In a period of shifting global dynamics, the signing of the comprehensive economic partnership agreement (CEPA) between Vietnam and the United Arab Emirates (UAE) on October 28, 2024, signals both nations’ intent to deepen their partnerships beyond traditional alliances.
For Vietnam, the UAE represents a pathway to diversifying trade partners and enhancing economic resilience by establishing ties with a region it has not traditionally engaged deeply. Meanwhile, the UAE is keen to build a strategic bridge into fast-growing Southeast Asian markets, aligning with its broader vision to strengthen its global trade and logistics network. This agreement has tremendous potential as it opens up a gateway for market access not only between both countries but the entire region. However, to be able to achieve that, there are many practical challenges to overcome.
UAE’s venture into the Southeast Asian market is a significant step to expand its reach internationally. The Gulf state signed a CEPA with Indonesia in 2020, which subsequently attracted approximately $10 billion in Emirati investments in logistics and energy. An agreement with Cambodia followed swiftly after, coming into force earlier this year. This new agreement with Vietnam thus signals a growing partnership between the Association of Southeast Asian Nations (ASEAN) and the Gulf Cooperation Council (GCC), encouraging connectivity between these two regions.
With Vietnam, Cambodia and Indonesia formalizing economic ties with the UAE, the foundation is emerging for a broader ASEAN-GCC relationship that reflects a shift toward South-South cooperation. Medium-sized countries like Vietnam and the UAE are forging mutually beneficial partnerships, setting a precedent for similar agreements that reduce dependency on major powers and foster a more multipolar diplomatic landscape.
Although economically significant, the Vietnam-UAE relationship has thus far been modest. The trade volume between the two countries is around $6 billion, far lower than Vietnam’s trade with traditional partners such as South Korea ($100 billion) and Japan ($50 billion). The new agreement aims to unlock economic potential across two primary pathways: expanding the trade of Vietnamese goods into the UAE and the broader GCC region, and encouraging UAE investment into Vietnam’s growth sectors such as infrastructure, renewable energy, and technology.
With the UAE’s small domestic market of 10 million, this agreement is less about local consumption than about positioning the UAE as a re-export hub for Vietnamese goods across the wider GCC. Key Vietnamese exports – including agricultural products, seafood, textiles, and consumer electronics – stand to benefit from the UAE’s strategic position as a transit point to the GCC’s combined population of 54 million. For instance, seafood tariffs, previously ranging from 5 percent to 15 percent, are expected to reduce substantially, boosting competitiveness for Vietnamese exporters. Currently, Vietnamese agricultural products account for around 4 percent of the UAE’s agricultural imports, but with improved access and reduced tariffs, this share could rise significantly, potentially positioning Vietnam as a top-five supplier to the UAE in agriculture.
Beyond trade, the CEPA is intended to facilitate UAE investment in Vietnam’s infrastructure, technology, and renewable energy. In alignment with the UAE’s Vision 2030, which directs billions toward foreign direct investment (FDI) across Asia, the UAE’s commitment to joint ventures in ASEAN countries is evident, particularly in Indonesia, where Emirati investment in infrastructure has already exceeded $3 billion. This collaborative model can serve as a blueprint for similar UAE projects in Vietnam, where capital investment can further strengthen Vietnam’s manufacturing and logistics sectors. Vietnamese infrastructure, energy, and digital innovation hold particular interest for Emirati investors seeking new opportunities for growth.
While this agreement opens significant new avenues for collaboration, both nations will need to address practical challenges to fully realize its potential. Vietnamese exporters face high shipping costs and complex regulatory requirements in the UAE, where branding and consumer recognition of Vietnamese products are still relatively low. Compliance with halal standards, crucial for access to the UAE’s Muslim-majority market, may also pose obstacles for smaller Vietnamese firms new to the sector.
For UAE investors, Vietnam offers substantial long-term potential, but understanding and adapting to Vietnam’s regulatory landscape will require careful navigation. Success will depend on coordinated efforts from both governments to facilitate business exchange and compliance support. Joint initiatives for customs simplification, regulatory training, and trade education can help overcome entry barriers, ensuring that businesses from both countries maximize the CEPA’s benefits.
The Vietnam-UAE partnership can bring about tremendous potential benefits for Vietnam, and at the same time, it is a step toward UAE’s strategic roadmap of growth domestically and internationally. With existing agreements with Indonesia and Cambodia, as well as the scope of negotiations finalized with the Philippines, the UAE’s presence in ASEAN is set to grow further.
Discussion about this post