International Journal of Advances in Engineering and Management (IJAEM)

Volume 4, Issue 5 May 2022, pp: 1004-1009 www.ijaem.net ISSN: 2395-5252

EU-Vietnam trade and FDI for one-year

EVFTA implementation under the effects of
covid-19 pandemic
Nguyen Thi Minh Anh1 and Kieu Thi Minh Thu2
1
International School, Thai Nguyen University, Thai Nguyen, Vietnam
2
Faculty of automotive and engines, Thai Nguyen University of Technology, Vietnam.
Corresponding Author: Kieu Thi Minh Thu

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Submitted: 10-05-2022 Revised: 17-05-2022 Accepted: 20-05-2022
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ABSTRACT: The European Union-Vietnam Free fastest-growing economies in the world and the
Trade Agreement (EVFTA), taking effect on August second fastest-growing state in the region (behind
the 1st 2020, has been expected to bring strategic China with an annual GDP per capital of 5.3% [1],
benefits for Vietnam with one of its largest and most [2]). Due to the 4th Covid-19 wave, in 2020,
important partners. This paper aims to identify and Vietnam’s real GDP rose only by 2.6%, compared
analyze the impact of the EVFTA on Vietnam-EU’s to the average of 2.9% GDP growth rate of the
trade and FDI under the negative effects of the Southeast Asia [3]. In such situation, Vietnam’s
Covid-19 pandemic. A comparative study was done score still being increased in the latest World Bank
for two seven-month periods before and after the Ease of Doing Business report, from 69 in 2020 to
Free Trade Agreement took effect, i.e. the first 70 in 2021, out of a possible 100 score [4].
seven months of 2020 and that of 2021. The two The Vietnam-EU Free Trade Agreement
most important aspects of Vietnam-EU import- officially entered into force on 1 August 2020 [5],
export balance as well as FDI into Vietnam from EU [6]. As the most ambitious free trade agreement
were analyzed using statistical techniques. The (FTA) that the EU has ever signed with a
secondary data were taken from the World Bank, developing country, the EU-Vietnam Free Trade
ADB and Vietnam’s Ministry of Planning and Agreement (EVFTA) will mutually lift 99% of the
Investment. The results showed that, the EVFTA tariffs within ten years. Immediately on the EVFTA
brought about the higher surplus for Vietnam trade, coming into effect, duty was lifted from 65% of EU
despite the fact that the overall of Vietnam trade are exports to Vietnam and 71% of Vietnamese exports
mostly deficit under the negative impact of the to the EU [7], [8], [9]. The agreement was expected
Covid-19 pandemic. After EVFTA, the average to bring about significant effects to overcome the
surplus of Vietnam-EU increased by around 100 negative impact of the Covid-19 pandemic.
USD millions. As a result of the 4th wave of the However, the fourth wave of the pandemic, started
Covid-19 outbreak, the FDI from EU to Vietnam from April 2021 has dramatically changed the
have significantly reduced. Nevertheless, several EU situation, especially the world’s trade, including EU
members still remain and continued to investigate members and Vietnam. Several investigations have
into Vietnam. The results would be helpful to been made to analyze the effects of the agreements
evaluate free trade agreements for overcoming the and the Covid-19, see for example [10], [11].
negative impact of the Covid-19 pandemic for However, an analysis for the same period of time
Vietnam and other developing countries. before and after the agreement implementation has
KEYWORDS:EVFTA; Free trade agreements; not been found. This paper provides a comparative
Covid-19; 7-month period; Vietnam-EU. study on the EU-Vietnam trade and FDI for the two
seven-month periods (from January 1 st to July 31st)
I. INTRODUCTION of 2020 and 2021, around the EVFTA
The European Union (EU) is a political and implementation (August the 1 st 2020). The
economic union of 27 member states, primarily evaluation of information in the same time point
locating in Europe. Vietnam is a country located in allows to eliminate objective seasonal factors, such
Southeast Asia, being considered as one of the as climate, traditional business practices, etc. For the

DOI: 10.35629/5252-040510041009Impact Factor value 7.429 | ISO 9001: 2008 Certified Journal Page 1004
 International Journal of Advances in Engineering and Management (IJAEM)
Volume 4, Issue 5 May 2022, pp: 1004-1009 www.ijaem.net ISSN: 2395-5252

purpose of analysis and estimation, data and literature, descriptive statistical method, and 2-
information were collected from official resources, sample t-test technique.
which are cited in the text. The methodologies used
in this paper are mainly synthesis and analysis of
II. EU-VIETNAM TRADING millions in April 2020. For the same period of
Figure 1 shows the overall trade balance 2021, under strong negative effects of the 4th wave
with respect to that of Vietnam – EU for the seven- of Covid-19 pandemic, the overall trade balance of
month periods of 2020 and 2021. The data were Vietnam recorded significant deficits in 5 out of 7
collected from CEIC [12], with the currency months, as shown in Figure 1b. Nevertheless, the
exchange rate between Euro and USD of 1.05 (the Vietnam-EU always have high values of surplus,
exchange rate was obtained at 2022 April). In the mostly higher than those in 2020. Besides, the
evaluated time of 2020 (Figure 1a), Vietnam's overall balance values of Vietnam were always
overall trade balance recorded deficits of 322.77 and deficit in April (both of the two years), as a results
1204.47 USD millions in January and April, of the time effect. However, the Vietnam-EU trade
respectively. In contrasts, the trade balance between were always surplus in those two months. These
Vietnam and EU always have surplus values during above effects would mostly be a result of the
the evaluated seven month, ranged from 1942.94 EVFTA’s positive impacts.
USD millions in March 2020 to 2368.48 USD

(a) (b)

