Vietnam – EU: From 35 Years of Cooperation to a New Wave of Strategic Investment (Part 2)

Building on more than 35 years of strengthened cooperation, and particularly following the entry into force of the EVFTA, Vietnam–EU relations are entering a new phase in which the focus is no longer limited to trade but is shifting strongly toward strategic investment. As European enterprises accelerate supply chain restructuring and seek stable, sustainable destinations in Asia, Vietnam is emerging as an attractive choice.

The question is no longer whether Vietnam can attract capital flows from the EU, but rather which factors are shaping Vietnam’s attractiveness compared to competing economies in the region, and which sectors are becoming focal points for investment inflows in this new phase.

Vietnam – An Attractive Investment Destination for the EU

1. Vietnam’s Competitive Advantages

Political and social stability: A foundation for long-term investment

Amid an increasingly volatile global geopolitical environment, stability has become a critical criterion in international investors’ capital allocation strategies. Vietnam is regarded as one of the countries that has maintained long-term political and social stability, along with a consistent policy orientation toward attracting foreign investment.

The legal framework governing investment and trade continues to be refined, while international commitments, including trade and investment protection agreements, enhance transparency and predictability in the business environment. This is particularly important for long-cycle projects such as infrastructure, energy, and manufacturing.

In addition, a foreign policy of diversification and multilateralization enables Vietnam to maintain balanced relations with major partners, facilitating trade and investment activities amid intensifying strategic competition among major economies.

Labor force: Large scale with improving quality

Vietnam possesses a large labor force of approximately 53.8 million people. By 2025, the population is projected to reach around 102.3 million, with 62.7% in the working-age group (15–59), indicating that Vietnam remains in its “golden population” phase.

Source: GSO

In terms of quality, the labor force has shown notable improvement. In 2024, about 27.8% of workers held degrees or professional certifications – a figure that, while still modest, reflects a positive trend in human capital development. Major economic centers such as Hanoi and Ho Chi Minh City are witnessing strong hiring demand in high-tech, energy, and digital transformation sectors.

However, the proportion of untrained labor remains high at 71.4%, posing a significant challenge in meeting the requirements of high-tech industries. In this context, many EU investors are adopting an approach that combines investment with workforce training to build long-term competitive advantages.

Notably, in the semiconductor sector – a priority for both Vietnam and the EU, Vietnam currently has around 5,000 chip design engineers, while demand could reach 20,000 within the next five years. This gap creates substantial opportunities for training collaboration and technology transfer from European partners.

Geographical location: A connectivity hub in regional and global supply chains

Located in the heart of Southeast Asia, bordering China and with over 3,200 km of coastline, Vietnam is well-positioned to integrate deeply into regional production and logistics networks.

As multinational corporations pursue supply chain diversification strategies, Vietnam is emerging as a suitable destination within the “China+1” model. Its connectivity to major regional manufacturing hubs, combined with competitive costs and a developing industrial ecosystem, makes Vietnam an important link in global value chains.

Furthermore, participation in regional trade agreements such as RCEP facilitates supply chain optimization through rules of origin accumulation, thereby enhancing the competitiveness of goods produced in Vietnam.

International integration: Advantages from an extensive FTA network

Vietnam currently has around 17 signed and effective free trade agreements, providing access to markets accounting for approximately 90% of global GDP.

Notably, Vietnam is among the few countries that maintain trade agreements with multiple major economic centers, including the EU, Japan, South Korea, and CPTPP member states. This creates a significant advantage for EU investors choosing Vietnam as a production base, not only to serve the domestic market but also to export to other markets with preferential tariffs.

The EVFTA, with its commitment to eliminate over 99% of tariff lines according to a roadmap, not only promotes bilateral trade but also drives improvements in production standards, product quality, and supply chain sustainability in Vietnam.

2. Potential Areas of Cooperation

Renewable energy and green transition

Among current areas of cooperation, renewable energy and green transition represent the clearest convergence of three core factors: Vietnam’s domestic demand, EU technological and financial capabilities, and global pressure for emissions reduction and supply chain decarbonization.

Vietnam is facing rapidly increasing energy demand. Under the revised Power Development Plan VIII (April 2025), offshore wind capacity is targeted to reach between 6,000 MW and 17,032 MW by 2035, while solar power (including rooftop solar) is expected to reach between 46,459 MW and 73,416 MW. This scale highlights a massive investment market opening up in the medium to long term.

The EU is already directly engaged in this transition. The Just Energy Transition Partnership (JETP), co-led by the EU and the United Kingdom, aims to support Vietnam in accelerating its shift toward a greener and more sustainable energy system.

On the financing side, concrete commitments are gradually being realized. The EUR 200 million credit facility agreement between EIB Global and Techcombank for climate investment is a notable example, focusing on renewable energy projects, energy efficiency improvements, and sustainable transport development.

At the project level, the presence of European enterprises is becoming increasingly evident. The La Gan offshore wind project, developed by Copenhagen Infrastructure Partners, is one of the largest renewable energy projects in Vietnam and reflects a broader trend of investment combined with technology transfer and domestic industrial ecosystem development.

Notably, the Direct Power Purchase Agreement (DPPA) mechanism under Decree 57/2025/ND-CP (effective from March 2025) has marked a significant breakthrough by allowing enterprises to purchase renewable electricity directly from producers. This mechanism not only reshapes the power market structure but also serves as a key tool for foreign investors to meet ESG standards and emission reduction commitments set by their European parent companies.

