Poland gives EU unlikely Vietnamese trade boost

Nassos DrakosGlobal Markets

Trade between Poland and Vietnam passed $3 billion last year, but may be set to grow even more as the EU signs a trade deal with the communist-ruled nation. Poland’s large Vietnamese population could provide the bridge.

With Poland growing at a rate of over 4%, while its neighbors show tepid GDP expansion, several Asian countries including China have been eyeing investments in the Eastern European country. South Koreans lead the way in Warsaw real estate, for example.

But Poland has another Asian partner on its doorstep, in the shape of its 50,000-strong Vietnamese community. Could it be the foundation for blossoming trade between the two nations as the EU signs a free trade agreement with the Southeast Asian country? Some certainly believe so.

“Vietnam is one of the most promising markets for Polish companies in South-East Asia,” Piotr Harasimowicz, chief representative officer of the Polish Investment and Trade Agency in Ho Chi Minh City, told DW.

EU inks Vietnam trade deal

In January, MEPs gave initial backing to a free trade agreement with Vietnam. Vietnamese exports of goods and services to the EU will increase by €15 billion ($16.4 billion) while EU exports to Vietnam augment by €8.3 billion by 2035.

The international trade committee of the European Parliament supported the agreement, opening the way to a vote in the full parliament when it meets this week. The EU-Vietnam agreement is the EU’s second deal with a member of the Association of Southeast Asian Nations (ASEAN), after Singapore.

The EU-Vietnam Free Trade Agreement (EVFTA), which is most likely to come into force in March, will eliminate almost 99% of custom duties between the EU and Vietnam. As much as 65% of duties on EU exports to Vietnam will be eliminated while the remaining will be gradually phased out over a period of 10 years. Also, 71% of duties will be eliminated on Vietnam exports to the EU, with the remaining to go over a period of seven years.

Sectors such as the pharmaceutical, agri-food, machinery and automotive industries will benefit most from the bilateral trade liberalization, Harasimowicz said. Almost half of the pharmaceutical products from the EU, including Poland, will be exempt from 8% customs duties as soon as the agreement comes into force, the rest after seven years.

In turn, customs duties on beef will be eliminated after three years, for dairy products after a maximum of five years and for processed food after seven years. Quite heavily burdened (tariffs reaching 48-50%), trade in wines and spirits will not be taxable after seven years from the implementation of the agreement.

Participation in tenders matters

In addition, EVFTA opens the Vietnamese public procurement market for all EU companies. According to the agreement, European entrepreneurs will be able to participate in tenders organized by the central administration (including infrastructure investments), the cities of Hanoi and Ho Chi Minh, as well as the largest state-owned enterprises, Harasimowicz says. The agreement also provides easier access to the Vietnamese postal market, banking and insurance services, as well as those related to maritime transport.

Harasimowicz said latest data from the agency showed bilateral trade between Poland and Vietnam surpassed $3 billion in 2019 and had recorded double-digit growth during the last couple of years. The key sectors of cooperation are agri-food, pharmaceuticals, cosmetics, green technologies and wastewater treatment.

Harasimowicz said potential areas were software/IT, heavy industries such as mining, shipbuilding, machinery and equipment for agricultural production, and food processing. Vietnam mainly exports electronics and equipment, footwear, textiles and agricultural goods such as coffee, pepper, coconut and cashews.

  • Little Hanoi

    Vietnamese make up the largest minority in Poland after Ukrainians, Germans and Belarusians, with 11,718 holding permanent residency permits, though the number is likely higher as it does not include people of Vietnamese heritage, those applying for or holding Polish citizenship or people on work permits.

    The Vietnamese Embassy and Vietnamese community leaders in Poland estimate that about 20,000 to 30,000 Vietnamese people may live in Poland, while the Polish government in 2002 put the upper possible range at about 50,000. The Vietnamese-Polish population is concentrated in Warsaw.

    The possible role of the expat Vietnamese is complicated, however. Many of those Vietnamese that ended up in Poland from the late 1960s onwards were often not supportive of the regime they left behind in Hanoi and then Saigon. The Gierek era in Poland, which saw an opening to the West, with some market reforms and then huge crippling debt and collapse in 1980, was the period when many of the opponents of the regime in Hanoi left the country.

    Wolka Kosowska on the map

    However, following the Polish transition to a capitalist economy in 1990, Poland became a more attractive immigration destination. This triggered a second, larger wave of Vietnamese immigrants to Poland, many as vendors selling clothes or cheap food. As of 2002, there were an estimated 500 Vietnamese restaurants in Warsaw, mostly serving fast food.

    The most popular location among the Asian immigrants settling in the capital’s Mazowieckie province is a small village, Wolka Kosowska, near the main E77 highway which connects Gdansk to Krakow.

    Some of the Vietnamese merchants, who previously rented apartments in Warsaw, have decided to settle there permanently, buying flats and houses in the proximity of Wolka Kosowska’s trade halls. The future of Polish-Vietnamese trade can be seen in microcosm here and it looks pretty healthy.

    Source:dw.com