VIETNAM-COMPARISON MARKET ACCESS – WTO – TRANS PACIFIC PARTNERSHIP AGREEMENT – EU VIETNAM FREE TRADE AGREEMENT – ASEAN ECONOMIC COMMUNITY – WHICH AGREEMENT PROVIDES BEST LEVEL OF MARKET ACCESS FOR FOREIGN INVESTORS AND SERVICE PROVIDERS? THE ANSWERS:

Vietnam’s economic trajectory has been one of resilience and transformation over the past decade. The country has sustained its momentum and remains a key destination for foreign investors. Despite global headwinds such as U.S.–China trade tensions, the COVID-19 pandemic, and ongoing geopolitical uncertainties, Vietnam continues to demonstrate robust growth, averaging around 6% annually in the years leading up to 2024. The nation has strengthened its institutional framework, improved infrastructure, and embraced digital transformation, positioning itself as a critical node in global supply chains.

A Dynamic Economic Outlook

Vietnam’s GDP growth in recent years reflects a stable macroeconomic environment, driven by strong manufacturing, rising domestic consumption, and strategic participation in global trade pacts. In 2024, GDP is projected to grow around 6% following a 5.05% expansion in 2023, supported by resilient exports and increasing foreign direct investment (FDI). Inflation remains under control, and the government’s commitment to market reforms and green transition policies strengthens investor confidence. Key sectors such as renewable energy, high-tech manufacturing, semiconductors, and digital services are emerging as new growth engines, backed by government initiatives to enhance human capital and promote sustainable development.

Vietnam has also seen a steady increase in FDI, with disbursements reaching record levels in 2023 and early 2024 as global companies diversify away from China. Electronics, semiconductors, and e-commerce logistics have become particularly attractive industries, supported by competitive labor costs and a young, tech-savvy workforce. At the same time, the government is intensifying efforts to improve administrative efficiency, strengthen the legal framework for intellectual property rights, and accelerate public investment in transportation networks to facilitate trade.

Major Trade Pacts Shaping Market Access

Vietnam’s trade policy continues to evolve, building on landmark agreements and adding new frameworks to expand its global reach. These agreements not only drive export growth but also require Vietnam to modernize its legal and regulatory systems, aligning them with international standards and fostering greater transparency. Key agreements include:

• ASEAN Economic Community (AEC): As part of ASEAN’s effort to create a single market and production base, Vietnam benefits from tariff elimination across Southeast Asia. The AEC now represents a combined GDP exceeding US$3.6 trillion and a population of over 670 million, with deepening integration in services and investment. Ongoing initiatives aim to reduce non-tariff barriers, improve customs procedures, and enhance digital connectivity within the region.
• EU-Vietnam Free Trade Agreement (EVFTA): Entered into force in 2020, the EVFTA eliminates over 99% of tariffs over a 10-year schedule. Vietnamese exports, particularly textiles, footwear, and agricultural products, have surged into the EU, while European investors gain broader market access in manufacturing, renewable energy, and high-tech sectors. The agreement also includes strong provisions on sustainable development, labor rights, and environmental protection, setting a benchmark for Vietnam’s future trade negotiations.
• Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP): The CPTPP came into effect for Vietnam in 2019. Covering 11 economies accounting for 13% of global GDP, it provides preferential access to key markets such as Canada, Japan, and Australia, while setting high standards on labor, environment, and digital trade. New members such as the United Kingdom, which formally acceded in 2023, further expand the agreement’s scope and economic significance. Regarding foreign investment protection vis-à-vis the Vietnamese Government, the CPTPP introduces the mechanism of Investor State Dispute Settlement (ISDS). Under that provision, for investment-related disputes, the investors have the right to bring claims to the host country by means of international arbitration. The arbitration proceedings shall be made public as a matter of transparency in conflict cases. In addition, all decisions of the ISDS tribunal are directly enforceable in Vietnam and offshore against Vietnam. That is a level of legal certainty that never existed before in Vietnam.
• Regional Comprehensive Economic Partnership (RCEP): Effective from 2022, RCEP creates the world’s largest trade bloc, integrating ASEAN with China, Japan, Korea, Australia, and New Zealand. Vietnam gains from harmonized rules of origin, streamlined customs procedures, and expanded supply chain networks. The agreement strengthens Vietnam’s position as a regional manufacturing hub and supports its ambitions to become a key player in Asia-Pacific trade.

Market Access Comparison: Vietnam vs. Key Trade Frameworks

Foreign investors considering Vietnam should evaluate sectoral commitments across the WTO, AEC, EVFTA, and CPTPP. These agreements differ in their approach to market liberalization and can significantly impact investment strategies:

1. Negative vs. Positive Lists: The WTO, AEC, and EVFTA follow a positive list approach, where only listed sectors are open to foreign investment. In contrast, the CPTPP uses a negative list, meaning all sectors are open unless explicitly restricted. This provides greater certainty and flexibility for investors and encourages a more competitive environment.

2. Distribution Services: Under the EVFTA and CPTPP, Vietnam has gradually relaxed restrictions on retail establishment, phasing out the Economic Needs Test (ENT) for outlets under 500 m² and committing to abolishing ENT entirely within five years of implementation. This reform is especially important for international retailers and e-commerce platforms seeking to scale operations in Vietnam’s fast-growing consumer market.

3. Energy Sector: The EVFTA allows foreign participation with restrictions in power generation, while the CPTPP offers broader commitments except for sensitive areas such as power transmission and nuclear energy. Recent government policies encouraging renewable energy projects, including wind and solar, create additional opportunities despite lingering regulatory challenges.

4. Financial Services: CPTPP members enjoy fewer restrictions on cross-border banking and insurance services compared to WTO commitments, where foreign shareholding caps remain higher. This has spurred interest from global financial institutions seeking to provide new products in Vietnam’s rapidly growing capital markets.

Insurance sector:

Bank Services:

Securities services:

5. Transport Services:

6. Telecommunications: Foreign ownership limits in non-facilities-based services have increased from 65% under WTO schedules to as high as 100% within five years of CPTPP entry into force. The liberalization of this sector supports the expansion of 5G networks and cloud computing services, enabling deeper digital integration.

7. Government Procurement and Intellectual Property: Both the EVFTA and CPTPP contain advanced provisions on government procurement and IP protection, giving foreign investors greater access to public projects and reinforcing Vietnam’s commitment to global best practices.

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Please do not hesitate to contact Dr. Oliver Massmann under [email protected] if you have any questions or want to know more details on the above. Dr. Oliver Massmann is the General Director of Duane Morris Vietnam LLC.