Vietnam-UAE CEPA: Strengthening Ties Between ASEAN and the Gulf

Vietnam-UAE CEPA: Strengthening Trade and Investment Between Southeast Asia and the Gulf

The United Arab Emirates (UAE) and Vietnam signed the Comprehensive Economic Partnership Agreement (CEPA) on October 28, 2024, marking their intention to expand their alliances beyond conventional partners at a time of changing global dynamics.

For Vietnam, the UAE represents a path to diversifying trading partners and improving economic resilience by establishing ties with a region it has not traditionally been deeply involved in. As part of its larger plan to strengthen its global trade and logistics network, the UAE is keen to establish a key link in the rapidly expanding Southeast Asian markets.
This deal has enormous potential since it creates a pathway to market access for both nations as well as 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. In 2020, the Gulf state and Indonesia inked a Comprehensive Economic Partnership Agreement (CEPA), which led to an estimated $10 billion in Emirati energy and logistics investments. Soon later, a deal with Cambodia was reached and went into effect earlier this year.

Thus, this new deal with Vietnam encourages connection between the Gulf Cooperation Council (GCC) and the Association of Southeast Asian Nations (ASEAN), signifying a strengthening collaboration between the 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 in two primary ways: expanding trade in Vietnamese goods with the UAE and the wider GCC region, and encouraging UAE investment in 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 example, seafood tariffs, previously ranging from 5 percent to 15 percent, are expected to be significantly reduced, which will increase competitiveness for Vietnamese exporters. Currently, Vietnamese agricultural products account for about 4 percent of the UAE’s agricultural imports, but with improved access and reduced tariffs, this share could rise significantly, positioning Vietnam as one of the top five suppliers of agricultural products to the UAE.

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.

Although this agreement creates a lot of new opportunities for cooperation, both countries will have to overcome real-world obstacles before it can reach its full potential. In the United Arab Emirates, where Vietnamese product branding and consumer recognition are still relatively low, Vietnamese exporters must contend with expensive shipping costs and intricate regulatory restrictions.
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.