FDI and vietnams liberalization on investment in free trade agreements

HOANG PHUONG YEN FDI AND VIETNAM’S LIBERALIZATION ON INVESTMENT IN FREE TRADE AGREEMENTS Master’s Thesis July, 2018 FDI AND VIETNAM’S LIBERALIZATION ON INVESTMENT IN FTAs Table of Contents LIST OF FIGURE LIST OF TABLE LIST OF ABBREVIATIONS Abstract I Introduction II A brief literature review of the impacts of FTAs on FDI III Background 3.1 Macroeconomics 3.2 Integration to global economy 3.3 Regulation and FDI Regulatory 11 IV Methodology 13 V An analysis on FDI inflow into Vietnam 14 5.1 Overview and distribution by sector and by countries 14 5.2 FDI from Korea, ASEAN and Australia 19 VI An analysis on Vietnam’s commitments in FTAs 24 6.1 The relationship between investment and services chapters 24 6.2 Liberalization provisions in investment chapters 25 6.3 Vietnam’s commitment on investment in trade in services chapters 28 VII Discussion 38 VIII Recommendation and Conclusion 40 ANNEX List of Free Trade Agreements of Vietnam 42 REFERENCE LIST 45 LIST OF FIGURE Figure FDI Restrictiveness index of Vietnam in total and by industry (2006 – 2016) 12 Figure FDI restrictiveness index of ASEAN countries 13 Figure FDI flow into Vietnam, 1995 – 2016 (BoP) 14 Figure FDI into ASEAN countries, 2010 – 2016 15 Figure Registered FDI into Vietnam by industry, 2005 - 2016 17 Figure Share of total registered capital by industry (percentage of total), 17 Figure Top 10 source countries of FDI into Vietnam in 2016 (percentage of total FDI) 18 Figure FDI into Vietnam from FTA partners in 2016 (percentage of total FDI) 19 Figure Registered FDI from Korea, 2005 - 2016 20 Figure 10 Registered FDI from Australia, 2005 - 2016 21 Figure 11 FDI from ASEAN countries in 2016 (percentage of total FDI from ASEAN) 23 Figure 12 Registered FDI from Singapore, Malaysia and Thailand, 2005 - 2016 23 LIST OF TABLE Table Sector/Subsector with commitment on full of market access 30 Table Sector/Subsector with wide market access 32 Table Sector/Subsector with narrow market access 33 Table Sector/Subsector with no commitment on market access 36 LIST OF ABBREVIATIONS ASEAN FTA FDI WTO UNCTAD AFTA AKFTA AANZFTA ACIA AFAS OECD Association of South East Asian Nations Free Trade Agreement Foreign Direct Investment World Trade Organization United Nations Conference on Trade and Development ASEAN Free Trade Agreement ASEAN – Korea Free Trade Agreement ASEAN – Australia/New Zealand Free Trade Agreement ASEAN Comprehensive Investment Agreement ASEAN Framework Agreement on Services Organization for Economic Cooperation and Development Abstract Being active in international economic integration, Vietnam not only promotes trade but also attracts a lot of foreign investment Over the past 20 years, FDI into Vietnam has increased dramatically and Vietnam has gained considerable success in joining the FTA and liberalizing investment By early 2018, it has signed 12 FTAs, one is planned to be signed and are negotiating three other FTAs However, the degree of liberalization on investment in Vietnam’s commitments is not the same under each FTA The objective of this study is to assess the FDI inflows and the extent of liberalization on investment in AFTA, AKFTA and AANZFTA Although Korea has the highest FDI inflows, Vietnam's commitments in AFTA are the highest in terms of investment and investment in services In general, the level of investment liberalization in services is lower than that in manufacturing industries regulated by investment agreements There are still a large number of sectoral reservations and sectors/subsectors with restrictions This reflects the fact that the FDI inflow into service is very limited compared to the investment flow in the manufacturing sector I Introduction International integration and the attraction of foreign investment are considered as two of the most important resources for the growth of Vietnam's economic since the reform “Doi Moi” in 1986 (Le, 2002) For over two decades, from 1996, when Vietnam joined its first free trade agreemen - ASEAN FTA, till early 2018 Vietnam has signed 12 FTAs, planned to sign one FTA and negotiated others, both individually and as member of ASEAN (WTO Center, 2018) Besides that, Vietnam has achieved impressive success in attracting FDI Since becoming a member of the WTO, FDI inflows into Vietnam have increased about five times compared to previous period and have made Vietnam as one of the largest FDI recipients in ASEAN It also became one of the five most attractive foreign investment destinations in 2016 in the