Vietnam - French ties a boon for business

Decathlon, one of the world’s leading sporting goods retailers, is very much enjoying its time in Vietnam. After nearly three decades of operations, Decathlon Vietnam now has nearly 600 of its own employees working at more than 100 factories employing more than 100,000 workers, producing and shipping tens of millions of products each day to different retail stores around the world. Benefiting from a stable economy and attractive market, Decathlon selected Vietnam as the location of its second-largest production base globally. Not only Decathlon, but many other French businesses also consider Vietnam an attractive investment environment and benefit from the good economic relationship between the two countries, which turns 50 years old this year.

2023 marks the 50th anniversary of the establishment of diplomatic relations and ten years of a strategic partnership between Vietnam and France. Over the past half a century, despite the ups and downs, the friendship and cooperation between the two countries have become more and more solid, rich, and effective in all fields, especially the economy.

According to H.E. Nicolas Warnery, Ambassador of France to Vietnam, economic cooperation is one of the key areas of the bilateral relationship. There are commercial exchanges in one direction or the other, cross-investments, and long-term efforts by French businesspeople to do business in Vietnam. “We want to further develop these exchanges and investments, but also rebalance them,” the Ambassador said. “It is for this reason that we are counting on the full and effective implementation of the EU-Vietnam Free Trade Agreement (EUVFTA), which entered into force in 2020, to go even further.”

Promising market

According to the Ministry of Planning and Investment, as of the end of May, France ranked third among European countries and 12th among the 141 countries and territories investing in Vietnam, with 672 projects and capital of $3.8 billion.

Many French companies have chosen to invest in Vietnam, not only because of the potential its market holds but also because it is a favorable business environment in the ASEAN region.

“French-Vietnamese economic relations are based on major projects,” Ambassador Warnery noted. “I would like to cite, for example, the Hanoi Metro Line No. 3, an emblematic project in which the State and the French Development Agency (AFD) are very much involved. Six French high-tech companies are also taking part in the project.”

According to Mr. Philippe Fouet, Head of the Economic Section at the French Embassy in Vietnam, French companies had only a handful of locations in Vietnam half a century ago that employed, according to records, 15,000 people. There are now around 400, including those created by individual French nationals in Vietnam, and they employ nearly 50,000 people; a sign of the appeal of the Vietnamese market and the confidence of French companies in the country.

France is, therefore, an important player in Vietnam, since it ranks third among EU countries with investments. All but five of the CAC-40 companies (an index of the 40 best-valued French companies on the Paris Stock Exchange) are present in the country. Vietnamese can see these companies at work in various fields, such as infrastructure projects, like Metro Line No. 3 and the Phu My 2 thermal power plant project in southern Ba Ria-Vung Tau province, with the latter being carried out by French company EDF. “These projects are never easy, and can experience long delays, but we are proud of what our companies are achieving and believe they can offer much more to Vietnam,” said Mr. Fouet.

As Vietnam’s economy becomes increasingly sophisticated, some French companies are also beginning to see it as a base for designing new products or even carrying out research and development (R&D) activities. This is especially the case with Decathlon.

Mr. Lionel Adenot, Country Head at Decathlon International in Vietnam, said Decathlon Vietnam benefits from highly-skilled and qualified human resources and low labor costs as well as a stable political regime and macro-economy. In addition, the benefits from bilateral and multilateral international trade agreements, the sustainable development policy, which shares many points in common with global trends, as well as the rapid development of infrastructure and logistics services are also attractive features of the Vietnamese market.

With five outlets in Hanoi and Ho Chi Minh City, Decathlon plans to expand its retail network in the country in the near future, optimize logistics processes, and better cooperate with domestic suppliers in order to limit the importation of raw materials and products. Vietnam, with a young population that is increasingly interested in health and sports and boasts natural climate conditions that are suitable for sporting activities, is a retail market of potential for Decathlon, he added.

Not only attractive to manufacturing and retail businesses, Vietnam, with its high-quality human resources, is also a favorite investment destination of French technology companies, with Gameloft being a prime example.

Gameloft opened its first studio in Vietnam in 2004 in Ho Chi Minh City and then, quite quickly, another in Hanoi in 2011. “Vietnamese studios have become an important growth area for Gameloft,” said Mr. Arthur Michoux, Studio Manager at Gameloft in Hanoi. “We are actually very satisfied with our investment in the country, especially in terms of the quality of human resources. We are able to recruit quite talented people and that is really our strength in Vietnam.”

“I think the advantage the country holds lies in advancements in its education system and the experience of the workforce. These two points will make Vietnam a very attractive country for foreign businesses to invest in the development of applications and video games in particular and the information technology sector in general.”

Many other French investors, such as Dassault Systèmes, Keyrus, Kantar, and CapGemini, have also set up offices in Vietnam to support the country in its digital transformation and to tap into its talent pool in new technologies. Innovative small and medium-sized enterprises (SMEs) such as Synergie CAD, in electronics, are also establishing a presence.

Conversely, some Vietnamese companies have invested in France. Among the latest to have established a subsidiary in the country are well-known names such as Vietnam Airlines, FPT Software, Viettel, and VinFast. “I believe this is another aspect of the relationship where things can go even further,” Mr. Fouet said. “France has a large and dynamic market and privileged links with other markets, such as Africa. Its innovation ecosystem (talent, taxation, and labor availability, etc.) is also popular among technology companies. We are ready to help Vietnamese companies internationalize by setting up industrial factories and R&D centers in our country.”

The future

Two-way trade between Vietnam and France has been growing steadily over the years. Data from French customs, Mr. Fouet noted, show that bilateral exchanges, which were extremely limited half a century ago, at some $35.6 million, have continued to grow and exceeded $8.6 billion in 2022. They have therefore multiplied by a factor of 242 over the last 50 years.

With continued efforts to strengthen economic cooperation, both countries are expected to see further prosperity and greater economic integration. “Looking ahead, I believe more can and should be done to increase and rebalance our trade and investment,” said Mr. Fouet.

Accelerating the implementation of the EUVFTA would likely revitalize and gradually rebalance trade and investment between the two countries. In accordance with the commitments Vietnam has made within the framework of the EUVFTA, market access for European and French agricultural and pharmaceutical products, which are very popular in Vietnam and meet leading international standards, should be further facilitated and simplified. This is not just a business issue, as it would also benefit Vietnamese consumers and patients. French companies are therefore ready to continue to bring capital, technology, and talent to Vietnam’s economy. They hope that the business environment can be further improved to facilitate the introduction of new products, protect intellectual property, and ensure visas for executives and skilled employees.

Furthermore, to enhance cooperation between the two countries, officials in Vietnam are urging France to ratify the EU-Vietnam Investment Protection Agreement (EUVIPA). Once ratified, the agreement will provide a welcome boost to cross-border investment through safeguarding European investors and their investments in Vietnam, including those from France.