Vietnam-Canada Bilateral Relations, Trade, and Investment Outlook

As the leading trade partner in ASEAN, Vietnam is seeking to expand bilateral commercial trade and business opportunities with Canada besides capitalizing on prospects via the CPTPP. In this article, we discuss some of the key factors that have made Vietnam an attractive investment destination for Canadian businesses.

Vietnam-Canada relations

The relationship between Vietnam and Canada has blossomed over the past five decades, marked by significant milestones in trade, investment, and commercial ties. Canada established diplomatic relations with Vietnam in 1973, opening an Embassy in Hanoi in 1994 and a Consulate General in Ho Chi Minh City in 1995. In 2017, the Canada-Vietnam Comprehensive Partnership was formally established and last year, 2023, saw the two countries commemorate 50 years of diplomatic ties. The Comprehensive Partnership identifies a number of areas for cooperation: political and diplomatic; trade and investment; development cooperation; defense and security; cultural and academic exchange; science, technology and innovation; and people-to-people ties.

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To boost bilateral collaboration, the two countries established the Canada-Vietnam Joint Economic Committee (JEC) on January 10, 2022. Co-chaired at the Deputy Minister level, the JEC offers a forum to address current and emerging bilateral trade and commercial matters. The inaugural meeting of the JEC took place in Vancouver on July 6, 2022.

In November 2023, Vietnam President Vo Van Thuong had a meeting with Canadian Prime Minister Justin Trudeau in San Francisco on the sideline of the APEC Economic Leaders’ Week. At the meeting, President Thuong suggested that both sides maintain exchanges at all levels, step up cooperation between localities, and maintain existing dialogue mechanisms in the fields of politics-diplomacy, defense-security, and economy-trade.

Building upon the momentum of high-level discussions, Canada’s Minister of Export Promotion, International Trade, and Economic Development, Mary Ng, is leading a mission to Vietnam from March 27 to 29, 2024. This mission aims to explore export opportunities within the Indo-Pacific region, with Minister Ng accompanied by over 135 Canadian businesses and organizations. During the visit, discussions with international counterparts will focus on promoting sustainable and inclusive trade practices. Additionally, Canadian enterprises are expected to establish meaningful connections with potential business partners and clients in Vietnam.

Vietnam-Canada bilateral trade

In 2023, Vietnam emerged as the leading trade partner for Canada within ASEAN, with bilateral trade reaching close to C$14 billion (approx. US$10.37 billion), as disclosed by the Vietnamese Ambassador to Canada, H.E. Pham Vinh Quang. He released these details during a recent speech at a conference in Ottawa ahead of the imminent trip of Minister Ng.

According to the United Nations COMTRADE database, Vietnam’s exports to Canada in 2023 amounted to US$9.82 billion, enjoying a large trade surplus of US$8.5 billion.

Vietnam being among Canada’s strongest trading partners is expected to see their bilateral trade relations grow stronger in 2024. Vietnamese items expected to experience export growth include footwear, leather products, and hats.

Impact of the CPTPP

While Canada and Vietnam do not have a direct bilateral free trade agreement (FTA), their participation in the CPTPP, which came into force in 2018 for Canada and 2019 in Vietnam, has led to increased trade exchanges.

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As per the Vietnam Chamber of Commerce and Industry (VCCI), the CPTPP has yielded impressive trade outcomes for Vietnam and Canada since its inception.

Under the CPTPP, both countries enjoy duty-free access for trading goods, while Canada has eliminated tariffs in key export sectors, fostering favorable conditions for bilateral trade. Moreover, the agreement facilitates Vietnamese consumers’ access to high-quality Canadian products at competitive prices. Canada has abolished tariffs on 94 percent of tariff lines for Vietnamese imports, reciprocated by Vietnam eliminating tariffs on roughly 66 percent of tariff lines for Canadian imports.

