Subchapters:
- Business Relationships
- Foreign direct investment
- FTAs and Treaties
- Development Cooperation
- Prospective fields of study (MOP)
Business relations
Trade relations with the EU
The EU is the fourth largest trading partner of Vietnam (behind China, Korea and the USA). Mutual trade between the EU and Vietnam shows a dynamic growth interrupted only in 2020 due to the negative effects of the Covid-19 pandemic. Imports from Vietnam to the EU consistently exceed exports from the EU to Vietnam by roughly 3-4 times, and the negative balance on the EU side is constantly deepening. Vietnam is an important source for the EU of many cheap consumer products (mobile phones, electronics, shoes, clothes, food). The largest exporter and importer to/from Vietnam is Germany, which accounts for roughly 20% of EU-Vietnam trade. The EU is also the fifth largest investor in Vietnam. The EU has so far invested USD 19.4 billion here, which represents roughly 6% of total foreign direct investment in Vietnam.
| 2017 | 2018 | 2019 | 2020 | 2021 | |
| Exports from the EU (million EUR) | 9,950.20 | 10,397.00 | 11,098.50 | 8,775.20 | 10,623.70 |
| Imports into the EU (million EUR) | 30,819.20 | 32,479.40 | 34,507.40 | 34,537.70 | 38,470.60 |
| Balance with the EU (million EUR) | – 20,869.0 | – 22,082.4 | – 23,408.9 | – 25,762.5 | – 27,846.9 |
Source: European Commission
Trade relations with the Czech Republic
Vietnam is the second largest trade partner of the Czech Republic within the ASEAN countries (after Malaysia). In a global comparison, Vietnam is the twenty-sixth largest trading partner of the Czech Republic, after India. Like other EU countries, the Czech Republic also has a permanent negative balance in foreign trade with Vietnam. While mainly machinery and industrial equipment are exported from the Czech Republic to Vietnam, mainly consumer goods (mobile phones, electronics, shoes, clothes, food) are imported from Vietnam to the Czech Republic.
| 2017 | 2018 | 2019 | 2020 | 2021 | |
| Exports from the Czech Republic (billion CZK) | 22 | 3.1 | 1.7 | 1.7 | 2.0 |
| Imports to the Czech Republic (billion CZK) | 2.4 | 22.4 | 26.8 | 33.3 | 43.1 |
| Balance with the Czech Republic (billion CZK) | -19.3 | – 19.4 | – 25.1 | – 31.6 | – 41.1 |
Source: businesscarriers.com
Trade relations with countries outside the EU
Due to its geographical location, Vietnam carries out the majority of its trade (93%) with countries outside the EU. China is Vietnam’s largest trading partner with a share of 25% of the total trade turnover (18% share of exports, 35% of imports). The largest export market for Vietnam still remains the USA (28%), ahead of China (18%) and the EU (12%). The largest importers to Vietnam are China (35%), South Korea (19%) and Japan (8%). In mutual trade with countries outside the EU, Vietnam has a negative balance, mainly due to massive imports from China.
| 2017 | 2018 | 2019 | 2020 | 2021 | |
| Exports from countries outside the EU (million EUR) | 172,901.0 | 196,706.4 | 213,529.1 | 231 459.4 | 274,916.0 |
| Imports to countries outside the EU (million EUR) | 150,236.5 | 168,859.2 | 180,877.0 | 188,749.5 | 243,021.1 |
| Balance with non-EU countries (million EUR) | 22,664.5 | 27,847.2 | 32,652.1 | 42,709.9 | 31,894.9 |
Source: EIU, Eurostat
Foreign direct investment
Vietnam has not lost its appeal as an investment destination even during the pandemic. Despite the dramatic decline in the rate of economic growth in the last two pandemic years, Vietnam maintains its position as one of the most attractive investment destinations in the Asian region. Vietnam can offer a number of interesting investment opportunities for Czech investors as well.
Although the growth rate of the Vietnamese economy fell in the last two years from 7% in 2019 to 2.9% in 2020 or 2.6% in 2021, foreign investors did not significantly limit their investment activities here, and roughly the same amount of investment flowed into Vietnam as in the pre-crisis years (approx. USD 20 billion per year). A stable economic and political environment, dynamic growth of the population and its purchasing power, low wages compared to other industrialized countries in Southeast Asia and especially compared to China make Vietnam one of the most attractive countries for foreign investors in the Asian region. In addition to the long-term trend of shifting production capacities from China to Vietnam, in recent years, an increasing trend of investment inflows from ASEAN countries can also be observed.
