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DIPLOMATIC ACADEMY OF VIETNAM
INTERNATIONAL ECONOMIC FACULTY
TOPIC 7:
THE ROLE OF THE EUROPEAN UNION
TO VIETNAM’S ECONOMY
GROUP 7 - KT37A
Ha Noi, November 2012
CONTENT
LIST OF ABBREVIATIONS
PREFACE.................................................................................................................................3
CHAPTER 1: RATIONALE....................................................................................................6
1. Basic problems...................................................................................................................6
1.1. The general market......................................................................................................6
1.2. Trade............................................................................................................................6
1.3. FDI............................................................................................................................... 6
1.4. ODA............................................................................................................................6
2. Overview of EU..................................................................................................................6
2.1. History.........................................................................................................................6
2.2 The EU in the world economy......................................................................................7
3. Vietnam-EU relation background.......................................................................................8
3.1. Vietnam-EU relation history........................................................................................8
3.2. Vietnam-EU trade feature............................................................................................9
3.3. Some features of EU’s FDI to Vietnam......................................................................10
3.4. Some features of EU’s ODA to Vietnam....................................................................10
CHAPTER II: THE ROLE OF EU TO VIET NAM’S ECONOMY..................................11
1. Trade.................................................................................................................................11
1.1. Export to EU..............................................................................................................11
1.2. Import from EU.........................................................................................................12
2. EU’s FDI to Viet Nam.......................................................................................................14
2.1. The situation of the EU's FDI to Vietnam in recent years..........................................14
2.2. FDI from the EU's role in Vietnam............................................................................15
3. EU’s ODA to Viet Nam.....................................................................................................17
3.1 The situation of the EU's ODA to Vietnam in recent years.........................................17
3.2. The role of EU in the process of providing ODA to Viet Nam...................................20
4. EU – an important supporter of Vietnam about labor and trade-related assistance...........20
4.1. Labour........................................................................................................................21
4.2. Trade-Related Assistance...........................................................................................21
CHAPTER III: SOLUTIONS TO PROMOTE THE ROLE OF EU TO VIET NAM’S
ECONOMY.............................................................................................................................22
1. Chances and challenges....................................................................................................22
1.1 Chances.......................................................................................................................22
1.2 Challenges..................................................................................................................23
2. Orientation of co-operation and some solutions to promote the relationships between Viet
Nam-EU................................................................................................................................24
2.1. Orientation.................................................................................................................24
2.2. Solutions....................................................................................................................25
C. CONCLUSION..................................................................................................................28
1
LIST OF ABBREVIATIONS
ABBREVIATIONS FULL PHRASE
EU European Union
FDI Foreign Direct Investment
ODA Official Development Assistance
PCA Partnership and Cooperation Agreement
FTA Free Trade Area
2
A. PREFACE
Economic globalization - the increasing economic interdependence of national
economies across the world through a rapid increase in cross-border movement of goods,
service, technology, and capital - has become a global trend. In that process, both developed
and developing countries have reaped the benefits of international trade increases,
experiencing acceleration in growth, many of them quite substantial. In 1986, Vietnam
launched an ambitious program called “Doi moi” and accelerated its implementation in 1989.
Under this program the highly controlled economy was thrown wide open and market led-
policies were introduced. More specifically, this included unifying and devaluing the exchange
rate, trade liberalization, increasing interest rates above the rate of inflation, decontrolling the
prices of food and most other commodities, decollectivization of agriculture, abolition of trade
restrictions on inter-provincial trade, diversification of ownership and the abolition of
employment limits on private enterprises. In 2007, the country joined the World Trade
Organization following more than a decade-long negotiation process. As a result of Vietnam
integration into the global economy, we become more interdependent on other economies,
especially world economic power like the European Union (EU).
In recent years, the ties between Vietnam and EU have been closer than ever. The
relationship between the two sides has been developing in both depth and width, cemented by
a bilateral cooperation agreement. Due to its being one of the largest importers and foreign
investors in Vietnam, EU undoubtedly plays a key role in the Vietnam’s economy. Therefore,
the importance of EU to Vietnam’s economy should be taken into consideration in every
economic and even social policy. How we can fully utilize this close relation, maximize the
good impacts and prevent detrimental influences becomes a matter of concern to both the
government and the people. Thus, there is a need for research into the current situation,
challenges and prospects for the impacts of EU on Vietnam economy.
