EU Trade Ties with Vietnam Heating Up Marked by Czech PM Visit After 15 Years

Czech Prime Minister Petr Fiala made his first trip to Asia since taking office at the end of 2021. This is also the first visit from the head of the Czech Government to Vietnam in 15 years, a further sign that trade and business between EU member states and Vietnam is heating up.

On April 20th, 2023, the Prime Minister of the Czech Republic, Petr Fiala, embarked on an official visit to Vietnam at the invitation of Vietnamese Prime Minister Pham Minh Chinh. This was in line with Vietnam’s growing importance to EU member states as a result of trade reforms in recent years, most notably the EU-Vietnam Free Trade Agreement (EVFTA).

“Vietnam holds a significant status as the foremost partner of the Czech Republic in the Southeast Asian region,” Czech Prime Minister Petr Fiala told a forum in Hanoi last week.

“Over the course of more than seven decades, the cooperative ties between these two nations have continued to evolve, with a particular emphasis on the economic dimension serving as a pivotal pillar,” he said.

The visit was capped with a signing ceremony for a range of agreements between agencies and enterprises from both nations. These included:

• A cooperative agreement between the Vietnam Federation of Trade and Industry and the Czech Republic Chamber of Commerce that aims to promote the exchange of knowledge and to enhance support for businesses of both nations;
• A cooperative agreement between Czech Airlines and Vietjet Air to collaborate on the training of commercial pilots with licenses, including private pilot’s licenses, instrument ratings, and commercial pilot’s licenses, as well as Airline Transport Pilot Licenses; and
• A Memorandum of Understanding between the Armex Group and PetroVietnam Power Corporation that seeks to strengthen and advance cooperation between the two entities.

These agreements are set to further boost and strengthen trade between these two countries.

Trade relations between the Czech Republic and Vietnam

The collective import-export turnover between Vietnam and the Czech Republic in 2022 surged by 15 percent compared to 2021, reaching  US$848 million. As a result of this considerable trade volume, the Czech Republic now stands as one of Vietnam’s most significant trading partners in Central and Eastern Europe.

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The two countries have also set a target to further strengthen trade ties and boost trade turnover to US$1 billion in the next 1-2 years.

They intend to do this by encouraging Czech companies to concentrate on areas of Czech expertise, such as automobile production, digital transformation, renewable energy, environment, and infrastructure. At the same time, they plan to make it easier for Vietnamese agricultural and aquatic products to enter the Czech market.

Czech FDI projects in Vietnam

Over the past 10 years, Vietnam has made substantial strides in enhancing its environment for foreign investors, rendering it an appealing investment location for Czech firms.

As it stands, the Czech Republic maintains 41 direct investment projects in Vietnam, with a combined registered capital exceeding US$92 million. This position ranks the Czech Republic 49th out of the 141 countries and territories with direct investment in Vietnam.

Investment from the Czech Republic has significant potential in a number of fields, including energy, locomotives (railway wagons, buses, and trams), agricultural machinery, and irrigation equipment. In terms of developmental cooperation, the Czech Republic has provided Vietnam with official development assistance to the value of roughly US$20 million.

See also: Vietnam FDI Tracker: Latest Update March 2023

Czech exports to Vietnam

The Czech Republic’s key exports to Vietnam

Source: General Statistics Office of Vietnam

Electronics

The Czech Republic’s high number of exports of machine, equipment, tools, and instruments can be attributed to its competitive advantage in electronics. These include its favorable geographic location, infrastructure, and qualified labor force as well as a number of investment incentives.

Chemicals

The strengths of the Czech chemical industry includes a well-educated workforce, a strategic central European location, a unique national pipeline network, a longstanding history and a tradition of chemical production.

Vietnam’s exports to Czech

Mobile phones, tablets, computers, and electronic devices constitute a considerable proportion of Vietnamese exports to the Czech Republic. These products account for approximately 40 percent of total exports from Vietnam to the Czech Republic.

In contrast, the most lucrative commodity exported from the Czech Republic to Vietnam in 2021 was mechanical machinery, which contributed to 15 percent of the nation’s overall trade volume with Vietnam.

Vietnam’s key exports to the Czech Republic

Source: Exports and imports value by months of 2022 – General Statistics Office of Vietnam

Machines and electronics

Vietnam has a low cost of production compared to many other countries, which makes it an attractive location for manufacturing electronic devices. This helps to keep the prices competitive, which is important in the highly competitive market for machines, equipment, tools and instruments.

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Apart from this, Vietnam has a skilled workforce in electronics manufacturing, which is crucial for producing high-quality products.

Footwear

Vietnamese companies have invested in developing high-quality footwear products that meet international standards. This has helped to build a reputation for Vietnamese footwear manufacturers as reliable and trustworthy.

Vietnamese companies produce various footwear products, including athletic shoes, dress shoes, sandals, and more. This variety of products makes it easy to find footwear that meets their specific needs and preferences.

Textiles and garments

Vietnam has made significant improvements in the quality of its textiles and garments over the years. Many Vietnamese manufacturers have invested in modern equipment and technology to produce high-quality products.

The future of trade between Vietnam and Czech

Vietnam and the Czech Republic are determined to elevate their trade turnover to US$1 billion. The implementation of the EU-Vietnam Investment Protection Agreement (EVIPA) is expected to further enhance bilateral trade moving forward. The EU-Vietnam Investment Partnership Agreement, if agreed to, will also promote cross-border investment. This should also foster a level of investment security that will be welcomed by both nations.

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