BRUSSELS, BELGIUM: HSBC Vietnam has reported that the recently established European Union-Singapore Free Trade Agreement (EUSFTA) is the first free trade agreement (FTA) that was conducted between the EU and an ASEAN country and it signifies a significant moment for the economies of Singapore and the EU as well as Vietnam, which is currently in negotiations with Europe on a similar FTA.
The EUSFTA, which would remove all tariffs and decrease non-tariff barriers between Singapore and Europe, will allow for manufactured goods to have ASEAN cumulation. This means that selected inputs, especially those from Vietnam, that are sourced by Singaporean businesses from ASEAN member states will also come under Singapore’s zero tariff regime with Europe.
Winfield Wong, Head of Wholesale Banking at HSBC Vietnam has commented that with the EUSFTA in place, Singapore and the ASEAN region including Vietnam will be impacted in areas like electronics and pharmaceuticals. Additionally, a large proportion of Singapore products have components that are produced in other ASEAN countries, with ASEAN ranking in as the largest exporter to Singapore – just in 2017 alone, Singapore had imported US$71.06 billion worth of goods from ASEAN. In particular, common Vietnamese exports to Singapore includes computers, electronic products, machinery and equipment and parts.
Currently, Singapore is the third largest trade partner to Vietnam in ASEAN and the country’s tenth biggest trade partner globally. Singapore is also Vietnam’s third largest foreign investor and the country’s highest spending ASEAN investor, with a total investment value of US$43 billion invested in over 2,000 Vietnamese projects in areas such as manufacturing, energy, logistics and services.
Moving forward, the EUSFTA will serve as a template for future EU-ASEAN FTAs especially as the EU continues negotiations towards an FTA with Vietnam, Indonesia, Thailand and Malaysia. As of July 2018, the EU and Vietnam have already agreed on the final text for the EU-Vietnam Free Trade Agreement and the EU-Vietnam Investment Protection Agreement. This adds on to Vietnam’s current status as the EU’s second biggest trading partner in ASEAN after Singapore. Similarly, as ASEAN grows in its role as the supply chain hub for European companies, the region is expected to benefit from the FTAs that have been established.
WANT MORE INSIDER NEWS? SUBSCRIBE TO OUR DIGITAL MAGAZINE NOW!