Indeed, following the enactment of the CPTPP, Vietnam reported a significant surge in its export turnover to Canada, soaring by almost 60 percent from US$3.8 billion in 2018 to over US$9 billion in 2023. This substantial increase is attributed to the competitive advantage stemming from preferential import tariffs, with tariff reductions of up to 94 percent.

In turn, the CPTPP has also progressively eliminated tariffs on significant Canadian exports to Vietnam. Notably, tariffs on items such as canola seed and fresh, chilled, and frozen salmon, along with frozen fish fillets, were immediately removed upon the agreement’s entry into force. Looking ahead, tariffs on beef and pork products are in the process of being phased out over varying timelines, with significant reductions expected within the next few years.

Key sectors for Canadian investment in Vietnam

In November 2023, Vietnam’s Ministry of Planning and Investment reported that Canada had a total of 258 active projects in Vietnam, valued at approximately US$4.81 billion.

Among these projects, several ventures stand out, showcasing Canada’s successful engagement in Vietnam’s development. Notably, the Ho Tram project, with a licensed investment of US$4.3 billion since 2008, focuses on the development of resorts, hotels, entertainment facilities, and a casino in the Ba Ria-Vung Tau province.

Another noteworthy example is Canada’s Triple Eye Infrastructure Corp, which obtained a license in 2014 to establish a joint venture with Vietnam’s Dai An JSC Co. The joint investment of US$260 million aims to construct the Dai An Vietnam-Canada International Hospital in the Hai Duong province.

Canada views Vietnam as a crucial trading partner within the ASEAN region. According to the Canadian government, sectors of priority interest for Canadian investment in Vietnam include (but are not limited to):

• Agriculture and agri-food
• Education
• Information and communication technology (ICT)
• Clean technology
• Infrastructure
• Aerospace
• Life sciences

Agriculture and processed foods

Agriculture plays a significant role in Vietnam’s economy, contributing to employment, food security, and rural livelihoods. It remains a vital sector for the country’s overall economic development.

In 2023, Vietnam’s agriculture sector demonstrated robust growth, expanding by 3.83 percent, making it the second-highest growing sector after the services industry, which experienced a 6.82 percent increase compared to 2022. Contributing to this sectoral growth were crop products and husbandry, which saw an increase of 3.88 percent, followed by forestry expanding by 3.74 percent, and fishery growing at 3.71 percent.

Overseas direct assistance (ODA) has played a crucial role in Vietnam’s agricultural growth, complementing the efforts of the Ministry of Agriculture and Rural Development (MARD). At the beginning of 2024, the Canadian government announced its commitment to provide a grant of US$30 million to Vietnam in order to support Vietnam’s development projects for sustainable and inclusive growth.

Vietnam and Canada have prioritized collaboration in the agricultural sector over the years, with a shared objective of bolstering global food security and fortifying the food supply chain. This collaboration has resulted in initiatives such as the Food Safety for Development and Smart Coastal Community Adapting to Climate Change projects, aimed at promoting safe and sustainable agricultural practices. Additionally, Canada’s Indo-Pacific strategy presents opportunities for Vietnam to enhance its participation in agricultural supply chains, promote biodiversity, and foster sustainable circular agriculture practices.

Renewable energy and green infrastructure

Vietnam stands out as one of the most efficient power markets in Southeast Asia, benefiting from affordable resources like hydro and coal. Having achieved nearly universal electrification at a relatively low cost compared to neighboring nations, the country boasts around 99 percent electrification.

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As electricity demand is forecasted to rise by approximately eight percent each year until 2025, the government is taking proactive steps to promote the development of renewable energy sources. This strategic move aims to bolster energy security and meet the escalating power needs of the nation.

The Canada-Vietnam Clean Energy Partnership forum convened in Ho Chi Minh City on August 2023 to foster collaboration between the private sectors of both nations. Through such alliances, Canada aims to contribute to the Just Energy Transition Partnership (JETP), assisting Vietnam in reaching its target of achieving net-zero emissions by 2050.

