UKVFTA: Transforming Trade and Investment

The trade and investment relations between Vietnam and the UK have experienced substantial growth in recent years, validating the accurate forecast that both parties would reap substantial advantages upon the full implementation of the UKVFTA.

UKVFTA and Its Impacts on Trade and Investment
The UK receives high interest from investors in the manufacturing and processing industry in Vietnam.

The UKVFTA – Overcoming Global Fluctuations

The UKVFTA is a significant step forward as Vietnam and the UK share a strategic commitment to global trade and the liberalization of capital and investment transactions. The UKVFTA is a crucial element in ensuring the continuity of the dynamic and growing trading relations between the two countries.

With the strong foundation and progress inherited from the Vietnam – EU Free Trade Agreement (EVFTA), the UKVFTA serves as a driving force in promoting bilateral trade relations. After almost 3 years of implementation, the UKVFTA has proven its vitality as a bilateral FTA by creating economic momentum to support people and businesses on both sides in overcoming the challenging period of the pandemic.

In 2021, amidst the difficult context of the pandemic, the supply chain experienced disruptions; however, bilateral trade between Vietnam and the UK still reached nearly USD 6.6 billion. Specifically, Vietnam’s exports exceeded USD 5.7 billion, marking a 16.4% increase compared to 2020.

In 2022, with the accelerated recovery of the global economy, the Russia-Ukraine conflict caused oil prices to escalate, inflation to rise, and consumer demand to weaken. Nevertheless, thanks to the UKVFTA, trade turnover between Vietnam and the UK reached USD 6.8 billion in 2022, reflecting a 3.3% increase from 2021. This figure is three times higher than the trade turnover in 2010 when the two countries established a strategic partnership. Specifically, Vietnam’s export turnover to the UK reached USD 6.1 billion, an increase of 5.2% compared to 2021.

In recent times, Vietnam-UK trade relations have flourished, confirming the accurate predictions made by negotiators from both sides. The full implementation of the UKVFTA agreement has enabled Vietnam to save up to Pounds 114 million in export taxes, while the UK can save Pounds 36 million.

Rapid Increase in Investment

In addition to trade, the UKVFTA has brought about significant changes in British investment in Vietnam. Since the UKVFTA came into force, a major investment commitment from the UK is Enterprize Energy’s offshore wind farm project.

British financial institutions, particularly those focused on green finance, have shown keen interest in supporting Vietnam. Green finance will play a critical role in helping Vietnam fulfill its commitment to achieving net-zero emissions by 2050.

Since the UKVFTA took effect, direct investment from the UK into Vietnam has experienced rapid growth. In 2021, the first year of UKVFTA implementation, the UK had 434 valid projects in Vietnam with a total registered capital of USD 3.98 billion. As of the end of September 2023, the number of projects and investment capital has significantly increased. The UK now has 542 direct investment projects in Vietnam, representing a 24.8% increase compared to the end of 2021. The total registered investment capital amounts to approximately USD 4.29 billion, up 7.7% compared to the end of 2021. This places the UK 15th out of 143 countries and territories in terms of direct investment capital in Vietnam.

UK investments in Vietnam primarily focus on three main sectors. The processing and manufacturing industry accounts for 38.7% of the total registered investment capital, followed by the real estate business at 26.2%, and the mining sector at 17.6%.

Investment capital from the UK has flowed into 35 provinces and cities in Vietnam, including the oil and gas sector. Ho Chi Minh City has received the highest amount of investment, accounting for 22.7% of the total registered investment capital.

Hai Dang