UKVFTA and Its Impacts on Trade and Investment

The manufacturing and processing industry in Vietnam receive high interest from UK investors.

UKVFTA - Overcoming global fluctuations

The UKVFTA is a new step forward, as Vietnam and the UK have shared a strategic commitment to global trade and liberalization of capital and investment transactions. The UKVFTA is an important element in ensuring the continuity of the dynamic and growing trading relations between the two countries.

With the foundations of high commitment and progress, inherited from the Vietnam - EU Free Trade Agreement (EVFTA), the UKVFTA is a driving force in promoting bilateral trade relations. After nearly 3 years of implementation, the UKVFTA has proven the vitality of a bilateral FTA by creating economic momentum to support people and businesses on both sides to overcome the challenging period of the pandemic.

In 2021, in the difficult context of the epidemic, the supply chain was disrupted at times, but bilateral trade between Vietnam and the UK still reached nearly USD 6.6 billion. Particularly, Vietnam exported more than USD 5.7 billion, an increase of 16.4% compared to 2020.

In 2022, while the world economy was just beginning to recover, the Russia-Ukraine conflict occurred, causing oil prices to escalate, inflation to rise, and consumer demand to weaken. However, with the UKVFTA, trade turnover between Vietnam and the UK reached USD 6.8 billion (2022), an increase of 3.3% in 2021, three times higher than in 2010 when the two countries established a strategic partnership. Specifically, in 2022, Vietnam's export turnover to the UK reached 6.1 billion USD, an increase of 5.2% compared to 2021.

Vietnam - UK trade relations have grown in recent times, proving the correct prediction of negotiators on both sides, when predicting that the UKVFTA agreement will be fully applied, Vietnam will benefit by being able to save up to Pounds 114 million in export taxes; while for the UK the figure is Pounds 36 million.

Investment increased rapidly

Besides trade, UKVFTA has created alterations in British investment in Vietnam. A major investment committed by the UK is Enterprize Energy's offshore wind farm project, since the UKVFTA came into force.

British financial institutions are particularly interested in supporting Vietnam with green finance, and this type of finance will be critical for Vietnam to meet its commitment to net zero emissions by 2050.

Since the UKVFTA took effect, direct investment from the UK into Vietnam has increased rapidly. 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. By the end of September 2023, the number of projects and investment capital has increased significantly. The UK now has 542 direct investment projects in Vietnam (an increase of 24.8% compared to this number at the end of 2021); with a total registered investment capital of about USD 4.29 billion (up 7.7% with data as of the end of 2021), ranking 15/143 countries and territories with direct investment capital in Vietnam.

Projects that the UK invests in Vietnam focus on three main areas. The first is the processing and manufacturing industry, accounting for 38.7% of total registered investment capital. Ranked second is real estate business, accounting for 26.2% of total registered investment capital. The third is the mining sector, recording 17.6% of total registered investment capital.

There have been 35 provinces and cities in Vietnam receiving investment capital from the UK, including the oil and gas sector. Ho Chi Minh City is the locality receiving the largest investment, accounting for 22.7% of total registered investment capital.

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