In a interval of shifting international dynamics, the signing of the excellent financial partnership settlement (CEPA) between Vietnam and the United Arab Emirates (UAE) on October 28, 2024, alerts each nations’ intent to deepen their partnerships past conventional alliances.
For Vietnam, the UAE represents a pathway to diversifying commerce companions and enhancing financial resilience by establishing ties with a area it has not historically engaged deeply. In the meantime, the UAE is eager to construct a strategic bridge into fast-growing Southeast Asian markets, aligning with its broader imaginative and prescient to strengthen its international commerce and logistics community. This settlement has super potential because it opens up a gateway for market entry not solely between each international locations however all the area. Nonetheless, to have the ability to obtain that, there are various sensible challenges to beat.
UAE’s enterprise into the Southeast Asian market is a major step to develop its attain internationally. The Gulf state signed a CEPA with Indonesia in 2020, which subsequently attracted roughly $10 billion in Emirati investments in logistics and vitality. An settlement with Cambodia adopted swiftly after, coming into power earlier this 12 months. This new settlement with Vietnam thus alerts a rising partnership between the Affiliation of Southeast Asian Nations (ASEAN) and the Gulf Cooperation Council (GCC), encouraging connectivity between these two areas.
With Vietnam, Cambodia and Indonesia formalizing financial ties with the UAE, the muse is rising for a broader ASEAN-GCC relationship that displays a shift towards South-South cooperation. Medium-sized international locations like Vietnam and the UAE are forging mutually helpful partnerships, setting a precedent for related agreements that scale back dependency on main powers and foster a extra multipolar diplomatic panorama.
Though economically vital, the Vietnam-UAE relationship has up to now been modest. The commerce quantity between the 2 international locations is round $6 billion, far decrease than Vietnam’s commerce with conventional companions equivalent to South Korea ($100 billion) and Japan ($50 billion). The brand new settlement goals to unlock financial potential throughout two major pathways: increasing the commerce of Vietnamese items into the UAE and the broader GCC area, and inspiring UAE funding into Vietnam’s development sectors equivalent to infrastructure, renewable vitality, and know-how.
With the UAE’s small home market of 10 million, this settlement is much less about native consumption than about positioning the UAE as a re-export hub for Vietnamese items throughout the broader GCC. Key Vietnamese exports – together with agricultural merchandise, seafood, textiles, and shopper electronics – stand to learn from the UAE’s strategic place as a transit level to the GCC’s mixed inhabitants of 54 million. As an illustration, seafood tariffs, beforehand starting from 5 % to fifteen %, are anticipated to scale back considerably, boosting competitiveness for Vietnamese exporters. Presently, Vietnamese agricultural merchandise account for round 4 % of the UAE’s agricultural imports, however with improved entry and diminished tariffs, this share may rise considerably, probably positioning Vietnam as a top-five provider to the UAE in agriculture.
Past commerce, the CEPA is meant to facilitate UAE funding in Vietnam’s infrastructure, know-how, and renewable vitality. In alignment with the UAE’s Imaginative and prescient 2030, which directs billions towards international direct funding (FDI) throughout Asia, the UAE’s dedication to joint ventures in ASEAN international locations is obvious, significantly in Indonesia, the place Emirati funding in infrastructure has already exceeded $3 billion. This collaborative mannequin can function a blueprint for related UAE tasks in Vietnam, the place capital funding can additional strengthen Vietnam’s manufacturing and logistics sectors. Vietnamese infrastructure, vitality, and digital innovation maintain specific curiosity for Emirati traders in search of new alternatives for development.
Whereas this settlement opens vital new avenues for collaboration, each nations might want to tackle sensible challenges to totally understand its potential. Vietnamese exporters face excessive delivery prices and sophisticated regulatory necessities within the UAE, the place branding and shopper recognition of Vietnamese merchandise are nonetheless comparatively low. Compliance with halal requirements, essential for entry to the UAE’s Muslim-majority market, may pose obstacles for smaller Vietnamese companies new to the sector.
For UAE traders, Vietnam affords substantial long-term potential, however understanding and adapting to Vietnam’s regulatory panorama would require cautious navigation. Success will rely on coordinated efforts from each governments to facilitate enterprise trade and compliance help. Joint initiatives for customs simplification, regulatory coaching, and commerce schooling may help overcome entry obstacles, making certain that companies from each international locations maximize the CEPA’s advantages.
The Vietnam-UAE partnership can result in super potential advantages for Vietnam, and on the similar time, it’s a step towards UAE’s strategic roadmap of development domestically and internationally. With current agreements with Indonesia and Cambodia, in addition to the scope of negotiations finalized with the Philippines, the UAE’s presence in ASEAN is about to develop additional.