EU investors enticed by fresh development options

EU investors enticed by fresh development options

European investors are increasingly enthusiastic about expanding operations in Vietnam, driven by the country’s focused strategy on free trade, high-tech development, infrastructure, and sustainability.

European companies are prioritising clean energy, advanced tech, logistics centres, and more, Photo: Le Toan

According to the European Chamber of Commerce in Vietnam (EuroCham), European businesses are particularly interested in free trade zone (FTZ) projects, viewing the model as a new growth driver.

“Vietnam has recently begun piloting the construction of FTZs, opening up new development opportunities for our member companies,” EuroCham said. “If the pilot proceeds smoothly, it will create significant potential for Vietnam to attract additional capital inflows from the EU.”

At present, several cities and provinces are planning to develop FTZs. Ho Chi Minh City, for instance, is developing four. In recent months, Danang city in central Vietnam and Haiphong city in the north have also secured government approval to establish FTZs.

In the south, alongside Ho Chi Minh City, Dong Nai province is proposing to build an FTZ around the future Long Thanh airport, with subdivisions specialising in manufacturing, logistics, financial and commercial services, and the digital economy.

Le Duy Hiep, former chairman of the Vietnam Logistics Business Association, said FTZs worldwide are often linked to seaports, airports, and logistics centres, thereby forming integrated logistics chains.

“This is a popular international model that helps attract foreign investment,” he noted. “Like their European counterparts, Vietnamese companies and other foreign-invested enterprises are keen on FTZs, seeing them as a fresh development opportunity.”

However, Hiep pointed out that the lack and inconsistency of policies for FTZs remain a major challenge. “The most important thing is to have a clear investment attraction mechanism and a robust legal framework. Since we lack practical experience, we need to learn from other countries,” he said.

Dr Tran Quang Thang, head of the Ho Chi Minh City Institute of Economics and Management, suggested applying an institutional sandbox mechanism to test policies in areas such as green finance, fintech, digital assets, and cross-border logistics.

“It is necessary to adopt a principle of doing while perfecting the framework, rather than waiting until all laws are in place,” he said, citing China’s controlled pilot model in Shenzhen and Shanghai.

EuroCham highlighted that FTZs are among the emerging priorities for European companies in Vietnam, alongside clean energy, advanced technologies, and logistics centres, as the country aims to become a regional transit hub.

For example, in March, the European Investment Bank (EIB) announced plans to promote preferential lending for transport infrastructure projects, green energy, decarbonisation, and emission reduction initiatives for small- and medium-sized enterprises in Vietnam.

“By boosting green finance, the EIB supports Vietnam in attracting investment, creating opportunities, and building a future economy that benefits both individuals and businesses,” said Nicola Beer, EIB vice president.

Ambassador Julien Guerrier, Ambassador and Head of the EU delegation to Vietnam, said the EU is looking to deepen cooperation across sectors including infrastructure, renewable energy, and green transformation.

These priorities are expected to further strengthen the EU’s investment profile in Vietnam. The EU–Vietnam Free Trade Agreement (EVFTA) has helped boost EU investment in the country since its enforcement five years ago, with Ministry of Finance data showing an increase from $2.5 billion in 2022 to $3.25 billion in 2024.

Of the nearly 2,500 European-invested projects in Vietnam to date, the Netherlands, France, Luxembourg, and Germany have contributed a combined total of more than $20 billion. As of July, accumulated European investment in Vietnam had surpassed $30 billion.

European capital traditionally flows into 18 industries. Processing and manufacturing account for the largest share, at 36.3 per cent of total investment, followed by electricity and gas production and distribution at 20.7 per cent, real estate at 11 per cent, and information and communications at 6.6 per cent.

According to EuroCham, beyond tariff reductions, the EVFTA has opened new opportunities for European firms to tap into Vietnam’s fast-growing domestic market, from public–private partnerships to incentivised funding from abroad. In sectors such as sustainable agriculture, digitalisation, and green energy, European expertise complements Vietnam’s resource base and development goals.

For instance, European innovations in digitalised, sustainable farming are improving productivity and quality across Vietnam’s agri-food and aquaculture sectors – areas where Vietnam is a key supplier to Europe.

EuroCham chairman Bruno Jaspaert said, “As the world turns its attention to the fine print of new trade deals and the enforcement of reciprocal tariffs from the US, the EVFTA offers clarity and certainty. Its detailed provisions and mutual commitments between Vietnam and the EU show that aligned standards and open markets can deliver real growth and shared prosperity.”

While welcoming Vietnam’s reform agenda to modernise its economy and boost efficiency, European businesses expect further policy adjustments to maximise the EVFTA benefits and strengthen Vietnam’s global position amid growing uncertainties. “As someone who has built businesses and helped other investors find their niche in Vietnam as a second home, I understand the frustrations when administrative bottlenecks delay projects,” Jaspaert added. “But I also see something else: a government that listens, engages, and takes real steps towards change. Now, more than ever, it is time to double down on promised reforms and turn dialogue into delivery.”

Meanwhile, the EU–Vietnam Investment Protection Agreement is still pending ratification by several member states. Once fully enforced, it will provide a critical legal framework to safeguard and promote long-term European investment in Vietnam, Jaspaert noted.

Momentum is also growing towards a comprehensive strategic partnership, the natural next step for two partners increasingly aligned on trade, sustainability, and global governance.

VIR