Credit: ITC market
Table 3. Vietnam’s imports from the UK from 2016-2018 (unit: GBP)
Credit: ITC market
Figure 1. Vietnam’s major import items (2018)
Machinery and mechanical appliances accounted for the largest proportion (25%) among the items with the greatest share of import turnover from the UK. The second largest import item is pharmaceuticals at 19%. Electrical machinery and equipment also accounted for a relatively high portion and is additionally also the product of greatest value that Vietnam exports to the UK. Besides the above; plastics, fish and crustaceans appear as top items of import-export turnover between Vietnam and the UK.
Vietnam and the United Kingdom have established diplomatic relations for the past 45 years. Regarding investment, the United Kingdom is currently in the top 15 largest foreign investors in Vietnam with approximately GBP £3.91 billion, accumulated until the end of 2018; in which FDI inflow nearly reached GBP £3.13 billion and indirect investment capital (FPI) reached nearly GBP £783 million (as of June 2019).
Among European countries, the United Kingdom is currently the second largest FDI investor into Vietnam (the largest being the Netherlands) and Vietnam’s third largest trading partner (after Germany and the Netherlands). Bilateral trade turnover in 2018 reached GBP £5.30 billion, up by 10% in comparison to 2017.
Although the two countries have made great strides in cooperation, the value of direct investment of nearly GBP £3.13 billion from British investors into Vietnam has not reflected the true potential of cooperation when considering that the UK is one of the world’s top five countries in terms of highest value of outward foreign direct investment (about GBP £234,95 billion).
Indirect investment from the UK to Vietnam is currently only at about GBP £783 million – still quite modest compared to the Vietnamese market’s ability to accommodate and absorb investment. The Vietnamese economy continues to grow strongly at an average of about 6% per year for the past 30 years and is consistently regarded as having great potential for sustainable long-term development.
Thus, it can be seen that the Vietnamese market still presents great promise for continued growth and development, providing a stable and healthy environment for UK investors along with a great many opportunities for financial cooperation between parties in the UK and Vietnam.
Chart 1: Total FDI inflow and Number of FDI projects from the UK to Vietnam in 2014 – 2018 (Source: Foreign Investment Agency)
*The exchange rate used is USD/GBP at the end-of-year exchange rates announced by the Bank of England during the period of 2014 – 2018.
UK companies (UK) invested in Vietnam quite early (1988-1989), initially focusing on the oil and gas sector (70% of total investment). So far, UK investment has expanded into many new areas such as banking, finance, the manufacturing industry, services, garments etc. In general, UK investment projects are of medium and small scale, focusing on the mineral sector with 7 projects, comprising a total investment capital of US $715.6 million. This is followed by the manufacturing and processing industry with 55 projects, comprising a total registered capital of US $714.4 million, accounting for 32.2% of registered capital. Real estate business ranked third with US $548 million of registered capital, accounting for 25.3% of registered capital. Banking, financial services and insurance compromise the majority of the remaining registered capital.
Currently, the number of foreign investors of British nationality with registered securities depository accounts in Vietnam amount to 269 accounts (including 120 individual investor accounts and 149 corporate investor accounts), amounting a total investment value of VND 21,700 billion (equivalent to USD 944 million). It could thus be said that broad market in Vietnam still has a lot of new room for cooperation between the two countries, and therefore there is a lot of potential for British investors.
A number of major UK companies have invested in Vietnam, as shown in the table below:
Table 5: Big UK Companies invest in Vietnam
SOCO International is a British Group established in 1997, operating in the field of oil and gas exploration and exploitation with a total asset worth of nearly 450 million USD. International cooperation activities of SOCO International are mainly concentrated in Vietnam, Angola and Congo. In Vietnam, since 2009, SOCO International has achieved many successes in cooperation with PVN, conducting exploration, construction and operation of oil and gas platforms on the continental shelf of Vietnam.
Over the past 19 years, SOCO International has invested over US $1 billion in Vietnam in the oil and gas sector and became the UK’s largest investor in Vietnam.
Prudential Insurance Group is a multinational life insurance and financial services company headquartered in London, United Kingdom.
According to the business results of 2018, Prudential Vietnam Co., Ltd. (Prudential) continues to affirm its stable growth and strong financial potential. Prudential is also recognized in the top 10 foreign-invested enterprises in Vietnam at the Rong Vang Awards Ceremony, and is the only insurance company on this list.
Unilever Vietnam has affirmed itself as one of the leading businesses in the consumer goods industry in the Vietnam market.
Starting its business in Vietnam in 1995, Unilever has invested over US $300 million in Vietnam. Through a network of more than 150 distributors and more than 300,000 retailers, Unilever Vietnam’s products are familiar names to most Vietnamese families.
EcoEgg is a British company that produces “green” laundry, sanitary and household products. Founded in 2008, the company’s first product is a special “egg”, EcoEgg, an environmentally friendly alternative that is more effective than common detergent. Recently, that products are distributed in Vietnam.
The British Business Group Vietnam (BBGV)
Department for International Development of UK in Viet Nam
Eu- Asean Business Council
In recent years the UK and Vietnam have developed close relations in terms of business and investment cooperation. The UK and Vietnam have continued to sign a Memorandum of Understanding on Financial Cooperation in the period of 2018-2021. The areas of cooperation include bond market management and development; developing policies to support green capital financing; development and restructuring of financial markets, developing a greater investor’s base, increasing the participation of institutional investors and foreign investors in Vietnam’s financial markets, development and application of international financial reporting standards, etc.
Along with that, bilateral cooperation on tax and customs between the UK and Vietnam continued to be strengthened. Vietnam and the United Kingdom have signed important framework agreements such as the Double Taxation Avoidance Agreement. Vietnam Customs and UK Customs have signed a cooperation agreement, proposing specific cooperation content in terms of the field of anti-smuggling and the need to support training and capacity building for customs authorities.
The key agreements that the UK and Vietnam have reached include:
- The Double Taxation Avoidance Agreement signed on April 9th, 1995.
- Bilateral Investment Agreement
On August 1st 2002, Vietnam and the United Kingdom signed the Agreement on Promotion and Protection of Bilateral Investment between the two countries. This agreement helps to strengthen the level of investment activity of state-owned enterprises and interstate companies.
- EU-Vietnam FTA