This year, 2023, the United Kingdom and Vietnam celebrate 50 years of diplomatic relations. The strategic partnership between the UK and Vietnam has been tightening over the years. Following the entry into force of the UKVFTA, 65% of all tariffs was eliminated in 2021, which will increase to 99% by 2027. This equates to tariff savings of $134.65 million per year on Vietnamese exports to the UK after full implementation, and of $42.52 million per year on UK exports to Vietnam.
In addition to the UK, Vietnam is also party to other 14 FTAs with 52 countries globally. Vietnam is currently a member of two mega trade deals – the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the Regional Comprehensive Economic Partnership (RCEP) – which give Vietnam access to a gross market accounting for 32% of world population and 35% of world GDP. The UK, on the other hand, has signed 38 FTAs with 94 countries globally. The UK is also seeking to join the CPTPP and is under the process of accession negotiations.
In the last decade, merchandise export between the two countries has seen 5.7% and 7.4% of annual growth, respectively. There is still ample room for expanding bilateral trade. The UK holds $1.1 billion of export potential to Vietnam, covering pharmaceuticals, electronic integrated circuits, motor vehicles, among others. Vietnam, on the other hand, holds $4.5 billion of potential to the UK, covering electronics components, footwear, and apparel, etc. In terms of trade in services, potential exists for enhancing bilateral trade in Other Business Services, Financial Services, and Insurance Services, which the UK has surplus in exports and Vietnam experience deficit in 2021.
In 2020, the stock of foreign direct investment (FDI) from the UK in Vietnam was £932 million ($1,242 million). The prospect for Vietnam as an investment destination is strengthened by the expanding consumer base and middle-class. Vietnam is projected to add 36 million people to its middle class by 2030, positioning as the 7th market with fastest growing middle-class population in the world. This will drive greater demand for services, especially finance and insurance, healthcare, and education. The UK’s investment potential in Vietnam spans several sectors, including Green & Renewable Energy, Education & EdTech, Healthcare & MedTech, Finance, and Innovation & ICT.