Doing Business

Vietnam and Italy lift strategic partnership to new heights

Trường Lăng

September 7, 2023

Doing Business

Vietnam and Italy lift strategic partnership to new heights

Trường Lăng

September 7, 2023

Since the establishment of diplomatic relations between Vietnam and Italy on March 23, 1973, the political relationship between the two countries has been consolidated and developed rapidly.

Vietnam – Italy growing political-diplomatic relations

January 21, 2013, marked a milestone as the two countries signed a joint statement on the establishment of the strategic partnership on the occasion of the official visit to Italy by Party General Secretary Nguyen Phu Trong. Since then, both countries have actively promoted practical and effective cooperation in all areas, including politics, diplomacy, economics, science, education, defense and security, environmental protection, and local connectivity. Over the past five decades, bilateral relations have grown intensively and extensively across spheres.

Both sides have maintained effective mechanisms for bilateral cooperation, including the annual Strategic Dialogue at the Deputy Foreign Minister level (4th round in June 2022), Defense Policy Dialogue at the Deputy Minister level (3rd round in 2019), the Joint Committee on Economic Cooperation (7th round in June 2022), and the Joint Committee on Science and Technology Cooperation (7th round in July 2020).

Recently, on the celebration of 50th founding anniversary of diplomatic ties and the 10th anniversary of the bilateral strategic partnership, Vietnam President Vo Van Thuong and his Italian counterpart Sergio Mattarella discussed and agreed on major orientations and measures to strengthen the Vietnam – Italy strategic partnership at their talks in Rome (July 26, 2023).

Source: Vietnam Plus, 2023.

Vietnam & Italy economic-trade-investment ties

Vietnam is one of the 10 emerging markets prioritized for trade and investment development by Italy until 2030. Both sides continue to create favorable conditions for businesses of the two countries to enhance cooperation in areas where Italy has strengths and Vietnam has demand, such as mechanical engineering, infrastructure construction, textiles and garments, leather shoes, wood processing, supporting industries, construction materials, oil and gas, renewable energy, food processing, and more.

  • Economic-trade cooperation

In 2022, bilateral trade reached over 6.2 billion USD, up 11% compared to 2021, with expectations to reach 7-8 billion USD per year. Italy is the third largest trading partner of Vietnam in the EU (after Germany and the Netherlands), and Vietnam is the largest trading partner of Italy in ASEAN.

Vietnam’s exports to Italy are quite diverse, with many items having large export turnover, including phones and components, machinery and equipment, transportation parts, iron and steel, textiles and garments, footwear, coffee, among which, phones and components are the leading export group, accounting for about 25% of Vietnam’s exports to Italy. Some exports such as steel to the Italian market have increased sharply due to taking advantage of the benefits from the EVFTA agreement. Overall, bilateral trade between Vietnam and Italy has grown thanks to positive effects of the EU-Vietnam Free Trade Agreement (EVFTA)

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Source: General Statistics Office of Vietnam & General Department of Vietnam Customs. Infographic from Vietnam Plus, 2023.
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Source: General Statistics Office of Vietnam & General Department of Vietnam Customs. Infographic from Vietnam Plus, 2023.
  • Investment cooperation

Regarding investment, as of June 2023, Italy had run 147 valid projects worth 472.83 million USD in Vietnam, ranking 36 out of the 141 countries and territories investing in the country, and ninth among the 25 EU investors in the country. The projects are mainly in industries such as leather shoes, construction, sanitation equipment, water heaters, steel processing. Many large Italian corporations are actively operating in Vietnam in the manufacturing industry, such as Bonfiglioli (manufacturing motors), Piaggio (manufacturing and assembling motorcycles, engines), Danieli Officina (steel production), Fiat Iveco (Mekong automobile joint venture), Datalogic, Ariston (water heater production). Many wood processing and stone processing factories in Vietnam are using Italian machinery and technology. Danieli’s steel refining equipment has been present in over 10 projects in Vietnam, including the Vietnam-Italy steel plant and the Phu My steel plant.

Deputy Foreign Minister Ha Kim Ngoc and his Italian counterpart Manlio Di Stefano co-chair the consultation. Photo: VNA

Binh Duong and Vinh Phuc are typical examples of commercial cooperation and investment activities with Italy. Regular investment promotion activities are conducted annually. Binh Duong (ranked third in the country in attracting FDI after Ho Chi Minh City and Hanoi) currently has 8 investment projects with Italian enterprises with a total capital of nearly 64 million USD in the fields of manufacturing industry, fashion accessories, consumer goods, and food production. Among the 17/63 provinces and cities with Italian investment, Vinh Phuc is at the forefront with large projects from Piaggio with a total registered capital of 165 million USD.