world, according to UNCTAD (2017) Participation in FTA plays an important role not only in enhancing international trade but also in attracting FDI Through FTA, market access are provided, stable and non-discrimination environment are ensured, and investment and interests of foreign investment are protected However, the commitments and the degree of liberalization of Vietnam, like other countries, are different in each FTA and therefore have different influence on the attraction of FDI inflows The aim of this study is to clarify the content of Vietnam's commitment to investment in some FTAs, compares the extent of the liberalization of investment, and from there, identify how it might affect the FDI inflows into Vietnam The impact of the FTA investment agreements on perceptions and decision of investor is not only by opening market for foreign investors, creating opportunities and protecting them and their investments in host countries, but also by creating a favorable environment, promoting investment and securing investor’s interests in disputes However, the scope of study limits only to principles of investment liberalization that Vietnam has committed to foreign investors For services, the effectiveness of investment liberalization are usually imposed in Mode (Commercial presence) but also in other modes, especially Mode (Presence of natural persons), the coverage of persons who are eligible to enter the market which is often strictly regulated However, this paper is also limited only to Vietnam's commitments in market access under Mode in specific schedules ASEAN FTA (AFTA), Asean – Korea FTA (AKFTA) and Asean – Australia/New Zealand FTA (AANZFTA) are selected to be assessed in this study While ASEAN and Korea are the two largest investors of Vietnam in 2016, Australia is one of the FTA partners which have low investment capital in Vietnam Both agreements of AKFTA and AANZFTA came into force during the period 2009 to 2010 For ASEAN, ASEAN Comprehensive Investment Agreement (ACIA) was signed in 2009 and came into effect in 2012 In term of services, although the ASEAN Framework Agreement on Services (AFAS) was signed in 1995, from the 1st to 7th Package of Commitments under AFAS the level of service openness in Vietnam’s commitments is just equal or even lower compared to that in WTO Until 2010, when the 8th Package came into force, higher commitments were made for some subsectors and some new subsectors were opened for trade and investment (WTO Center, 2015) Particularly, this study are based on the text of investment and services agreement/chapters as following: - For ASEAN-Korea FTA: o Agreement on investment o Agreement on trade in services o Schedule of Specific Commitments of Vietnam – Annex of Agreement on trade in services - For ASEAN - Australia – New Zealand FTA o Chapter 8: Trade in services o Chapter 11: Investment o Vietnam’s Schedule of specific services commitments - For AEC o ASEAN Comprehensive Investment Agreement (ACIA) o ASEAN Framework Agreement on Services (AFAS) o Vietnam’s schedule of specific commitments – The 8th Package of Commitments under AFAS (2010) o Vietnam’s schedule of commitments on Air transport services under AFAS – The 7th Package (2011) o Vietnam’s schedule of commitments on Financial services under AFAS – The 5th Package (2011) The next sections of this paper will be organized as follows Section will give a brief literature review of the impacts of FTAs on FDI Section then provides an overview of Vietnam’s economy and FDI regulation framework Following is section which refers to methodology Section analyze on Vietnam’s inward FDI and Vietnam’s commitments in FTAs Section follows this by giving a discussion The final section are conclusion and recommendations II A brief literature review of the impacts of FTAs on FDI FDI is considered as one of the importance source of economic development, especially for developing countries According to OECD (2002), generating technology spillovers, promoting international trade integration, generating production and employment, especially skilled labor, management know-how are the benefits of FDI for host country In addition, FDI also helps to create a more competitive business environment, plays as a mean for enterprise development and brings an access to international markets and to production network (UNCTAD, 1999) All of these help host countries to advance economic growth, increase welfare and reduce poverty Despite the fact that empirical studies support for the impact on economic growth of FDI is mixed (Walsh & Yu, 2010) and there is different between developed and developing countries, global FDI flows have grown rapidly in recent years, particularly into emerging markets The attractiveness of country for FDI is attributed by a number of determinants According to Walsh and Yu (2010), effective macroeconomic management, such as high growth, low inflation, openness; more independent judiciary and good infrastructure are important factors to explain the growth of FDI In addition, developing country also should to develop a flexible labour market and strong and deep financial market in order to attract more FDI By comparison successful countries in attracting FDI with others using panel data from 68 low-income and lower-middle income developing countries, Mottaleb and Kalirajan (2010) found that beside the large market and the high GDP growth rate, the business friendly environment and the openness of economy are the crucial factors for developing countries to attract FDI Among those, openness is one of the key determinant for the attractiveness of developing countries (Mottaleb & Kalirajan, 2010; Sekkat, 2007; Liargovas & Skandalis, 2012) In particularly, other studies (Daude, Stein & Yeyati, 2003; Kreinin & Plummer, 2008; Büthe & Milner, 2008) stresses that international trade agreement which has a positive and significant impact on FDI and developing countries are enable to increase FDI inflow by joining regional integration agreement In more recent work, although Medvedev (2012) found the relationship between preferential liberalization and FDI in only from late 1990s to early 2002, his study also concludes that preferential trade agreement significantly impact on increase the net FDI inflows of country members and “this relationship is driven by the developing countries” Notably, by analyzing the bilateral data of 30 OECD and ASEAN countries from 2000 to 2009, Thangavelu & Narjoko (2014) observes that FTAs also resulted in the increase of FDI in ASEAN countries and they can expect a larger FDI inflows by developing infrastructure, human capital and technologies There are several channels that joining the trade agreements may promote the attractiveness of a country toward foreign investors According to Nguyen & Cao (2016), the increase of FDI by trade liberalization is caused by signaling effect, commitment effect, commerce expansion and efficiency gain By joining free trade agreement, country want to show its desire to create a friendly investment environment and pursue policy for economic development, therefore, to become appealing to foreign investors In addition, under its commitment in FTAs, on the one hand, government reduces concern of investors about the inconsistency problem, such as change in regulation, a higher tax rate or political conflict which might lead to significant loss of investors In other words, key policies and regulations would be ensured the same after FTA came into effect as governments bound On the other hand, country members also committed to open their market and facilitate investment and investors from other countries in FTAs Investors, therefore, have the opportunity to expand their commerce and increase their investment By taking advantages of preferential treatments from FTAs, they would not only reduce their costs, gain the productivity and efficiency but also expand their market Besides, Daude et al (2003) also indicates that capital flow liberalization, legal harmonization and cooperation in cross-border disputes between countries members help to reduce transaction cost for investors, while they can get more profit thank to the tariff reduction and economies of scale through the increase size of market as a result of FTAs In the context of Vietnam, openness and joining the FTAs are also ones of the important factors which lead to the high growth of FDI inflows Pham (2010) indicates that the effect of WTO accession on the dynamic of FDI into Vietnam is significant during the period from 1990 – 2008 The same result is founded in the period 2006 -2010 by Nguyen, Zhong & Tran (2012), although that study observed that law factor is considered as the stronger determinant With regards to FTAs, both Hoang, Tran & Dong (2015) and Nguyen and Cao (2016) found that being a member of FTAs has a “strong and significant” impact on attracting FDI inflow, however individual FTA have not equal effects While AFTA, ASEAN – China FTA, ASEAN – Japan FTA have not affected, AKFTA significantly facilitated FDI inward flows in Vietnam By contrast, AANZFTA is shown in negative