European Union External Action

Vietnam and the EU

Since establishing diplomatic ties in October 1990, Vietnam has become one of EU's main partners in Southeast Asia. The EU and Vietnam have since established cooperation in areas concerning political issues, global challenges, trade and development.

Established in 1996, the EU's diplomatic representation in Hanoi has aimed at;

  • Supporting Vietnam's sustainable economic development and improvement of the living conditions of the poor
  • Encouraging Vietnam's integration into the global economy via trade and support of socio-economic reforms.
  • Supporting Vietnam's transition into an open society based on good governance, rule of law and the respect for Human Rights.
  • Raising the profile of the European Union in Vietnam.

An important milestone in the EU-VN bilateral relations was the signing of an EU-Vietnam Framework Cooperation Agreement (FCA) in 1995 that entered into force on 1 June 1996.  The FCA defined the terms and broadened the EU's relationship with Vietnam beyond the humanitarian dimension of early years.

In 2012, the signing of the EU-Vietnam Framework Agreement on Comprehensive Partnership and Cooperation (PCA) marked the EU's commitment to strengthen and broaden the scope of the mutually-beneficial partnership with Vietnam. The PCA which entered into force in 2016 broadens EU-VN cooperation scope in the areas of trade, environment, energy, science and technology, good governance, human rights, as well as, tourism, culture, migration and the fight against corruption and organized crime.

By incorporating the EU and its Member States, the PCA provided an opportunity for increased coherence and synergy between EU and Member State policies. It allows high-level discussions on political, trade, economy and development issues, as well as on the implementation of EU cooperation programs. As a result, the annual EU-Vietnam enhanced Human Rights Dialogue and the EU-Vietnam Political Consultations at Vice-Ministerial Level were established in order to implement some key aspects of the PCA Agreement.

After completing the three-year negotiations of an EU-Vietnam Free Trade Agreement (FTA) at the end of 2015, the EU looks forward to realizing the trade and investment principles established in the PCA. The FTA, which is expected to enter into force in 2018, will bring EU-Vietnam way trade and investment to new levels

Lastly, in the area of development cooperation, through the EU and its Member States' engagement, the EU has become the largest grant donor in Vietnam. The EU will contribute with €400 million for development cooperation during the period of 2014-2020 focusing on good governance, energy and climate change.

Further information on EU-Vietnam political and economic relations can be found in the following links:

Over the last decades, the European Union has been a committed partner supporting Vietnam's integration into the global economy. Continuous assistance from the EU complemented the successful implementation of the market oriented reform policies known as Ðổi Mới in 1986 and has led to Vietnam's remarkable economic progress. Vietnam with improved living standards has left behind its status as one of the least developed countries in the world. With an average per capita income of US$ 2215, Vietnam is now classified as a lower middle-income country.

In 2016, the EU constituted one of the most important overseas markets for Vietnam (EU came second after the US). The EU purchased as much as 19.5% of the country's global exports in2016. The two way trade expanded by 9.5% mainly owing to the impressive growth rate of Vietnam's exports to the EU which made year-on-year increase of 10% (US$34 billion). The EU was also the third largest trading partner of Vietnam after China and the United States of America. In particular, the continuous surplus of nearly US$22.9 billion that Vietnam enjoys in its bilateral commercial links with the EU significantly helped to balance Vietnam's huge trade deficits with China and South Korea and led to an estimated global trade surplus of about US$ 2.68 billion. Thus, 2016 marks another year in which Vietnam enjoys a record-high trade surplus with the EU.

Vietnamese exports to the EU concentrated on labour intensive products including assembly of electronic items/ telephone sets, footwear, garments and textiles, coffee, seafood and furniture. The main commodities of EU exports to Vietnam are high-tech products, including boilers-machinery & mechanical products, electrical machinery & equipment, pharmaceutical products, and vehicles.

The expansion of Vietnamese exports to the EU market benefit considerably from the EU's Generalised Scheme of Preferences (GSP) which facilitates exports of goods from developing countries into the EU. Comprehensive information on EU import tariffs and other market access conditions can be found at the EU's Export Helpdesk.

Investment

The European Union is one of the most important sources of foreign investments for Vietnam. According to the Foreign Investment Agency of the Vietnamese Ministry of Planning and Investment , investors from 23 out of 28 EU Member States injected a total committed FDI worth US$21.77 billion into 1903 projects over the course of the past 26 years (by the end of 2016).

In 2016 investors from the EU poured US$478.4 million in 162 projects in Vietnam. The EU's ranking has been shifted down to the seventh position from the third position in 2015 among the biggest FDI partners of Vietnam. During this period, South Korea was the largest investment partner of Vietnam with committed FDI worth US$5.518 billion (accounting for 36.3% of the committed FDI licensed in2016) followed by Singapore (US$1.59 billion; 10.5%), China (US$1.263 billion; 8.3%), Hong Kong (US$1.103 billion; 7.3%), Japan (US$868.1 million; 5.7%), and Taiwan (US$826 million; 5.4%).