As outlined by the Canadian Consulate General, under the framework of JETP, which Vietnam entered into with the G7 countries, Canada commits to mobilizing US$15.5 billion from both the private sector and government channels over the next three to five years to support Vietnam’s transition towards green energy and sustainability.

Moreover, between 2018 and 2022, Canada pledged a total of US$1 million to the Federation of Canadian Municipalities (FCM) to assist two medium-sized Vietnamese cities in mitigating short-lived climate pollutants (SLCPs) within the solid waste sector. This initiative aimed to aid Vietnam in achieving its nationally determined contributions (NDCs) and fulfilling its obligations under the Paris Agreement.

Additionally, Canada allocated US$15 million, through contributions to the Canadian Climate Fund for the Private Sector (CFPS) in Asia – CFPS I (US$82.39 million) and CFPS II (US$200 million) – at the Asian Development Bank (ADB), to support the establishment of a 47.5-megawatt peak (MWp) of floating solar photovoltaic panels on the man-made reservoir of its existing 175 megawatt (MW) Da Mi hydro power plant. This project marks Vietnam’s first major privately funded solar power initiative, supported by international financing.

ICT

In 2023, the ICT sector experienced a 14 percent growth, reaching a value of VND 240 trillion Vietnamese dong (approx. US$10.2 billion). By 2027, it is anticipated that the IT market will surpass VND 400 trillion (approx. US$17 billion) as a result of heightened adoption of ICT solutions by both public and private sectors.

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Moreover, the Vietnamese government has approved the National Digital Transformation Program, which is expected to drive growth in the ICT market. Industries such as aviation, energy, and banking within the private sector are actively embracing advanced ICT solutions to enhance efficiency and promote sustainable development.

In order to boost investment in this sector, Vietnam has implemented regulations stipulated in Decree No. 108/2006/ND-CP, which outline the implementation of the Investment Law concerning the production of software and digital content. These regulations offer incentives, including:

• A preferential tax rate of 10 percent for a duration of 15 years;
• A tax exemption for four years; and
• A 50 percent reduction for the subsequent nine years.

Canada can significantly contribute to the growth of Vietnam’s ICT sector by fostering investment and trade, facilitating technology transfer and knowledge exchange, and supporting capacity building initiatives.

Healthcare and life sciences

In the past 20 years, Vietnam’s healthcare sector has evolved from a predominantly public sector-led system to one increasingly leveraging both domestic and international private sector expertise, technology, and knowledge to enhance access to life-saving medical services. In 2023, for example, there have been several notable mergers and acquisitions in the medical and pharmaceutical industry, with two international hospitals acquired by foreign entities and a rise in foreign investors buying Vietnamese pharmaceutical firms.

Within the healthcare sector, Vietnam recognizes Canada’s expertise in healthcare management, particularly its publicly funded yet privately delivered system. The two nations have worked closely to explore opportunities for collaboration. This partnership has materialized through initiatives like the Canada Vietnam Business Council (CVBC), facilitating discussions and agreements to promote investment in healthcare infrastructure. An example is Canada’s Triple Eye Corporation, a founding member of CVBC, which has undertaken significant projects such as the Dai An Vietnam Canada International Hospital.

Positive investment outlook for Canadian businesses in Vietnam

Overall, Vietnam’s fast-paced growth, political stability, and ease of doing business have collectively made the country ideal for foreign investment as it transforms into a regional powerhouse.

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As Canada’s largest trading partner within Southeast Asia, Vietnam offers unrivaled investment opportunities for Canadian businesses looking to enter or expand their footprint in the ASEAN market – which enjoys some of the highest growth rates globally. ASEAN is also expected to become a major consumption hub by 2030, owing to its substantial market size. Canadian companies have also already benefited from the flourishing trade relations between the two nations following the implementation of the CPTPP.

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