side It might be explained by the tariff reduction which help investors to export directly to Vietnam at lower rate It should be noted that studies on the effects of FTAs on FDI inflows usually treated FTA as "black boxes", while in practice FTAs vary in their own provisions and the commitments of each member country This can be considered as one of the reasons that the effects of FTA on FDI in each country and the results in the studies are open to discussion III Background Over the past 20 years, macroeconomics and regulation framework have seen significant development and became the essential conditions for increasing FDI inflows into Vietnam Before analysis the level of liberalization in Vietnam as committed in its FTAs, this section will provide an overview of Vietnam's economy, integration process and important milestones in FDI regulatory of Vietnam in recent years 3.1 Macroeconomics Vietnam is considered as one of the most impressive, dynamic and stable economies in South East Asia GDP growth has averaged over 6% in the last 20 years and is forecasted to remain at 6.4% in the period from 2017 – 2020 (World Bank, 2017) Despite the difficulties and challenges in the global economy, especially the global economic crisis in 2009, Vietnam has demonstrated its resilience with growth drivers coming from strong domestic demand, increasing investment, greater integration and export oriented manufacturing (KPMG, 2016) After peaking at 22.9% in 2008, the Vietnamese government made great effort and was successful in controlling inflation by contractionary fiscal and monetary policies While the average price increase in 2011-2015 was about 7%, in the next five years it is projected to be lower, at 4% (World Bank, 2017) In addition, the high level of political stability1 (World Bank, 2018a) along with the commitment to pursue economic development of government has made the macroeconomic environment steadily improved in recent years 3.2 Integration to global economy While the first and important step in trade integration of Vietnam is joining ASEAN in 1995 and ASEAN Free Trade Agreement in 1996, becoming the 150th WTO’s member from January 2007 is considered as the biggest milestones Since then, Vietnam has been actively pursuing the further integration into the world economy In addition to entering into FTAs as a member of ASEAN with other countries in the Asia Pacific region, Vietnam also negotiated and signed its own bilateral FTAs The year of 2015 is considered as a successful year of Vietnam as agreements with its important trading partners was signed, including Korea, Eurasian Economic Union, EU and TPP2 Up to now, Vietnam has signed 12 FTAs, planned to sign one FTA in 2018 (see Annex 1) and FTAs3 are under negotiation Political Stability Index is indicator developed by World Bank in order to assess the potential of government for instability or being overthrown by unconstitutional or violent means, including political violence and terrorism It ranges from -2.5 to 2.5 The higher indicator is better (Kaufmann, Kraav & Mastruzzi (2010) The score of Vietnam in 2016 is 0.2 which is higher than almost scores of ASEAN countries Now is CPTPP Including Regional Comprehensive Economic Partnership (RCEP), Vietnam – Israel and Vietnam – EU Vietnam's FTA partners are mainly countries in the Asia Pacific region However, in recent years, Vietnam has entered into negotiations and signed FTAs with countries from Europe and the Middle East The extent of commitments of Vietnam in FTA is also higher and more comprehensive Most recently, Vietnam has joined and negotiated the very deep and comprehensive agreements, which are considered as 'new generation' FTAs, including CPTPP, EVFTA RCEP, and even Free Trade Area of the Asia-Pacific among APEC economies (World Bank, 2016) These agreements cover not only traditional trade in goods, trade in services, investment but also other trade-related areas, such as intellectual property, labor, environment, competition, state enterprises, public procurement, e-commerce, etc With the signing of these agreements, Vietnam has expanded its market to foreign investors not only in manufacturing, real estate but also in services Active participation and success in Vietnam's economic integration over the years has made Vietnam as a FTA hub in South East Asia and became an attractive investment destination Before signing the CPTPP, ASEAN was the FTA that Vietnam had joined with the highest and most comprehensive commitments among Vietnam’s FTAs Currently, Vietnam is close to