In a interval of shifting world dynamics, the signing of the great financial partnership settlement (CEPA) between Vietnam and the United Arab Emirates (UAE) on October 28, 2024, indicators 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 world 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 your complete area. Nevertheless, to have the ability to obtain that, there are lots of sensible challenges to beat. 

UAE’s enterprise into the Southeast Asian market is a big 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 indicators 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 useful partnerships, setting a precedent for comparable agreements that scale back dependency on main powers and foster a extra multipolar diplomatic panorama.

Though economically vital, the Vietnam-UAE relationship has to date been modest. The commerce quantity between the 2 international locations is round $6 billion, far decrease than Vietnam’s commerce with conventional companions similar 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 progress sectors similar 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 client electronics – stand to profit from the UAE’s strategic place as a transit level to the GCC’s mixed inhabitants of 54 million. For example, seafood tariffs, beforehand starting from 5 p.c to fifteen p.c, are anticipated to cut back considerably, boosting competitiveness for Vietnamese exporters. At the moment, Vietnamese agricultural merchandise account for round 4 p.c of the UAE’s agricultural imports, however with improved entry and decreased 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 overseas direct funding (FDI) throughout Asia, the UAE’s dedication to joint ventures in ASEAN international locations is obvious, notably in Indonesia, the place Emirati funding in infrastructure has already exceeded $3 billion. This collaborative mannequin can function a blueprint for comparable UAE tasks in Vietnam, the place capital funding can additional strengthen Vietnam’s manufacturing and logistics sectors. Vietnamese infrastructure, vitality, and digital innovation maintain explicit curiosity for Emirati traders looking for new alternatives for progress.

Whereas this settlement opens vital new avenues for collaboration, each nations might want to tackle sensible challenges to completely understand its potential. Vietnamese exporters face excessive transport prices and sophisticated regulatory necessities within the UAE, the place branding and client recognition of Vietnamese merchandise are nonetheless comparatively low. Compliance with halal requirements, essential for entry to the UAE’s Muslim-majority market, may additionally pose obstacles for smaller Vietnamese corporations new to the sector.

For UAE traders, Vietnam gives 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 assist. 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 progress 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.