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How Will Brexit Change the UK/Vietnam relationship?

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Sumeet Manhas
How Will Brexit Change the UK/Vietnam relationship?

There’s no doubt that the UK appears to be inching towards a no-deal Brexit arrangement, with Downing Street continuing to dismiss the resumption of talks despite the recent arrival of the EU’s chief negotiator Michel Barnier on these shores.

With this in mind, it’s imperative that the UK government ramps up its attempts to secure a raft of free trade deals outside of the EU, as otherwise the region could face a significant GDP growth short-fall after December 31st (and one that will be compounded by the Covid-19 crisis).

Fortunately, Vietnam has recently offered something of an olive branch to the UK, but how could Brexit ultimately change the relationship between these two regions?

 

Could the UK and Vietnam Sign a New Trade Treaty?

The UK Foreign Secretary Dominic Raab arrived in Vietnam this week, with a view to finalising a proposed free trade deal and taking another step towards creating a series of bilateral pacts in Asia.

Interestingly, Vietnam has been one of the first Asian nations to voice its support for the UK’s proposed Comprehensive and Progressive Agreement for Trans-Pacfic Partnership (CPTPP), which would be an 11-member free trade block that includes Japan as its most recent signatories.

Vietnam is a deceptively important member of this new trading bloc from the perspective of the UK, especially when you consider the ratification of the country’s recent trade agreement with the EU.

Referred to as the EU-Vietnam Free Trade Agreement (EVFTA), its terms have already strengthened the economic relationship between the UK and Vietnam, while they will remain firmly in place until a new and bilateral deal can be reached.

 

Will This Create New Market and Economic Opportunities?

Vietnam is also one of the fastest growing countries in Asia, and one of the few in the region with a positive growth forecast for 2020.

Despite the coronavirus having seen Vietnam’s growth forecast decline by 2% according to the most recent figures for 2020, it’s still expected to expand by 3% at a time when the global economy is in turmoil.

This will create significant opportunities for economic growth and UK investors, particularly with the domestic tourism and technology sectors having been boosted by sustained government investment throughout Q2 and Q3.

From a currency perspective, the Vietnemese Dong (VND) has also remained resilient amid the sell-off in similar regional currencies, with the USD/VND remaining firm above the $23,000 level.

This type of strength is great news for traders, who can hedge against the USD/VND and simultaneously profit from the decline and uncertainty that continues to characterise the greenback.

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Sumeet Manhas
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