completing the tariff reduction and elimination schedule as it committed in the agreement Nine packages of commitments under AFAS have been signed and implemented, with higher commitments and higher number of service sectors that Vietnam bound to open for trade and investment A comprehensive investment agreement that was in place since 2012 has created more investment opportunities for countries in the region Domestic regulations on investment also provide a friendlier environment for investors to access Vietnam market In 2016, as a group, ASEAN is the second largest investor in Vietnam The Framework Agreement on Comprehensive Economic Cooperation between ASEAN and Korea was signed in 2005 but it was not until 2007 that the Agreement on Trade in Goods was signed and came into effect Trade in Service and Investment reached an agreement later and came into force in mid-2009 With the aim of promoting trade and economic cooperation between Korea and ASEAN countries, the agreement has reduced and eliminated up to 90 % of tariff lines as well as important barriers to trade in goods, and most of the sectors and subsectors important to trade in services are covered in agreement on services Creating a liberal, transparent and competitive investment environment are the goal of the ASEAN-Korea FTA 10 Pa x x x ss Fr x x x ei M x O O Ai rM x x x R Fr x x x ei M x O O nt R oPa x x x ss Fr ei Se rv C x O O ar C x x x on tai x O O C on O t h x x x e r s Note: X – Narrow market access O - No commitment It can be seen the group of services with narrow market access are sectors which are closely related to public interest, like social services, cultural, security; sectors which are sensitive such as communication, human health, financial; or sectors that Vietnam has weak competitiveness like transport services In this group, there are 15 sub-sectors that Vietnam commits to open for investors of ASEAN under AFAS but not for investors under AKFTA and AANZFTA They are mainly belong to business services and transport sectors Besides that, freight transportation (CPC 7112) in rail transport services sector has wider commitments under AFAS (join venture with Vietnamese partners with limitation at 51% of foreign capital) than its commitments under AKFTA and AANZFTA (same form of foreign investors but with limitation at 49% of foreign capital) Whereas, only few subsectors are opened for AKFTA and AANZFTA but not for ASEAN It is notable that for some subsectors not committed under these FTAs but under WTO, investors from the country which is member of WTO still have market access in these sectors 35 With regard to form of restrictions remained in the commitments on market access in these service sectors, restriction on form of foreign investors (business cooperation contract, joint venture), restriction on the foreign capital (ranging from 30% to 70%), restriction on the Vietnamese partners and foreign juridical person in relative service sectors are mainly imposed - Services sectors without commitments on market access Although Vietnam’s commitments to open cover most covers most of the services sectors and sub-sectors, there are still many sub-sectors that Vietnam has no commitment under three FTAs As mentioned earlier, all three FTAs use a positive list approach, meaning that the commitments are applied only to the sectors listed in the schedule of specific commitments of each countries, while sub-sectors not committed to open are not listed It is, therefore, difficult to exactly determine the sub-sectors without commitments on market access Based on W/120, Vietnam has not committed to open the following sub-sectors under all three FTAs: Table Sector/Subsector with no commitment on market access Sector/Subsector (CPC code) BUSINESS SERVICES Professional services Services provided by midwives, nurses, physiotherapists and para-medical personnel (CPC 93191) R&D services on social sciences and humanities (CPC 852) Interdisciplinary R&D services (CPC 853) Real Estate Services Involving own or leased property (CPC 821) On a fee or contract basis (CPC 822) Rental/Leasing Services without Operators Relating to ships (CPC 83103) Relating to other transport equipment (CPC 83101; 83102; 83105) Relating to other machinery and equipment (CPC 83106 – 83109) Other Business Services Services incidental to fishing (CPC 882) Services incidental to mining (CPC 5115) Services incidental to energy distribution (CPC 887) Convention services (CPC 87909*) Placement and supply services of Personnel (CPC 872) Investigation and security (CPC 