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Economic diplomacy

THE MACROECONOMIC OVERVIEW

Vietnam, with a population of nearly 100 million and an economy that has experienced sustained growth in recent decades, is now one of the most dynamic and promising emerging Southeast Asian countries on the regional and global scene.

The economic reform process launched in 1986 (“doi moi” or “renewal”) and accession to the World Trade Organization in 2007 initiated a gradual liberalization and opening of the economy to international trade, stimulating sustained and steady growth that has maintained an average of 6 percent in recent years. Vietnam thus entered the middle-income country category in 2010, setting a goal of becoming an upper-middle-income economy by 2030 and a high-income developed country by 2045.

THE BUSINESS ENVIRONMENT

The legal framework, traditionally focused on attracting FDI and refined with the measures launched in recent years (on administrative simplification, business law, investment, real estate market, Public-Private Partnership, revision of the maximum threshold of foreign capital for listed companies), maintains an advantageous system of incentives and tax breaks and confirms the authorities’ commitment in the direction of an increasingly effective level playing field between private and SOEs.

Targeted incentives are provided for specific sectors, industrial parks and areas with special characteristics (high-tech, economic zones, areas with complex socio-economic conditions).

Vietnam is home to a growing innovation ecosystem. There are numerous start-ups and venture capital funds looking with increasing interest at the Vietnamese economy.

TRADE AGREEMENTS

Vietnam’s participation in a dense network of free trade agreements (about 15 with more than fifty countries) offers companies operating in the country comparative advantages in terms of tariff reductions in the export of their products, particularly in regional markets. With its strong integration into international markets and global value chains, Vietnam is a manufacturing and trade hub for the entire region.

Vietnam has been a member of ASEAN since 1995 and of the WTO since 2007. On December 15, 2015 and January 23, 2017, it implemented the Protocol on Trade Facilitation Agreement and the Protocol amending the TRIPS Agreement, respectively.

The formal establishment of the ASEAN Economic Community, effective January 1, 2016, is an important step for the country in the integration process with the economies in the area, complementing the system of facilitation already provided in the free trade area (with tariff asymmetries ensuring Vietnamese products preferential treatment).

In 2018, Vietnam ratified the Trans-Pacific Trade Pact (CPTPP), which involves 11 countries in the Asia-Pacific region (about $10 trillion in GDP, for nearly half a billion people). This development, together with the many other free trade agreements the country has concluded, makes Vietnam the most open economy in the world, with trade worth twice its GDP.

From the 1st January 2022, the Regional Comprehensive Economic Partnership – RCEP came into effect, integrating the ASEAN agreements with China, South Korea, Japan, Australia and New Zealand into a single framework, forming a network equal to one-third of the global population and 1/3 of the world’s GDP.

EVFTA

The EU-Vietnam Free Trade Agreement, effective Aug. 1, 2020, provides for tariff liberalization at 99 percent (with particularly attractive terms for European companies in the alcohol, automotive, machinery, leather and furniture sectors); protection of intellectual property and geographical indications; and provision of a set of measures aimed at offering European companies a level playing field for exports and investment (NTB forecasts, substantial range of sectors open to EU companies in the field of services, investment, procurement, discipline of State Enterprise subsidies).

ITALY-VIETNAM. RELATIONS AND PROSPECTS.

Vietnam offers interesting OPPORTUNITIES, thanks to its industrial profile based on SMEs, its attractiveness in terms of foreign investment, the availability of a low-cost and skilled young workforce, as well as participation in the network of free trade agreements.

Vietnam’s industrial structure consists of 96 percent SMEs determined to acquire qualified products, machinery, technology and development models in order to successfully enter the supply chain of large international investments and to be able to concretely benefit from the advantages offered by the dense network of FTAs. Significant prospects are also assured by the sustained impetus of liberalization processes and investment incentives, ambitious goals in multiple sectors (infrastructure, energy, agricultural mechanization, biomedical, tourism) and the expansion of a more affluent middle class that is particularly sensitive to the appeal of “Made in Italy” products (gastronomy, furniture, design and fashion).

Finally, the tariff liberalizations offered by the conclusion of the Free Trade Agreements are reflected not only in the potential of exports to Vietnam (EU-Vietnam FTA Agreement), but also in the potential of production and exports to Southeast Asian markets in particular and to world markets, thanks to Vietnam’s hub profile and the CPTPP, ASEAN, Korea and Eurasian Union Agreements.