Managing the relationship

The European Commission represents the EU as a whole on trade policy issues, in close consultation with EU Member States. Regular meetings between the Economic and Commercial Counsellors of all EU missions and the EU Delegation to Vietnam ensure a vital exchange on issues of importance. In addition, the EU Delegation also regularly seeks views of European business, represented by the  European Chamber of Commerce.

Moreover, as part of the European Market Access partnership, the European Market Access Team for Vietnam was established in 2008. This serves as a forum for discussions between the business community, Member States Trade Counsellors and the EU Delegation in Vietnam aiming at addressing market access barriers in a more systematic and effective manner.

Both the Trade Counsellors and EuroCham follow thoroughly developments of the business climate in Vietnam and possible protectionist measures introduced by Vietnamese authorities that could affect trade. Some of these issues are featured in EuroCham's 'White Book of Trade / Investment Issues & Recommendations'.

The European Trade Policy and Investment Support Programme (EU-MUTRAP) is a key ongoing project promoting economic development, inclusive growth and poverty reduction in Vietnam. Totalling over € 35.37 million since 1998, it currently engages €16.5 million for the fourth programming period running between 27 August 2012 and 30 June 2017.

EU-MUTRAP has been instrumental in supporting Vietnam's negotiating efforts during the WTO accession process and during the EU-Vietnam FTA negotiations. It also continues to assist the country to further its integration into the global, ASEAN and sub-regional trade systems. The specific purpose of the programme is to support the Vietnamese Ministry of Industry and Trade (MOIT) and other relevant ministries or agencies in facilitating sustainable international trade and investment through improved capacity for policymaking, policy consultation and the implementation of related commitments, particularly vis-à-vis the EU-Vietnam FTA.

Free Trade Agreement

Trade plays a key role in Vietnam’s economic development strategy and a range of multilateral and bilateral trade agreements under negotiation reflect this importance.

The EU and Vietnam officially launched negotiations for the Free Trade Agreement (FTA) in June 2012. After 14 rounds of negotiations, the FTA negotiations were formally concluded in Brussels in December 2015.

This EU-Vietnam FTA is a modern and comprehensive deal. It will remove nearly all tariffs on goods traded between the two economies. It shows the shared conviction of the EU and Vietnam that trade is essential to growth, the creation of jobs and sustainable development.

Besides eliminating tariffs, Vietnam will also remove almost all of its export duties. The agreement will equally create new market access opportunities in services and investment. Vietnam has agreed to liberalise trade in financial services, telecommunications, transport, and postal and courier services. On investment, Vietnam will open its market to the EU by removing or easing limitations on certain sectors e.g. manufacturing of food and beverages, of ceramics or plastic products).

On government procurement, the EU and Vietnam have agreed on disciplines largely in line with Government Procurement Agreement (GPA) rules of the WTO, achieving a degree of transparency comparable to other EU Free Trade Agreements with developed countries and more advanced developing countries.

The agreement will also improve the protection in Vietnam of Geographical Indications (GIs) representing EU flagship agricultural products, such as Champagne, Parmigiano Reggiano cheese, Rioja wine, Roquefort cheese and Scotch Whisky. Vietnamese GIs too will be recognised and protected in the EU through the virtue of the FTA Agreement, providing the adequate framework for further promoting imports of quality products such as Mộc Châu tea or Buôn Ma Thuột coffee.

The FTA includes a robust and comprehensive chapter on Trade and Sustainable Development, covering labour and environmental matters of relevance in trade relations between the EU and Vietnam. Commitments to the core labour standards and Conventions of the International Labour Organisation (ILO) ensure the respect of fundamental workers' rights by both parties. In addition, the chapter includes commitments which will support the conservation and sustainable management of natural resources (including wildlife, forestry, and fisheries). Special attention is given to areas such as Corporate Social Responsibility and fair and ethical trading schemes.

The FTA will set up a dedicated structure to ensure the full implementation of the chapter, including mechanisms to ensure the involvement of independent economic, social, and environmental stakeholders both in the EU and in Vietnam.
The Agreement will also contain a legally binding link to the Partnership and Cooperation Agreement (PCA) that governs the overall relationship between the EU and Vietnam, thereby ensuring that human rights, democracy, and the rule of law are essential elements of our bilateral trade relations.

In June 2016, the EU Delegation to Vietnam published the Guide to the EU-Vietnam Free Trade Agreement. It provides first-hand information about the FTA as well as about the economic relations between EU and Vietnam.

