Vietnamese Trade Counselor in Switzerland: FTA negotiations to increase investment cooperation opportunities

Vietnamese Trade Counselor in Switzerland Nguyen Duc Thuong

Vietnam, attractive investment destination

During his presentation at the Meeting of Vietnamese Counselors in Europe held in Italy on July 18 and 19, on enhancing cooperation and attracting investment to develop fundamental and supporting industries, Vietnamese Trade Counselor in Switzerland Nguyen Duc Thuong emphasized the significant potential for investment cooperation in the industrial sector between Vietnam and Switzerland.

Citing statistics from the General Department of Vietnam Customs, Trade Counselor Nguyen Duc Thuong said that as of the end of June 2024, Switzerland had 214 effective investment projects totaling US$2.028 billion in registered capital in Vietnam, ranking 21st among 146 countries and territories investing in the country.

In the first half of 2024, Vietnam attracted an additional seven Swiss investment projects with a total registered capital of US$1.14 million, while three other Swiss projects increased their capital by US$104.73 million, and an additional US$0.38 million were poured into Vietnam-based Swiss projects through shares purchase. This took the total Swiss registered investment capital in Vietnam in the first half of 2024 to US$106.25 million, more than 6.3 times of that in the same time last year, and made Switzerland rank 12th among countries and territories investing in Vietnam in this period.

The sharp increase in the Swiss investment capital was attributed to Nestlé Vietnam that has recently increased its investment capital in Vietnam by US$100 million to increase the capital of its Nestlé Tri An factory in Dong Nai Province to more than US$500 million and double the factory’s high-quality coffee production capacity.

Thuong cited statistics from the Swiss Federal Department of Economic Affairs, Education and Research (EAER), saying that about 60 Swiss enterprises currently have direct investment activities in Vietnam, providing thousands of jobs in the country. Most of Swiss projects are found in processing and manufacturing industries.

The results of surveys conducted with associations and local businesses show that Vietnam attracts foreign investors and those from Switzerland due to the following factors:

Firstly, rapid economic growth: Vietnam is one of the fastest-growing economies in Asia with a stable GDP growth rate. This dynamic growth creates an attractive environment for investment.

Secondly, strategic location: Vietnam's position in Southeast Asia provides access to major shipping routes and proximity to other large markets, including China, Japan, and ASEAN countries.

Thirdly, deep international integration: Swiss businesses highly appreciate the Free Trade Agreements (FTAs) that Vietnam has participated in, especially new ones such as the EVFTA and the CPTPP.

Fourthly, young and dynamic workforce: Vietnam has a large, young, and increasingly skilled labor force, which is very attractive to businesses seeking investment opportunities in Vietnam.

Fifthly, stable political environment: This stability makes foreign investors feel secure.

Sixthly, the Vietnamese government offers various incentives for foreign investors, including tax exemptions and reductions, as well as land use incentives.

Swiss businesses highly appreciate Vietnam's decision to establish its first Free Trade Zone in Da Nang in 2025. This will help Vietnam attract foreign investors.

Seventhly, a growing consumer market: With a rapidly expanding middle class, Vietnam has a widening market for consumer goods and various services, which can attract Swiss companies in these sectors.

Administrative reforms to attract Swiss investment

Besides the advantages, investment between the two countries still faces challenges, notably the absence of an FTA. According to local businesses, Vietnam will need to compete for investment, particularly with other Asian countries such as India, Indonesia, Thailand, Malaysia, and the Philippines. The lack of an FTA between the two sides is also a challenge for Swiss businesses looking to expand their investments in Vietnam. Meanwhile, India signed an FTA with the EFTA bloc in early 2024. In the ASEAN region, Singapore, Indonesia, and the Philippines have FTAs with the EFTA bloc, while Thailand and Malaysia are also negotiating FTAs like Vietnam.

Additionally, there are shortcomings in infrastructure: Although there have been improvements, Vietnam still faces challenges in infrastructure, particularly in transportation, urban infrastructure, logistics, and energy.

Other challenges include complex legal barriers and inconsistent enforcement of laws and regulations; limited skilled labor in some specialized fields. While its workforce is young and dynamic, Vietnam still lacks highly skilled experts in specialized areas such as high-tech manufacturing and advanced engineering.

Moreover, the enforcement of intellectual property rights remains a concerning issue and could be a barrier for foreign companies, especially those involved in high technology and innovation.

To boost cooperation and investment attraction from Switzerland, especially develop fundamental industries, supporting industries, the Vietnamese trade counselor in Switzerland made a number of proposals:

First, due to the characteristics of the Swiss economy, the fundamental industries that Vietnam can attract investment from this country include mechanics (especially precision mechanics; medical equipment; pharmaceutical; information technology - digitalization; renewable energy; food industry...

Second, promote negotiation and signing of FTAs ​​with the EFTA bloc (including Switzerland) to create a favorable legal foundation for trade exchange, investment and industrial cooperation between the two countries. According to the FTA between EFTA and India signed recently in early 2024, a chapter on cooperation and investment needs to be supplemented to promote Swiss and EFTA investment in Vietnam.

Third, continue to modernize infrastructure, including transportation networks, energy supplies and digital connections to reduce operation costs and improve operation efficiency of businesses.

Fourth, simplify administrative procedures, ensure consistent enforcement of regulations and provide clearer instructions to make it easier for foreign investors to access business environment in Vietnam.

Fifth, focus on developing a skilled workforce by strengthening the education system, vocational training programs and cooperation with foreign educational institutions, especially in the high technology and special fields.

Sixth, strengthen the protection of intellectual property rights, improve the legal framework and enforcement mechanism of intellectual property rights to build confidence for Swiss companies, especially those in the field of technology and innovation.

Seventh, continue to maintain a stable political environment and reasonable macroeconomic policies to create a safe investment environment.

Eighth, encourage sustainable business activities and investment in green technology, in line with global trends and Switzerland's capacity for sustainable environmental protection.

Ninth, promote the role of trade and investment promotion agencies, and also organize more business forums and events to introduce business opportunities in Vietnam to Swiss investors.

Finally, take advantage of the good diplomatic relationship between Vietnam and Switzerland, promote closer bilateral cooperation through bilateral cooperation agreements and exchanges of delegations.