Five Years of the EVFTA: Impacts on Vietnam’s FDI

The EU–Vietnam Free Trade Agreement (EVFTA), which came into force in August 2020, marked a pivotal moment in Vietnam’s economic trajectory. As one of the EU’s most comprehensive trade agreements with a developing country, it aimed to liberalize trade, enhance institutional reforms, and attract high-quality foreign direct investment (FDI). Five years on, the EVFTA has significantly reshaped Vietnam’s trade and investment landscape, positioning the country as a strategic hub in Southeast Asia.

Trade and Investment Growth

Since its implementation, the EVFTA has delivered robust results. Tariff reductions—65% immediately and nearly 99% by 2030, have boosted bilateral trade, which reached approximately USD 298 billion between August 2020 and May 2025. Vietnam is now the EU’s top trading partner in ASEAN and ranks 16th globally. EU FDI into Vietnam has surpassed USD 35 billion, with investments concentrated in manufacturing, renewable energy, pharmaceuticals, and high-tech sectors.

Sectoral Transformation

Manufacturing has been a major beneficiary. European firms in automotive, electronics, and machinery have expanded operations in Vietnam, drawn by favorable rules of origin and the opportunity to build local supply chains. This has led to more sophisticated FDI, emphasizing technology transfer and workforce development.

Renewable energy has flourished under the EVFTA’s sustainability provisions. European investors have launched numerous wind, solar, and biomass projects, supported by Vietnam’s clean energy goals and improved legal frameworks.

High-tech industries such as pharmaceuticals, biotechnology, and IT have gained from stronger intellectual property protections and regulatory alignment. Vietnam’s skilled labor pool and government incentives have made it an attractive destination for innovation-driven European firms.

Legal Certainty and Investor Confidence

The EVFTA has elevated Vietnam’s reputation from a low-cost manufacturing base to a reliable strategic partner. Legal certainty has improved through dispute resolution mechanisms and commitments to transparency, reducing perceived risks and encouraging long-term investment planning.

Implementation Challenges

Despite progress, Vietnam faces several challenges:

• Regulatory enforcement remains uneven. While legal frameworks have improved, gaps persist in labor rights, environmental standards, and IP enforcement. These inconsistencies can erode investor confidence.
• SME engagement is limited. Although awareness of the EVFTA is high, many small and medium-sized enterprises struggle with technical barriers, certification, and compliance. Only half report significant benefits, despite rising profits among top performers.
• Infrastructure bottlenecks, especially in industrial zones and border areas—hinder scalability. Transport, logistics, and digital infrastructure need further investment.
• Administrative inefficiencies continue to frustrate investors. Bureaucratic delays and unclear procedures persist despite reforms. A centralized one-stop-shop for EU investors could streamline approvals and improve the business climate.

STRATEGIC OUTLOOK

Vietnam has an opportunity to deepen its integration with the EU by expanding cooperation in digital trade, green finance, and innovation. The EU’s Global Gateway initiative and Vietnam’s digital transformation agenda offer promising platforms for collaboration. Joint ventures, academic exchanges, and technology partnerships can further enrich bilateral relationships.

CONCLUSION: BUILDING ON SUCCESS

The EVFTA’s fifth anniversary is both a celebration and a call to action. It has delivered nearly USD 300 billion in trade and over USD 35 billion in EU FDI, transforming Vietnam’s investment profile. To sustain this momentum, Vietnam is suggested to:

• Strengthen institutional capacity and regulatory enforcement.
• Streamline administrative processes and improve inter-agency coordination.
• Invest in infrastructure and digitalization.
• Empower SMEs through training, financial support, and stronger linkages with foreign investors.

By addressing these structural challenges, Vietnam can unlock new opportunities and ensure the EVFTA remains a cornerstone of its economic strategy. In a world of shifting trade dynamics, the EVFTA stands as a model of trust and shared prosperity—one that Vietnam is well-positioned to build upon.

The above content is provided for informational purposes only. The provision of this article does not create an attorney-client relationship between D’Andrea & Partners and the reader and does not constitute legal advice. Legal advice must be tailored to the specific circumstances of each case, and the contents of this article are not a substitute for legal counsel.