CEPA: a stepping stone towards Middle East and Africa markets

Prime Minister Phạm Minh Chính and Vice President and Prime Minister of the UAE Sheikh Mohammed bin Rashid Al Maktoum witness the signing of the Comprehensive Economic Partnership Agreement between Việt Nam and the UAE in Dubai on October 28. VNA/VNS Photo Dương Giang

Prime Minister Phạm Minh Chính's recent visit to the UAE culminated in a historic milestone: the signing of the Việt Nam-UAE Comprehensive Economic Partnership Agreement (CEPA) on October 28.

Minister of Industry and Trade Nguyễn Hồng Diên described the agreement as a breakthrough, one that will significantly enhance economic, trade, and investment cooperation between the two nations, creating substantial new market access for Việt Nam in the Middle East and Africa.

The CEPA is considered one of two historic milestones during Prime Minister Phạm Minh Chính’s visit. Could you briefly outline the negotiation process and summarise its key provisions?

Minister Nguyễn Hồng Diên: Since 2022, Việt Nam’s Ministry of Industry and Trade and the UAE’s Ministry of Economy have explored the feasibility of a bilateral free trade agreement (FTA), recognising the substantial benefits it could generate for both countries. This study and impact assessment conducted in 2022 confirmed the FTA’s viability and mutual advantages, leading to an official endorsement of the name Comprehensive Economic Partnership Agreement (CEPA) in April 2023. This name selection coincided with a working session where both sides signed a Ministerial Statement to initiate negotiations, establishing the Terms of Reference (TOR) for CEPA.

On June 20, 2023, Việt Nam’s government approved the launch of CEPA negotiations, underscoring the increasingly robust relations between Việt Nam and the UAE, especially in economic and trade cooperation.

Negotiations since June 2023 have covered an expansive range of topics: trade in goods and services, investment facilitation, digital trade, rules of origin, intellectual property, trade defence, sanitary and phytosanitary measures (SPS), technical barriers to trade (TBT), customs and trade facilitation, government procurement, legal and institutional issues, and support for small and medium enterprises. This extensive agenda ensures balanced interests for both countries, tailored to each one’s key sectors and market demands.

The signing of the CEPA during Prime Minister Chính’s UAE visit reflected both nations’ strong determination and collaborative efforts. Remarkably, the negotiation process was completed in just over a year—significantly faster than other FTAs and indeed a historic milestone.

The CEPA comprises 18 chapters, 15 annexes, and two bilateral letters. Notably, it includes a strong commitment to trade liberalisation, with the UAE agreeing to eliminate tariffs on 99 per cent of Việt Nam’s exports, while Việt Nam will phase out tariffs on 98.5 per cent of UAE exports. The agreement incorporates provisions that align with global trends in digital transformation and green development, underscoring a forward-looking approach to FTA design.

Given the tariff incentives outlined in the CEPA, which industries and sectors in Việt Nam do you think are likely to gain the most from this agreement?

Minister Diên: The UAE’s commitment to eliminate tariffs on numerous key Vietnamese export sectors will provide better conditions for boosting exports to the UAE and other Middle Eastern markets. The UAE is opening nearly all of its market to products with export potential from Việt Nam.

Agricultural products such as cashew nuts, pepper and honey are expected to see considerable growth, as demand for premium, clean, organic, and halal-certified agricultural products is strong in the UAE and neighbouring countries.

Vietnamese consumer goods—textiles, garments, footwear, and electronics—will also benefit from CEPA’s tariff reductions. This agreement enhances these products’ ability to compete on price and increase market share in the UAE, which has high demand for stylish, high-quality consumer goods.

Seafood, especially premium items like shrimp and fish, will also find greater opportunities. CEPA incentives will help expand exports and enhance product value in the UAE, a market known for its high standards for seafood.

Additionally, wood products are expected to benefit due to the UAE’s rapid urbanisation and high-end real estate developments, which drive demand for quality furniture and construction materials. The CEPA also includes commitments to open the services market and enhance transparency in government procurement, facilitating further investment exchanges between the two countries.

