A man works on the assembly line of a Piaggio scooter and motorcycle factory in the northern province of Vinh Phuc. Photo: Reuters
Progress in free-trade talks between the European Union and Vietnam may trigger a resurgence of investment in the Southeast Asian nation from companies within the 27-nation bloc, the EU's top representative in Vietnam said.
Early headway in negotiations would boost interest in Vietnam even before an accord is signed, Ambassador Franz Jessen, head of the European Union delegation to Vietnam, said in an interview. Vietnam's Minister of Industry and Trade Vu Huy Hoang is scheduled to meet EU Trade Commissioner Karel De Gucht in Brussels today to announce the negotiations, he said.
Renewed interest from EU companies may help slow a declining trend in foreign direct investment into Vietnam stretching back to 2008. Pledged FDI fell 26 percent in 2011 from a year earlier and dropped 32 percent in the first five months of 2012, according to the Foreign Investment Agency, amid a global economic slowdown and as government measures to tackle inflation shackled growth. Vietnam's economy expanded by 4 percent in the first quarter, the slowest pace since 2009.
"My impression is that the Vietnamese authorities are very concerned about the decrease in foreign direct investment," Jessen said last week. The FTA can be used to reverse that trend, he said, "because if proceedings are seen as progressing quite rapidly, companies will adjust now."
The trade commissioner is "keen" to reach a final agreement with Vietnam by October 2014, Jessen said.
The EU was the fourth-biggest investor in Vietnam in 2011, pledging $1.77 billion, or more than 12 percent of the nation's total committed FDI for the year, according to the delegation's website. Italian scooter manufacturer Piaggio & C. SpA, and Finnish mobile-phone company Nokia Oyj are among European companies that are investing in production facilities in the Southeast Asian country.
Investment conditions in Vietnam will be included in the FTA negotiations, Jessen said, with transparency in the business environment a factor that may feature in companies' decisions.
"European companies are obliged to operate under very strict guidance on corruption and adhere to very stringent norms, and what I have been saying here is that if we want to stimulate investment into Vietnam, one of the ways to do it is to ensure the business environment is transparent and clear," Jessen said.
In addition to "standard" free-trade issues such as tariff reductions, trade facilitation and customs procedures will be among "more interesting" areas for discussion during the negotiations with Vietnam, Jessen said. Protection of intellectual property rights is also a "big issue".
The EU plans to open business centers in Hanoi and Ho Chi Minh City this year or early in 2013 to support small and medium-sized companies, Jessen said. Similar centers are planned for Indonesia, Malaysia and the Philippines, he said.
Vietnam is the third member of the Association of Southeast Asian Nations to enter free-trade talks with the EU, following the opening of discussions with Singapore and Malaysia. It's also negotiating a Trans-Pacific Partnership trade agreement with eight other nations including the US.