The largest long-term investors in Vietnam include South Korea (18% of all FDI), Japan (16%) and Singapore (16%). Investments from these countries account for more than half of all foreign direct investment in Vietnam and are directed mainly to manufacturing industries (mobile phones, electronics, clothing, footwear) that use cheap labor. Most of the multinational companies in the mentioned sectors already have their production facilities in Vietnam. The biggest ever foreign investment in this area in Vietnam is Samsung’s mobile phone and tablet manufacturing plant in Bac Ninh province, whose products make up a significant part of Vietnam’s exports. Samsung has so far invested a total of USD 18 billion in Vietnam and employs over 170,000 workers. Samsung accounts for more than 20% of Vietnam’s total exports.
Also last year, Singapore (34%), Korea (25%) and Japan (20%) were among the biggest foreign investors in Vietnam. The largest newly announced project to receive an investment license last year was the Korean-Vietnamese investment in the construction of two liquefied natural gas thermal power plants, Long An I and II, totaling US$ billion, followed by LG Display’s plant expansion investment to manufacture LCD and OLED screens in Haiphong worth US$2.15 billion. The third largest investment project worth 1.33 billion USD was the investment of the Japanese company Marubeni in the construction of the O Mon II gas power plant in the southern Vietnamese province of Can Tho.
The most attractive sectors for foreign direct investment in Vietnam include the manufacturing industry, the real estate sector, energy and tourism. The manufacturing sector (mobile phones, computers, electronics, clothing, footwear, etc.) has an absolutely dominant position and accounts for almost 60% of all foreign investments in Vietnam. Also last year, the manufacturing sector dominated FDI, followed by energy, real estate, retail and logistics. The most attractive investment location in Vietnam is the southern metropolis of Ho Chi Minh City (with a total investment volume of USD 49.4 billion), followed by the neighboring province of Binh Duong (USD 37.2 billion). The capital city of Hanoi ranks third in the list of unattractive investment locations in Vietnam with a volume of USD 37 billion.
Czech investments in Vietnam
Vietnam’s rapid economic growth and stable political environment also attract Czech investors. Czech companies have so far invested in Vietnam in 34 projects worth USD 90 million. The largest Czech investor in Vietnam continues to be the company PPF, which has invested in the field of banking here and over the course of several years has built a leading position in the consumer credit sector on the Vietnamese market. However, according to the latest information, PPF is considering a gradual reduction of its activities in the Asian region, which will probably include the sale of its stake in Home Credit Vietnam. The second largest Czech investor is the company Elmich Group, which operates a plant for the production of kitchen utensils in Ha Nam province. The third largest Czech investment is the capacitor production plant of the Czech company Hydra as in Quang Nam province. A number of Czech investments in Vietnam are also implemented by entrepreneurs of Vietnamese origin who have built successful businesses in the Czech Republic and are now expanding their business activities to Vietnam. These investments are directed, for example, to tourism (luxury hotels on the coast of Vietnam), industry, agriculture, food industry, medicine distribution and other sectors.
Further improvement of the investment environment for Czech investors in Vietnam and new investment opportunities will be brought by the new Agreement on the Protection of Investments between the EU and Vietnam, which could enter into force within two years, after it goes through the ratification process in individual EU member states. The agreement includes an extensive chapter on liberalization of the investment environment containing a number of new measures to support and protect European investors in Vietnam.
FTAs and treaties
Treaties with the EU
In 2020, the EU-Vietnam Free Trade Agreement (EVFTA) entered into force . Within five years of the entry into force of the EVFTA, the volume of mutual trade between the EU and Vietnam is expected to increase by fifty percent. The drop in customs rates within the EVFTA will of course also have a positive effect on the growth of Czech exports to Vietnam. The EVFTA is one of the EU’s most comprehensive and ambitious agreements. It covers a comprehensive range of trade and investment areas, from rules of origin and customs matters and sanitary and phytosanitary measures, to government procurement, intellectual property rights, legal and institutional issues and competitiveness, to investment protection and dispute resolution in this area.
The investment protection agreement between the EU and Vietnam should enter into force within two years after its ratification by individual EU member states. The agreement will significantly support the entry of new European investors to Vietnam. The Czech Republic is one of the eleven EU countries that have already ratified the investment agreement.