  • Development cooperation

In terms of development cooperation, Italy has also maintained its official development assistance (ODA) to Vietnam, focusing on vocational training, personnel development, environmental protection, and water resources management, support to small and medium-sized enterprises, health care, and scientific research.

Italy is currently continuing to provide ODA to Vietnam with 7 ongoing projects and 3 other projects in the preparation phase, with a committed capital of over 117 million euros, focusing on vocational training and human resource development, environmental protection and water resource management, support for small and medium-sized enterprises, healthcare, and scientific research programs. Italy has approved the Ministry of Finance’s proposal not to extend the Agreement on supporting the water sector program (September 2022).

According to the WB’s National Climate and Development Report for Vietnam (July 2022), Vietnam needs about 368 billion USD in additional investment for climate change adaptation solutions by 2040, thus having a great demand for financial support from developed countries in the EU, including Italy. Additionally, Italy confirms its funding of 250 million euros to Vietnam from the Green Climate Fund under the JETP framework to combat climate change.

Prospects and trends in future bilateral relations

Vietnam and Italy have issued a Joint statement on strengthening their bilateral strategic partnership on the occasion of President Vo Van Thuong’s State visit to Italy (26 to 27 July 2023). The visit was of great significance in promoting political trust and strengthening the Vietnam – Italy Strategic Partnership. The visit was also particularly meaningful as it took place at a time when the two countries celebrate the 50th anniversary of diplomatic relations (1973-2023) and the 10th anniversary of the Strategic Partnership. Here are the key notes of the joint statement on strengthening economic, trade, investment and development cooperation:

  • The two Parties expressed their high appreciation for being each other’s important trade and investment partners, and underscored the potentials and needs for sustained cooperation in many other fields, especially in infrastructure development, digital economy, high technology, green growth, renewable energy, creative industries and smart agriculture. They stressed the need to continue creating favorable conditions for each other’s respective stakeholders engaging in investment and business activities.
  • The two Parties pledged to continue to fully and effectively implement the Vietnam – EU Free Trade Agreement (EVFTA) and improve the access to the market of each other’s Party, by removing unnecessary and unjustified trade restrictions. They also agreed to maintain the effective implementation of the Joint Committee on Economic Cooperation and strive to soon bring two-way trade value to US$7 billion.
  • Vietnam welcomed the adoption by the Italian Parliament of the law on the  ratification of the  EU – Vietnam Investment Protection Agreement (EVIPA), which will create favorable conditions for investors from both parties, on the basis of equality and mutual benefit. The Italian Party acknowledged Vietnam’s recent efforts in seriously and thoroughly implementing the EC’s recommendations in the fight against illegal, unreported, and unregulated (IUU) fishing.
  • The two Parties commended Italy’s continued ODA for Vietnam over the past years and welcomed the expansion of the Italian Agency for Development Cooperation Office in Hanoi in charge of the region, as well as Italy’s new strategy to promote development cooperation with ASEAN and Vietnam.
Vietnamese President Vo Van Thuong (L) and President of the Italian Senate Ignazio La Russa at their meeting in Rome on July 26.

Conclusion

In conclusion, the economic-trade potentials between Vietnam and Italy are promising and continue to flourish. The two countries have established strong partnerships in various fields, including trade, investment, and development cooperation. Vietnam’s strategic location in Southeast Asia, combined with its abundant natural resources and young, skilled workforce, presents a wealth of opportunities for Italian businesses seeking to expand their markets.

The year 2023 is of significance as it marks the 50th anniversary of the bilateral diplomatic ties, and 10 years since the establishment of the strategic partnership. With ongoing efforts to strengthen cooperation and investment ties, both countries can leverage their strengths and create mutually beneficial partnerships for sustained economic growth and development in the years to come.

If you are an Italian investor looking to expand your business into Vietnam, Viettonkin Consulting can help. We have extensive experience in the Vietnamese market and can provide you with the support you need to succeed. Contact us today to learn more. With our help, you can take advantage of the many opportunities available in Vietnam and build a successful business. Don’t hesitate to reach out to us!

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