"The role of EU to Vietnam’s economy” is a broad topic. Our group intends to give a
clear and simple approach to this issue. In this essay, we make use of many research methods
such as comparison, synthesis, analysis, statistics and reliable references including the macro-
economic and micro-economic theories, facts of economic development, and information from
books and journals by distinguished intellectuals to support our theories, arguments and
evidences. The essay has four chapters, 29 pages (including introduction, conclusion and
reference list):
Chapter I: Rationale. In the first chapter, we provide readers the rationale from which to help
the readers get an overview of the topic being researched.
Chapter II: The role of EU to Vietnam’s economy. This is the most important chapter which
covers almost all the main points in our topics. In this chapter, we will look into the importance
of EU in every aspect of Vietnam economy.
Chapter III: Solutions to promote EU’s role to Vietnam’s economy. In this last chapter, we
will take a further look into this issue, analyze the prospects and challenges of EU’s impacts on
Vietnam economy and offer some possible solutions.
3
In our study, we would like to express our stance on this topic as well as carry out our
evaluations based on related researches. However, due to limited knowledge and time, it is
unavoidable that our essay may contain some errors. We hope to receive further constructive
feedback to improve our essay.
4
CHAPTER 1: RATIONALE
1. Basic problems
1.1. The general market
The general market is the market in which the standard legal system applies to all
Member countries to ensure the free circulation of people, goods, services and capital.
1.2. Trade
Trade is an activity which exchanges wealth, goods, services, knowledge, money ...
between two or more partners, and can get a certain value (in cash through price) or by other
goods and services such as in the form of barter trade. In this process, the seller is to provide
wealth, goods and services to the buyer, in exchange for the buyer will pay the seller a certain
equivalent value.
1.3. FDI
Foreign direct investment (FDI) is direct investment into production in a country by a
company in another country, either by buying a company in the target country or by expanding
operations of an existing business in that country. Foreign direct investment is done for many
reasons including to take advantage of cheaper wages,and/or for special investment privileges
such as tax exemptions offered by the country as an incentive to gain tariff-free access to the
markets of the country or the region.
1.4. ODA
ODA is official financing or other forms of assistance, includes non-refundable aid,
refundable aid or preferential credit given by governments, intergovernmental organizations,
non-governmental organizations, organizations of the UN system, international financial
institutions to less developed countries and developing countries countries to promote and
implement development.
2. Overview of EU
2.1. History
The European Union (EU) was created by the Maastricht Treaty on November 1st 1993.
EU is a geo-political entity covering a large portion of the European continent. It is founded
upon numerous treaties and has undergone expansions that have taken it from 6 member
states to 27, a majority of states in Europe.1
Austria (1995)
Belgium (1952)
Bulgaria (2007)
Cyprus (2004)
Czech Republic (2004)
Denmark (1973)
Germany (1952)
Greece (1981)
Hungary (2004)
Ireland (1973)
Italy (1952)
Latvia (2004)
Netherlands (1952)
Poland (2004)
Portugal (1986)
Romania (2007)
Slovakia (2004)
Slovenia (2004)
1 http://europeanhistory.about.com/od/governmentandlaw/a/europeanunionhist.htm
5
Estonia (2004)
Finland (1995)
France (1952)
Lithuania (2004)
Luxembourg (1952)
Malta (2004)
Spain (1986)
Sweden (1995)
United Kingdom (1973)
The principle was at the heart of the European Coal and Steel Community (ECSC) in
the Treaty of Paris (1951), following the "Schuman Declaration" and the later the Treaties of
Rome establishing the European Economic Community (EEC) and the European Atomic
Energy Community (EAEC). Both the ECSC and EEC were later incorporated into the
European Union while the EAEC maintains a distinct legal identity despite sharing members
and institutions.
2.2 The EU in the world economy
Ever since its creation, the EU’s economic weight has made it an influential player in
the global economy. The EU-27 accounts for 19% of global trade. It is also one of the largest
hosts and sources of foreign direct investments. Internal coordination of foreign economic
policies has meant that it could at least partially translate its economic weight into influence in