873) Related scientific and technical consulting services (CPC 8675) Building-cleaning services (CPC 874) Photographic services (CPC 875) Convention services (CPC 87909*) 36 Ot he C O M M U NI C A E D U C T O U R E C R E T R A N S P O R T S E R VI C E S M ari ti m e Tr an sp ort Se There are 47 sub-sectors of 160 sectors and sub-sectors listed in W/120 that Vietnam does not have any market access commitments for foreign investors These sectors are usually related 37 to sensitive issues such as human health, security, transport, real estate Regardless of the fact that Vietnam has full space to apply any measures that prohibit or restrict foreign investors in the sectors that Vietnam has not committed to open, it does not mean that Vietnam does not allow foreign investors to access these sectors For example, services provided by midwives, nurses, physiotherapists and para-medical personnel, building-cleaning services (874) or postal services (CPC 7511) are sub-sectors that Vietnam does not commit but in fact full of market access are provided for foreign investors in Vietnamese legislation (VCCI) However, there is still problem that the Vietnam’s policy on these sectors might make obstacles in competitiveness or might be uncertain for foreign investors VII Discussion By analyzing FDI inflows from ASEAN, Korea and Australia and Vietnam’s commitments on investment liberalization in the three FTAs, there are some notable points as followed: First, based on the statistics, capital flows from Korea, Australia and ASEAN (except Malaysia) to Vietnam have increased since the signing of FTAs with more than 50% It is interesting to note that Singapore is the largest invested country in Vietnam among ASEAN countries, while it is also the recipient of most FDI from Australia compared to other ASEAN countries One of the main reasons is the close trade relationship between the two countries thanks to SAFTA, which is considered one of Australia's most effective FTAs (DFAT, 2017) So the question is whether Australia's investment in Vietnam through Singapore companies will benefit from incentives that ASEAN countries give for each other Considering the top 100 Singapore companies investing and operating in Vietnam, these companies are mostly Singaporean companies However, there is possible that these companies receive investment capital from Australia and then reinvests in Vietnam As the limitations of data collection in this study, it is needed to investigate more with more reliable data In addition, there is another possibility that Australian company invests in Singapore and then export goods and services to Vietnam using preferential tariff and higher liberalization in trade in services under AFTA Second, although Korea has the highest FDI inflow to Vietnam in the past two decades, and especially since 2010 when the AKFTA came into force, it is not the country that Vietnam has the widest commitments on liberalization in investment in general and investment in services in particular, but ASEAN instead The level of commitment under AKFTA is just equivalent to 38 or less than the commitments made by Vietnam under AANZ FTA For commitments in investment chapters, although the MFN principle of non-discrimination is more comprehensive than that of the AANZFTA, the reservation list of both agreements has not been finalized With regards to investment in services, Vietnam's commitments under the AKFTA are only equivalent to its commitments under the WTO On the other hand, Vietnam is committed to open more subsectors for Australia under AANZ FTA, including educational services and some other services These are subsectors with even higher commitments than in AFAS Among three FTAs, ASEAN is the FTA that Vietnam has highest commitment on liberalization in investment The liberalization principles, including non-discrimination rules, market access, performance requirements and the senior management nationality requirement apply to the investment which is made not only after but also before the entry into force of the agreement; while the scopes of investment agreement in AKFTA and AANZFTA restrict to investment made only after the agreement in effect In addition, the privileges accorded by ACIA member countries to other parties under any existing or future agreement shall apply to all ASEAN members By contrast, this rule is not available in AK and AANZFTA All industries are open to access except some related to Agriculture, Forestry, Fishery, Mining, Quarrying and manufacturing related industries with special or sensitive