Contracts with the Czech Republic
The most important agreements concluded between the Czech Republic and Vietnam in the economic field are the Agreement on the Promotion and Mutual Protection of Investments from 1997, the Agreement on the Avoidance of Double Taxation and the Prevention of Tax Evasion from 1997 and the Agreement on Economic Cooperation from 2005. The Agreement on the Protection of Investments between the Czech Republic and Vietnam will be replaced by an agreement between the EU and Vietnam within two years. As part of the agreement on economic cooperation, a regular commercial and economic dialogue between the Czech Republic and Vietnam takes place in the form of meetings of the Czech-Vietnamese intergovernmental commission for economic cooperation. The last meeting of the intergovernmental commission took place in 2018 in Hanoi. The next one is planned in Prague at the end of June 2022.
Developmental cooperation
Vietnam is a major recipient of development aid. The largest donors in Vietnam include Japan, the World Bank, the Asian Development Bank and the EU. In connection with the growth of living standards in Vietnam and its graduation into the category of middle-income countries, the volume of development aid from the Czech Republic to Vietnam has been gradually reduced in recent years. Today, the Czech Republic implements only so-called small local projects in Vietnam.
Prospective fields of study (MOP)
The Vietnamese economy offers opportunities for Czech exporters in more than twenty fields. The rapid growth of the Vietnamese economy, which is gradually changing the overall structure of the economy, and the growing incomes of the population will also positively influence demand in other industrial and consumer segments. Below we present opportunities for Czech exports in five main priority sectors.
Energy industry
Vietnam is planning large-scale investments in the construction of new energy capacities in the next ten years. The national energy strategy envisages an increase in the total installed capacity from the current 70 GW to 138 GW in 2030, which will require investments in the construction of new power plants in the amount of CZK 2,840 billion. A large part of the new investments will go to thermal power plants (gas and, to a lesser extent, coal), but investments in new power plants using renewable resources (water, wind, biomass) will not be left out either.
ICT
The information technology sector is a rapidly growing industry in Vietnam and its development is one of the government’s key priorities. The National Strategy for the Development of Digitization and Industry 4.0 expects the share of the digital economy in the total GDP to grow to 30% by 2030. Opportunities for the application of Czech companies will arise especially in the field of e-government, e-commerce and cyber security.
Defense industry
New security threats and the growing risk of armed conflict in the Southeast Asian region call for a large-scale modernization of Vietnam’s armed forces. Vietnam expects the defense budget to grow from the current 128 billion CZK to 170 billion CZK in 2024. We can therefore expect further growth in the Vietnamese government’s demand for new defense technologies. Czech defense technologies, with which the Vietnamese armed forces already have experience (training aircraft, flight simulators, radar technology), as well as other Czech defense technology, have a great chance of success.
Water management and waste industry
Growing environmental regulation and pressure from authorities to comply with environmental standards are driving the growing demand for environmental technologies in Vietnam. Population growth and rapid urbanization are intensifying the urgent need to address the deteriorating ecological situation. It will be necessary to invest up to CZK 214 billion in the next ten years in municipal wastewater treatment alone. Among the most promising sectors for Czech companies are waste water treatment and water distribution, cleaning of water sources, ensuring water quality in water sources and solid waste processing.
Healthcare and pharmaceutical industry
Vietnam is a market with huge potential for sales of medical technology and pharmaceutical products. Expenditures on healthcare are constantly growing and should reach CZK 490 billion in 2022. Extensive construction of new hospital capacities is planned. The domestic production of medical equipment and pharmaceuticals is very limited, the vast majority of medical equipment and medicines are imported. The Vietnamese market offers opportunities for Czech suppliers of medical devices, laboratory equipment, health information systems or manufacturers of food supplements.
Agricultural and food industry
Vietnam is a major importer of agricultural production and food. Vietnam annually imports agricultural products and food with a total value of around CZK 435 billion, and the demand for high-quality imported food here is constantly growing. It can be assumed that the space for Czech agricultural production on the Vietnamese market will continue to increase. Among the most promising Czech agricultural commodities that have the potential to succeed on the Vietnamese market are beer and raw materials for beer production, milk and milk products, meat and meat products, confectionery and cereals, apples, feed for farm animals and pets, fertilizers.