High-tech manufacturing

High-tech industries, particularly semiconductors and electronics, are emerging as a new pillar in attracting EU investment. Vietnam’s semiconductor market was valued at USD 7.03 billion in 2024 and is projected to reach USD 16.64 billion by 2033, with a compound annual growth rate of 9.30%. As of the end of 2024, Vietnam had attracted 174 FDI projects in this sector, with total registered capital of USD 11.6 billion.

As the EU intensifies its strategy to diversify semiconductor supply chains and reduce dependence on certain markets, Vietnam stands out as a suitable option due to competitive production costs, an expanding technical workforce, and relatively attractive investment incentives.

Specific investment projects clearly illustrate this trend. LEGO is developing a USD 1 billion project in VSIP III Industrial Park with a fully renewable energy-powered operation model – a benchmark for carbon-neutral manufacturing. Similarly, Pandora has committed USD 150 million to jewelry production, creating over 7,000 jobs, while Schneider Electric continues to expand its engineering operations in Ho Chi Minh City.

These projects reflect a significant shift: from purely manufacturing investment to integrated investment encompassing technology, environmental standards, and sustainable development strategies.

Digital transformation and the digital economy

Alongside manufacturing, the digital economy is becoming an important growth driver. Vietnam’s semiconductor industry is expected to generate USD 21 billion in revenue in 2025, while the e-commerce market is projected to reach USD 31 billion.

EU digital standards, including the General Data Protection Regulation (GDPR) and the AI Act, are increasingly shaping global norms. This creates requirements for Vietnam to develop a compatible legal framework while opening up opportunities for deeper cooperation with EU enterprises in advisory, technology transfer, and digital governance models.

At the local level, Ho Chi Minh City is proactively promoting cooperation in digital infrastructure, semiconductors, and green energy, leveraging resources from the European Investment Bank (EIB) and EU financial institutions under the Global Gateway initiative. The piloting of innovation sandbox models aligned with European standards also reflects a new approach to technology governance and development.

Sustainable agriculture and food

Although less prominent, sustainable agriculture and food represent a sector with significant potential, particularly as the EU tightens supply chain standards, notably through the EU Deforestation Regulation (EUDR).

Vietnam is one of the world’s leading agricultural exporters, with key products such as coffee, shrimp, pangasius, rice, and pepper. However, to maintain and expand its market share in the EU – one of the most demanding markets globally—Vietnam’s agricultural value chains need comprehensive upgrading, from processing technologies to traceability systems and sustainability certification.

This creates room for deeper EU participation, particularly in agricultural technology development and the establishment of integrated “farm-to-fork” value chains aligned with the EU’s Farm to Fork strategy.

3. Outlook 2026–2030: Toward a New Generation of Investment

From “investment for production” to “investment for ecosystem building”

The new wave of EU FDI into Vietnam is showing a clear qualitative shift compared to previous phases. While past investment was primarily driven by labor cost advantages and production expansion, the current focus is increasingly on building innovation ecosystems, promoting technology transfer, and co-developing industrial standards.

This approach not only generates higher added value but also fosters long-term linkages between EU investors and the Vietnamese economy. Instead of standalone projects, the emerging trend emphasizes industry clusters where production, research and development (R&D), workforce training, and supply ecosystems are tightly integrated.

In this context, EU capital is concentrating on core technology sectors such as artificial intelligence (AI), semiconductors, data centers, renewable energy, and green logistics – industries that will play a pivotal role in the future economic structure.

EU–Vietnam Forum: From policy dialogue to practical connectivity mechanisms

The EU–Vietnam Business and Investment Forum: Global Gateway Strategy, first held in March 2026, marks an important shift from policy-level cooperation to structured and recurring investment promotion.

Unlike symbolic conferences, this forum is designed as a practical platform connecting European businesses with Vietnamese partners. The direct participation of investment promotion agencies, development banks, and policymakers from both sides helps bridge the gap between strategic direction and implementation.

This approach reflects a broader trend in international cooperation: moving from dialogue to action, from commitments to execution. It also aligns with the view of EuroCham Chairman Bruno Jaspaert, who described this as a “golden time” for Vietnam to consolidate its foundational advantages, strengthen sustainable partnerships, and effectively leverage its FTA network to attract strategic FDI.

Expected scenario for 2026–2030

Based on current trends and newly established cooperation frameworks, a positive growth scenario for 2026–2030 is gradually taking shape. Accordingly, Vietnam’s annual disbursed FDI could exceed USD 30 billion, while the share of EU capital is expected to increase significantly as initiatives such as Global Gateway and JETP are implemented more substantively.

At the same time, Vietnam–EU bilateral trade is projected to continue growing and could surpass EUR 80 billion, with a shift toward higher value-added goods, reflecting supply chain upgrading.

However, to realize this scenario, several foundational conditions must be ensured. First is the continued improvement of the legal environment toward greater transparency, consistency, and predictability. Second, accelerating the development of a high-quality workforce will be critical to enhancing the absorption capacity for high-tech investment flows. Finally, maintaining stability and consistency in energy policies, particularly in renewable energy—will be key to retaining and expanding EU investment in the long term.

4. Conclusion

The foundation of 35 years of cooperation has established the legal framework and level of trust necessary for Vietnam–EU relations. The upgrade to a Comprehensive Strategic Partnership in January 2026 further expands the scope of cooperation both in breadth and depth. The core issue now is no longer political commitment, but the ability to translate those commitments into tangible flows of capital, technology, and employment opportunities.

Amid global supply chain restructuring, Vietnam stands at a strategic juncture to position itself not only as a manufacturing hub but also as a long-term development partner for Europe in the era of green and digital transformation.