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  • Writer's pictureVirtus Prosperity

From East to West: Strong economic ties between Vietnam - UAE

1, Political Relations

Official diplomatic relations between Vietnam and the UAE were established on August 1, 1993. However, in reality, the friendly and cooperative relationship between Vietnam and the UAE has been formed for a long time and was tested during the two countries' struggle for national independence. Over the past 30 years, the friendly and cooperative relations between Vietnam and the UAE have been increasingly developed in various areas such as politics, diplomacy, trade, investment, labor, and tourism.

Especially, during the visit and work in the UAE in April 2023, Minister Nguyen Hong Dien and UAE Minister of State for International Trade, Ministry of Foreign Trade Thani bin Ahmed Al Zeyoudi signed a Ministerial Declaration to launch negotiations on the Comprehensive Economic Partnership Agreement between Vietnam and the UAE (CEPA).

This agreement is a milestone in the cooperation between the two countries, opening a new phase of strategic cooperation in various fields. This is indeed an important basis for bringing Vietnam-UAE relations to a new stage of development, contributing to expanding the export market for goods and services to the UAE and creating an important premise for Vietnam to enhance trade and services relations with the Middle East and African countries.


2, Economic cooperation between Vietnam and the UAE and the economic potentials of both countries.

Both countries always strive to maintain and enhance their friendly and mutually beneficial economic cooperation (CEPA) in order to develop together. Specifically:

(1) Vietnam provides significant support to the UAE in technology products such as phones, computers, electronic components, and more.

(2) In terms of food, with agriculture accounting for less than 1% of the economy (around 0.9%, mainly livestock and chili pepper cultivation), the UAE has to import most types of food to meet the needs of its people. Vietnam, with its abundant food supply, can help ensure the UAE's national food security at a time when its economy is facing many challenges.

(3) In addition, cooperation in infrastructure and logistics, where the UAE has strength in finance and logistics while Vietnam has high demand, is also an area of collaboration.

(4) Both Vietnam and the UAE have prospects for promoting cooperation in the tourism sector. With the diversity of tourism products in both countries, they can complement and support each other.

There are several areas in which the UAE has invested in Vietnam. Here are some notable projects:

- Hiep Phuoc Port: UAE's DP World has invested $2 billion in Hiep Phuoc Port in Ho Chi Minh City, one of the largest container ports in Vietnam.

- Ha Long Star Hotel: UAE's Mubadala Investment Company has invested $1 billion in Ha Long Star Hotel, a 5-star hotel in Ha Long Bay, Vietnam.

- Tourism projects in Da Nang: UAE's Al Futtaim Group has invested $4 billion in tourism projects in Da Nang, Vietnam, including a resort, a theme park, and a shopping center.

- Renewable energy: UAE's Masdar has invested $2 billion in a solar power plant in Ninh Thuan province, Vietnam.

- Logistics: UAE's DP World has invested $300 million in a logistics center in Hai Phong, Vietnam.

These large-scale investments demonstrate the diversification of UAE's investment portfolio in Vietnam, including logistics, real estate, tourism, and more. However, the energy sector remains the most important investment category due to UAE's significant oil and gas reserves, developed oil and gas industries, and their important role in the global energy sector.

In addition, UAE has also invested in Vietnam through its own sovereign wealth funds such as Mubadala and Abu Dhabi Investment Authority. These funds have invested in various sectors in Vietnam, including energy, infrastructure, and technology.

It is forecasted that this year, the number of tourists visiting the UAE will increase, domestic consumption will rise, and imports and re-exports are expected to continue growing. Therefore, there will be a strong demand for food, beverages, processed agricultural products, textile and apparel, footwear, phones, electronics, machinery, and equipment. Furthermore, UAE is a unique market, an open market with virtually no trade barriers, as its production does not meet domestic consumption. UAE is heavily reliant on imports to serve domestic demand and re-export, which opens up opportunities for Vietnamese goods.


3. The economic values that the two countries bring to each other

The UAE is the largest trading partner of Vietnam in the Middle East and North Africa region, but there is still potential for further development of the strengths of the two economies complementing each other. The UAE is currently the 7th largest export market for Vietnam, following the United States, China, Hong Kong (China), Japan, South Korea, and Germany. Vietnam is the largest partner of the UAE in ASEAN. In 2022, Vietnam's exports to the UAE increased 27.5 times since 2006, with Vietnam having a trade surplus of $3.27 billion.


Source: Virtus Prosperity Research, GDC


In the first 6 months of the year, Vietnam spent 348.7 million USD importing goods from the UAE. The commodity group with the largest turnover is liquefied petroleum gas, reaching nearly 155.3 million USD. This is also the only group of "hundreds of millions of dollars" in the first 6 months of the year. Some other notable imported commodity groups have turnover from 10 million USD to several tens of millions of USD such as plastic raw materials; ores and minerals; Animal feed and raw materials…

In contrast, the UAE's strength lies in energy, and Vietnam considers the UAE to be one of its most important partners in the Middle East region. The UAE has significant reserves of oil and gas, a developed oil and gas industry, and an important position in the global energy market. By signing the Comprehensive Economic Partnership Agreement (CEPA), the two countries will have a legal basis for strengthening cooperation in oil and gas exploration and exploitation, exchanging technical expertise, and training high-quality human resources in this crucial field.


4, Difficulties and challenges

However, difficulties and challenges also accompany advantages. Firstly, the current global economy is facing many challenges and difficulties, so the demand for Vietnam's exports will face difficulties, including the UAE. This country both imports for domestic consumption and re-exports to third countries.

Although the UAE is an open market that relies entirely on imports for most products to serve domestic demand, it is also a highly competitive market. Most exporting countries in the world want to export goods to the UAE. Therefore, Vietnamese goods will face some difficulties and challenges, such as:

(1) Fierce competition in terms of price as Vietnamese goods have to directly compete with goods from countries enjoying import duty reduction policies due to signing CEPA with the UAE, which includes the same range of Vietnamese export items such as fruits, agricultural products, and food.

(2) Transportation costs of Vietnamese goods are higher compared to other countries due to geographical distance and freight rates.

(3) Most food and beverage products from Vietnam do not have Halal certification.

(4) Vietnamese exporting businesses have not fully grasped the needs, culture, and consumer tastes of Muslims and the business community there (the retail system is mainly dominated by Indians and South Asians).

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