More information can be found in the following links:

Overview

The European Union (EU) has been supporting Vietnam’s efforts towards poverty reduction, sustainable development and integration into the world economy since the 1990s. Development cooperation between Vietnam and the EU began with support for the return of Vietnamese asylum seekers in 1990. In 1996, the first meeting of the EC-Vietnam Joint Commission led to the “Framework Cooperation Agreement” which represented the legal basis for development cooperation between the two parties. The overall strategic objective of the EU in Viet Nam is to further develop political, economic and cultural ties and to increase the visibility, understanding and presence of the EU in the country. The Partnership and Cooperation Agreement, which entered into force in 2016, formalizes the EU's strategic objectives in line with Viet Nam’s Socio-Economic Development Plan (2011-2020). With this Agreement, the EU intends to leverage its added value in specific areas for a strengthened partnership, dialogue and cooperation with Viet Nam. These include the EU’s integration model based on fundamental values of democracy and human rights; its advanced regulatory environment and technological know-how to address global challenges on environment and climate change; and its unique experience of regional integration issues which are relevant for Viet Nam as a Member of ASEAN.

Since 1990, the European Union has provided more than EUR 600 million in grants for specific projects and programmes. The latest Multi-Annual Indicative Programme 2014-2020 will contribute EUR 400 milllion to support Viet Nam's socio-economic development by developing a sustainable energy sector and by strengthening governance and the rule of law. A number of new projects in these fields will be designed and launched over the coming years.

The previous Country Strategy Paper ,covering the period from 2007 until 2013, allocated a total of EUR 298.6 million for health, rural development, governance and economic cooperation. Additionally, many EU member states are also active in the country through their own development budgets. In 2013, EUR 743 million (US$965 million) were allocated for development cooperation to Vietnam, making EU and its Member States the largest grant donor in Vietnam.

The bilateral cooperation is complemented with regional cooperation and thematic programmes for Civil Society Organizations, environment, gender, etc. EU grants to Vietnam are in line with the country's socio-economic priorities, as underlined in the Socio-Economic Development Strategy, and come in support to the government efforts of restructuring the economy with the aim of ensuring long term growth and welfare for its citizens. EU has allocated development assistance to sectors where Vietnam is seeking progressive reforms in order to maximise synergies between government policies and development assistance programmes, and thus to contribute to the overall objective of inclusive and sustainable growth, poverty reduction and equity, and integration in the world economy. 

The EU Development policy is enshrined in the Agenda for Change Communication, adopted in May 2012, which concentrates EU aid on poverty reduction and sectors setting the foundation for inclusive and sustainable growth, including good governance (respect of human rights and democracy; gender equality, role of civil society and the fight against corruption); social protection, health and education; supporting a favourable business environment and deeper regional integration; and sustainable agriculture and clean energy, helping to provide safeguards against external  shocks  and  turn  challenges  of  food  security  and  climate  change  into opportunities for growth.

Blue Book

The Blue Book is a report on the overall European Union (EU) cooperation activities in Viet Nam. The objective of this report is to provide an overview, as well as specific details of EU (Member States and the European Commission) official development assistance (ODA) to Viet Nam. It also provides general and updated information about the EU institutional system and EU overall development policies.

Further information on EU-Vietnam cooperation in specific fields can be found in the below box.

The EU is the world’s largest provider of financing for humanitarian aid operations. Altogether, the European Commission and the governments of the 28 EU Member States pay for more than 50% of the assistance that comes from official channels. The European Commission itself manages almost half of this aid through its Humanitarian Aid and Civil Protection Directorate General (ECHO), which falls under the responsibility of Commissioner Mme Kristalina Georgieva. ECHO assesses humanitarian needs in disaster areas, allocates funding for food, shelter, medical provisions, water supplies, sanitation or emergency repairs, and evaluates their impact. ECHO grants cover emergency aid, food aid and aid to refugees and displaced persons worth a total of more than €1 billion per year throughout the world.  ECHO's operational partners. These partners include around 180 European NGOs, United Nations agencies and the Red Cross ‘family’.

ECHO also funds disaster preparedness and risk reduction projects in regions prone to natural catastrophes under through the DIPECHO (“Disaster Preparedness – ECHO”) programme. In Vietnam, projects focus on reducing the impact of typhoons, floods, flash floods and landslides for populations most at risk, such as those living in coastal areas, and more recently also those in mountainous, remote places. Partners have concentrated on training local authorities and improving preparedness capacities of local relief organisations or groups such as the Vietnamese Red Cross and local communities, in particular involving children.

Early 2014, the on-going humanitarian and DIPECHO projects in Vietnam amount to EU 8.7 Million. In response to the Wutip and Nari storms which hit Vietnam in the second part of 2013, an additional EUR 1.5 million is allocated to Vietnam and new projects will be agreed upon. 

Useful links

For any other questions, please contact the ECHO East and Southeast Asia regional support office in Thailand at echo-bangkok@ec.europa.eu or by phone at +66-22551035.

Mathias Eick,

Evangelos Petratos,

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