How will the CEPA strengthen economic and trade cooperation between Việt Nam and the UAE, and help Vietnamese goods gain broader access to the Middle East and Africa?

Minister Diên: As Việt Nam’s first FTA with an Arab country, the CEPA is a major milestone in strengthening relations with the UAE and the broader Middle Eastern and African regions. It not only facilitates economic and trade cooperation between the two countries but also attracts significant UAE investment into Việt Nam, especially in energy, industry, high technology, and supply chain development.

Việt Nam is committed to opening its market to the UAE at a level higher than those in WTO and other existing FTAs in areas like hotel and restaurant services, ship rental with operator, ship maintenance, repair, and shipping agency services. These sectors align with UAE strengths and pave the way for major investments in Việt Nam after the agreement’s implementation.

The CEPA includes a dedicated chapter on Economic Cooperation, where both sides commit to collaborative efforts in tourism, transportation, manufacturing, financial services, and energy.

Cooperation in these areas will be facilitated through conferences, seminars, delegation exchanges, and private-sector dialogues. These activities will enable Vietnamese businesses and experts to learn from the UAE’s expertise and access its advanced technologies.

The agreement offers Việt Nam a valuable opportunity to attract investment from the UAE, which is recognised for its significant financial resources. This includes sectors like processing, manufacturing, high-tech agriculture, and infrastructure. Before the CEPA signing, two delegations of major UAE enterprises had already visited Việt Nam to explore investment opportunities in energy, infrastructure, and logistics. Given the UAE’s position as a leading global logistics centre, the CEPA will strengthen transportation cooperation and supply chains, facilitating the efficient movement of Vietnamese goods.

How do you view the significance of the CEPA in helping Việt Nam access the Middle East market, which has an estimated value of US$2 trillion?

Minister Diên: Signing the CEPA with the UAE is a pivotal move for Việt Nam to seize trade and investment opportunities in the Middle East, a region with dynamic economies and significant economic potential that has been underexplored by Vietnamese businesses.

With the anticipated boost in the competitiveness of Vietnamese goods, businesses now have the opportunity to compete with or even surpass other partners in this key market.

The UAE is a major trade gateway in the Middle East, linking to many countries in the region, which will make it easier for Vietnamese products to penetrate large markets like Saudi Arabia, Qatar and Kuwait, as well as some North African and West Asian nations.

Through tariff reductions and expanded cooperation, the CEPA will be instrumental in unlocking the Middle East market’s potential. It represents the first step in Việt Nam’s government strategy to diversify and strengthen relations, placing priority on developing new partnerships alongside traditional markets, particularly with countries that have not been fully engaged in the past.

What specific challenges are Việt Namese exporters likely to face with CEPA implementation, and what actions will the Ministry of Industry and Trade take to help businesses leverage CEPA opportunities?

Minister Diên: To fully benefit from CEPA, businesses need to actively engage with the agreement’s commitments and understand UAE and Middle Eastern market practices, especially regarding halal certification. This certification is essential for entering Arab markets, and given that it’s a new area for many businesses, we must intensify efforts to remain competitive against countries that have long adhered to these import standards.

The government’s strong commitment will enable close collaboration between ministries, agencies, and the business community to tackle these challenges.

The Ministry of Industry and Trade has developed a CEPA Implementation Plan with three main goals. First, it will raise awareness of the agreement’s contents and impacts to ensure relevant parties understand the commitments and actions required to maximise opportunities.

Second, the ministry will work with other relevant ministries and agencies to develop or amend necessary legal documents, submitting these to competent authorities as per the CEPA’s roadmap. This includes a government decree on the special preferential import tariff schedule for UAE products and a circular on CEPA’s rules of origin.

Finally, the ministry will work with relevant bodies to establish programmes to support various industries and enhance competitiveness, with a particular focus on small, medium, and micro-enterprises. These efforts will assist businesses in meeting import requirements and exploring new export markets in the region, including achieving halal certification.