Figure 1. Trade balance between Vietnam-World (VN-W) and Vietnam-EU (VN-EU)

in seven-month period of (a) in 2020 and (b) in 2021
Source: The authors calculated from ADB’s and EuroStat’s data

In order to highlight the increase of seven months of 2020 and those of 2021. The result
surplus values that Vietnam obtained after the is represented in Figure 2.
EVFTA started coming into force, a 2-sample t-test The result revealed that, with a p-value of 0.03 and
study was implemented. The hypothesis was 95% upper bound for difference, the average
declared as below. surplus of Vietnam-EU trade obtained in seven-
H0 :   0 month period of 2021 is higher than that of 2020 by
around 100 USD millions.
H1 :   0 A more comprehensive comparative data of
Where µ is the average surplus difference of Vietnam-EU trade is represented in Figure 3.
Vietnam’s surplus with EU, obtained in the first

DOI: 10.35629/5252-040510041009Impact Factor value 7.429 | ISO 9001: 2008 Certified Journal Page 1005
 International Journal of Advances in Engineering and Management (IJAEM)
Volume 4, Issue 5 May 2022, pp: 1004-1009 www.ijaem.net ISSN: 2395-5252

Figure 2. Comparative t-test of Vietnam-EU surplus between 2020 and 2021’s seven-month periods

(a) (b)

Figure 3. Vietnam-EU Trade in seven-month periods: (a) the export value from Vietnam to EU and (b) the
trade balance of Vietnam-EU
Source: The authors calculated from EuroStat

As can be seen in Figure 3a, the export Accumulated for the 7 first months of
values from Vietnam to EU in each month of the 2021 (just after EVFTA), Vietnam has a trade
period after EVFTA’s implementation (August the surplus of 13.02 billion USD to the EU market,
1st 2020) were always higher than those of the same increasing by 15.75% compared to that of 7 first
month before the EVFTA coming into force. These months of 2020 (before EVFTA).
resulted in higher surplus values of every month in It is also noted that, according to EuroStat,
2021, compared to those of the corresponding time between January 2020 and December 2021, EU
in 2020. imports from Vietnam increased by 34.4 % while
Figure 4 shows the trade values of imports from other non-EU countries increased by
Vietnam export (to EU), Vietnam import (from 25.4 %. EU exports to Vietnam decreased by 6.7 %
EU) and the trade balance in 2021 with 10 EU while exports to other non-EU countries increased
members having the surplus higher than 1000 USD by 5.0 %.These would be the positive impact of the
millions. Netherland and Germany are the two EU EVFTA, resulted in surplus of Vietnam-EU trade,
members provided the highest surplus for Vietnam, while the overall trade (Vietnam with the world)
with more than 7203 and 4145 USD millions, were deficit as mentioned above.
respectively.

DOI: 10.35629/5252-040510041009Impact Factor value 7.429 | ISO 9001: 2008 Certified Journal Page 1006
 International Journal of Advances in Engineering and Management (IJAEM)
Volume 4, Issue 5 May 2022, pp: 1004-1009 www.ijaem.net ISSN: 2395-5252

Figure 4. Vietnam’s trade in 2021 with 10 EU members having highest surplus

Source: The authors calculated from EuroStat

III. FDI FROM EU TO VIETNAM 2021. Nevertheless, several EU members still

EU members are leading FDI partners in remain and continued to investigate, despite the
Vietnam. The agreement between EU and Vietnam negative impact of the Covid-19 pandemic. Figure
brought about major implications for FDI values 5a represents 11 EU countries having increase
from EU into Vietnam. FDI contributes more than investments into Vietnam. For example, FDI for
a half of the value of the manufacturing sector, and seven-month period of 2021 from Germany into
over 70 percent of Vietnam’s export turnover [5], Vietnam increased by around 20 million USD
[11]. compared to that of the same period in 2020.
As a result of the 4th wave of the Covid-19 Besides, several countries although reduced the
outbreak, the FDI from EU to Vietnam have investment but still having large FDI into Vietnam.
significantly reduced. The total FDI during the 7- Figure 5b shows 10 EU members investigating
month period, from January the 1 st 2020 to July 31st largest FDI amount into Vietnam in seven first
2020, was downgraded from 649.84 USD millions months of 2021.
to 364.38 USD millions for the same period of

(a) (b)

Figure 5. Vietnam’s trade in 2021 with 10 EU members having highest surplus

Source: The authors calculated from Vietnam MPI [13]

DOI: 10.35629/5252-040510041009Impact Factor value 7.429 | ISO 9001: 2008 Certified Journal Page 1007
 International Journal of Advances in Engineering and Management (IJAEM)
Volume 4, Issue 5 May 2022, pp: 1004-1009 www.ijaem.net ISSN: 2395-5252

As can be seen from Figure 5, Germany, Belgium, pandemic and tosupport developing countries in the
Ireland, Denmark, Sweden, and Italy are the 7 new normal situation.
countries not only increased their investment but
also contributed the largest FDI into Vietnam in ACKNOWLEDGMENT
seven first months of 2021. Also, Netherland, The authors would like to express their thanks to
France, and Luxembourg are the countries although Thai Nguyen University of Technology, TNU
reduced the investment but still having largest FDI International School and Thai Nguyen University
into Vietnam, compared to other EU members. for their supports of the study.
Inside them, Netherland is the country investigated
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DOI: 10.35629/5252-040510041009Impact Factor value 7.429 | ISO 9001: 2008 Certified Journal Page 1008
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Volume 4, Issue 5 May 2022, pp: 1004-1009 www.ijaem.net ISSN: 2395-5252

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DOI: 10.35629/5252-040510041009Impact Factor value 7.429 | ISO 9001: 2008 Certified Journal Page 1009