. Dear sir, recently Vietnam and the EU have signed the EU – Vietnam Free Trade Agreement (EVFTA) and Investment Protection Agreement (IPA) on June 30th. In your opinion, what opportunities will Dutch businesses have in term of export, investment and development in Vietnam?
The impact of the EVFTA is to result in 65% of the tariffs from the EU is eliminated immediately and the remaining gradually removed over the next 10 years.
Most of the agricultural products will be tariff-free, which brings significant advantages to Dutch companies working in this industry. The Netherlands has a strong base in livestock farming, experienced and innovation-driven production and advanced technologies. The EVFTA will give a dynamic boost to Vietnam, where the Dutch Business Association in Vietnam (DBAV) members have been investing and currently playing an important role in this industry such as Dairy (FrieslandCampina), Animal feed (De Heus), seeds (East-West Seed, NedSpice, Bejo, etc.)
With regard to shipbuilding and port operation, Vietnam has a 1650km coastline with more than 272 ports and thousands of ships, which is still increasing in number to meet the import and export demand. The Netherlands has an experienced industry in shipbuilding and seaport exploitation. Dutch businesses can take advantage of investing in Vietnam as there are abundant labor and seaports. These are located in a strategic trade location in ASEAN, providing opportunity to invest in developing Logistic, Shipbuilding and Port operation. Some Dutch companies have pioneered in these areas include Damen Song Cam Shipyard, Cai Mep International Terminal, Westerman.
Concerning Green Energy, according to UNDP, Vietnam has had a large potential for renewable energy. In 2015, just a couple of days before COP21 began in Paris, Vietnam’s prime minister announced a Renewable Energy Strategy (RES), to reflect the plan for National Power Development in 2021-2030 and reduce all the coat-fired power plants, together with the GreenHouse Gas emission. With topical weather and long coastline, Vietnam can shift the investment in developing solar, offshore wind and sea wave power. These also unlock further private investment, creating market for Dutch companies, which have experience and technology to exploit the renewable energy.
2. And from the Vietnamese side, which sectors in the Netherlands do you think Vietnamese businesses will have the opportunity to invest and export in?
The Netherlands is Vietnam’s current largest EU investor with registered capital of USD9.5 billion, and also the second biggest import-export partner of Vietnam in the EU. In 2018, the value of imports by Vietnam was USD 116 million worth of goods. While the export to the Netherlands reached USD 958 million. The main export goods from Vietnam to the Netherlands include electronic components, machinery and spare parts, footwear, textile and garment, food and other agricultural products. Among them, two areas that Vietnamese companies can focus on investing and exporting to the Netherlands include food and electronic components.
Vietnam has a large area of agricultural land, favorable weather for growing tropical veggies and fruits, with cheaper production costs. Until 2018, The Netherlands was the EU’s largest consumer of Vietnamese cashew nuts with the import values of USD303.6 million. The Netherlands is a major global exporter of agricultural and dairy products and can leverage the above mentioned factors to work together with Vietnamese business in this sector.
The electronic components industry in Vietnam is still at a developing stage. As per the figures reported by the World Trade Organization (WTO), component import tax is below 5%, and is to be reduced after the EVFTA takes effects. Since 2017, large enterprises have expanded in the market. In order to renovate technology and expand the scale, increasing the large amount of long-term assets are imported into Vietnam from The Netherlands. Vietnam also approved more technology investment where high-tech industrial parks are built throughout the country. Many international corporations, including those from The Netherlands, increased their investment, where Vietnamese enterprises will have the chance to receive the technology transfer from FDI.
3. Can you share with your insight, comments about the advantages of Vietnamese and Dutch businesses thanks to these agreements?
The EVFTA will create a strong bridge of trade and services between Vietnam and the Netherlands. The two countries have the potential to make the best use of the advantages from the mutual relations that have been built in the last 45 years, together with the EVFTA to bring the best benefits to both sides. The similar focus and industry overlap between the two countries create favorable conditions for both Dutch and Vietnamese businesses alike.
Vietnam and the Netherlands are both countries having large rivers system, located close to the sea as a strategic commercial and economic position. Vietnamese businesses have the opportunity to leverage these unique resources, while Dutch businesses have over 100 years of experiences in the field of their management and exploitation. With this advantage, Dutch and Vietnamese businesses can cooperate in investment, enhancing the economic importance of areas by the sea, rivers and ports.
Also, both countries are promoting the use of renewable energy such as sea wave power development. Provinces in Vietnam such as Bac Lieu, Soc Trang, Tra Vinh and Ca Mau are promoting investment on this issue.
4. Vietnam and the Netherlands have more than 45 years of establishing a strategic partnership. In the beginning, the cooperation of the 2 countries mainly focused on development cooperation as the Dutch Government supported Vietnam to overcome the consequences of the war such as technical assistance to develop agriculture. After that, the cooperation gradually moved more towards agriculture in general. So which sectors do you expect the 2 countries will strongly focus on when the EVFTA and IPA are active?
Vietnam and the Netherlands and can cooperate in areas where both countries have interest similarities and gain most benefits. The field of water resources management and climate change are the two most important area for Vietnam and the Netherlands. While populations in different continents share the same global issues, both countries are also impacted by rising sea level and should take these into consideration. Vietnam can learn from the Netherlands by making good use of green energy, applying Dutch innovation in its production, water resource management and climate change adaptation.
5. A final assessment, in your opinion, when EVFTA is officially implemented, how much will export turnover between Vietnam and the Netherlands reach?
The European Chamber of Commerce, together with the DBAV, has given their forecast that the EU’s export value to Vietnam will increase to 11.8% and import value will be about 11.5% by 2030. With the Netherlands – the EU’s second largest trading partner of Vietnam, the expectation is that export turnover between Vietnam and the Netherlands can increase more than 15%.
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