products in its reservation list, whereas these lists are still in Work Programme of AKFTA and AANZFTA Regarding to services, level of market openness under AFAS are higher than commitments under AKFTA and AANZFTA in term of number of sectors and subsectors which have market access and the level of liberalization More than 100 industries and sub-sectors are open to foreign investors from ASEAN, Korea and Australia, New Zealand However, there are 14 subsectors to which only ASEAN’s investors can access as Vietnam has not commit under AK, AANZ FTAs In addition, there are sectors that Vietnam has wider commitments in ASEAN than those under two other FTAs Third, although Vietnam has the highest commitment level under ASEAN in comparison with AKFTA and AANZFTA, it is not exceptional agreement in term of liberalization in investment in services There are still a large number of sectoral reservations and sectors/subsectors with restrictions, at around two third of total in the list of WTO Generally, sensitive sectors and sectors that Vietnam does not have strong competitiveness are the ones that 39 Vietnam does not commit for market access or limit for FDI This is one of the reasons why FDI inflows into the service sector are still limited VIII Recommendation and Conclusion Over the past 20 years, Vietnam has achieved great success in attracting foreign investment The FDI grew rapidly, with an increase of more than times after 20 years, and made Vietnam as one of the top host economies of FDI in the world in 2016 It plays an important role in job creation and enhancing economic growth Along with that, country actively integrates into the international economy and joins in many FTAs with higher commitments not only on trade but also on investment and other issues over time This study aims to exam the level of investment liberalization based on Vietnam’s commitments under three FTAs, including AFTA, AKFTA and AANZFTA Although FDI from Korea is much higher than the flows from ASEAN and Australia, based on the commitments made in these three FTAs, ASEAN is the agreement in which Vietnam has the highest commitment in terms of both investment and investment in services (Mode 3) Liberalization principles apply to investments both before and after the entry into force of the Agreement In addition, the privileges accorded by member countries to other countries also apply to all ASEAN countries Most non-service sectors are open to foreign investment, except those listed in the reservation list The provisions related to investment liberalization of AKFTA and AANZFTA are similar, but the AKFTA has slightly higher commitments with regards to MFN and senior management requirements For services, Vietnam has much wider commitment in ASEAN More services sectors are opened and many service sectors have a greater degree of market access for investors from ASEAN countries In the comparison between AKFTA and AANZFTA, commitments under AANZFTA are higher than that under AKFTA in some sectors/ subsectors In general, the level of investment liberalization in services is lower than that in manufacturing industries regulated by investment agreements This reflects the fact that the FDI inflow into service is very limited compared to the investment flow in the manufacturing sector All three FTAs contain provisions for further negotiations to enhance investment liberalization In which ASEAN has clearer path toward higher commitments with a specific schedule set out in AEC Blueprint 2025 In addition, in the past two years VKFTA and the 40 Package 9th under AFAS have come into force, as well as CPTPP has been signed, FDI flows from ASEAN, Korea, and Australia to Vietnam hence are expected to increase in the future Vietnam needs to liberalize more service sectors in order to attract more foreign investment, improve competitiveness and develop export-oriented services markets This not only enhances economic development but also creates favorable conditions for the domestic industry to develop 41 ANNEX List of Free Trade Agreements of Vietnam N o A ss oc iat io n of S o u A S E A A S E A A S E A N Vi et na m Ja pa n A S E A N – A A S E A Vi et Vi et na Si g ne d1 9 C o m e1 9 0 22 0 25 0 0 0 0 0 2 0 32 02 02 AS E A N Tr ad e in Ag ree Ag ree Tr ad e Tr ad e in Go od s -Ru Tr ad e in Go Ag ree Tr Tr 42 Vi et na m – E ur as ia n Ec on A S E A N – H on g C o m pr eh en si ve an d P r o g r e s Vi et (P la n) Ru les of Or igi n Tr ad -e Tr ad e in Go od s Tr ad Tr ad e in Go od s 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