Michele D’Ercole: Vietnam and Italy, an opportunity-rich partnership for investors and companies.

Edoardo Bonatti
20 novembre 2018


Michele D’Ercole is the President of the Italian Chamber of Commerce in Vietnam (ICHAM) since 2012. Before occupying this position, he matured a long experience in the private sector, which brought him to the South East Asian country for the first time in 2007.

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The interview

Investorvisa.it: Mr. D’Ercole, you have been working in Vietnam for more than ten years. How do your previous experiences influence your job as President of the Chamber?

D’Ercole: I arrived in 2007 to work on behalf of an Italian company producing leather for furniture, and then I worked for another Italian company, always Italian, now, since a few years, I dedicate quite some of my time to the Chamber. My previous experiences, having been in a management role, helped me greatly in directing the Chamber’s work: they were jobs in the industrial production sector, one very similar to what the Chamber does. The helped me greatly in organizing the staff and colleagues of the Chamber to make it work better.

Which are the Chamber’s activities aimed at connecting the Italian and Vietnamese economies that you consider more effective?

The Chamber’s core business is to improve bilateral relations between the two countries. Our main relations are with the companies, starting from the Italian ones present in Vietnam with their factories or representative offices, especially with the former ones, which are obviously much more rooted in the territory. The Chamber offers its services to registered members, both Italian and Vietnamese, considering its bilateral nature. The most important services are the ones helping to interact with local institutions, such as aid in customs practices or updates on regulatory aspects related to the activity of the company in question. Exactly how we provide these services varies as the size of the company changes, but anyone who needs information or lobbying turns to the Chamber, which operates in the area. The Chamber’s B2B initiatives and missions are also crucial, as they allow the companies of one country to meet with their foreign counterparts; of course, we also organize events dedicated to Italian companies interested in the Vietnamese market. For example, we are arranging the mission that will bring the Vietnamese companies to the TUTTOFOOD in Milan in 2019 with a pavilion dedicated to the country.

Vietnam is an example of virtuous development where macroeconomic improvements went hand in hand with excellent results in terms of reducing poverty and opening up both the commodity and capital markets to the global market. What is the future for the national economy and what role could a country like Italy play, now relatively marginal when compared to the main Asian partners?

Vietnamese GDP has seen a steady growth of over 6% since 2014, with controlled inflation of less than 4%. Data shows a country that continues to grow: the fundamental engines are a very young workforce, with over 60% of the 95 million inhabitants in the golden age of the working age; also, the economy remains very competitive in the manufacturing sector. In the eyes of a company that intends to invest, a stable government plays an equally crucial role. As for import/export, during the first ten months of this year, Vietnam imported goods worth 193 billion dollars, while exports amounted to about 200 billion, thus recording a trade balance surplus. The Italian trade balance was over 4 billion in 2017 but was very unbalanced in favour of Vietnam. In the first 7 months of 2018, Italian exports amounted to over 600 million, while Vietnamese export to Italy amounted to around 1.1 billion. Italy is catching up thanks to the main products of our economy: machinery, in transversal sectors; processed leather, as Vietnam is one of the largest producers of accessories; fabrics and chemicals. Imports mainly concern the components to produce finished products, as Vietnam suffers from a shortage of raw materials and does not have a highly developed supply chain, and then exports finished products. Imports are growing for the telephony and hi-tech manufacturing sector (among the major global players that have recently come to Vietnam we can mention Samsung and Intel). In addition to finished products, such as footwear, a good part of the country’s exports is composed of permanent crops and aquaculture.

The structural framework of the relations between Italy and Vietnam saw a significant change in the Free Trade Agreement with the EU. What impact will the Agreement have on exchanges and above all on mutual investments?

Vietnam, even before becoming part of this treaty, has other agreements, in fact it is, with 10 other countries, member of ASEAN (Indonesia, Malaysia, Philippines, Singapore, Thailand, Brunei, Laos, Burma, Cambodia, Papua New Guinea has been admitted as an observer state) and in this context, from 1 January 2018, a full free trade regime was reached. ASEAN has agreements with India, China, Australia, New Zealand, Hong Kong, South Korea and Japan; Vietnam has an agreement with the Eurasian Economic Union as well. The Vietnamese assembly recently approved the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, which replaced the TPP following the US withdrawal. The country offers great business opportunities by virtue of its openness to free trade. The FTA with the European Union, not yet in force, pending the approval and ratification of Brussels, can represent a great advantage for Italy, as it would significantly increase its exports. Tariffs on machinery (5%), synthetic fabrics (12%) and chemicals (15%) would essentially disappear. Companies could also choose to strengthen their activities in the Asian market thanks to the opportunities offered by the FTA and a physical presence on the territory.

According to the Italian Ministry of Foreign Affairs’ studies, Italian investments in the country are rapidly growing, but we are far from making the most of Vietnam’s potential. What is the relationship between the Chamber and the companies that have expanded their operations on the spot or do they intend to do so?

The main problems are the physical distance and knowledge gap between Italy and Vietnam, with the former having favoured more close and geographically closer places than Asia as a whole. Vietnam can be considered a recent discovery, and it was not always looked at with the due care. Piaggio and Datalogic celebrated 10 years of activity in Vietnam, while Ariston, for example, has been present for much longer. We hope that with the free trade agreement with the European Union the Italian presence will increase. Most of the companies that have invested in the country are members of the Chamber and recognize it as a reference point for their problems related to the insertion and continuation of their activity in the local market. All the activities of the Chamber aim at involving all its associates, both Italian and Vietnamese companies interested in increasing their businesses, and the Sistema-Italia can enjoy a very profitable cooperation with the Embassies and Consulates that assist us in our initiatives.

Is there, following the exponential increase of Italian investments (89 projects worth a total of 388.28 million dollars), a presence of companies and entrepreneurs structured enough to say that an Italian business community exists in Vietnam?

Yes, absolutely. Among the 81 associates, a record reached in 2018 on the tenth anniversary of the Chamber, 80% of them are Italian.

Looking instead to the Vietnamese entrepreneurs, which are the sectors that count the most important ones and what is their propensity in investing abroad? What synergies can be established between the Italian production system and a Vietnamese entrepreneur? Are there any sectors of the Italian economy that are more attractive than others in their eyes?

Vietnamese companies look at Italy with interest but, for the moment, there are no big investments. Vietnam is not financially comparable to other Asian countries like Japan, South Korea or Singapore, which can rely on large structures to support their ventures. Very often, they look at neighbouring countries, without neglecting the opportunities offered by Europe and Italy in the tourism and hospitality, obviously in close connection with tourism itself. Thanks also to free trade, countries can become closer and thus favour the arrival of Vietnamese capital in Italy. In Vietnam there are some sectors that are not open to foreign investment, while others are much more willing to receive foreign capital, such as those related to the 4.0 economy, hi-tech and infrastructure sectors, and, of course, the traditional ones. A relevant limit is the financial aspect: if a company is not solid, it will have to ask for the support of the World Bank Group or the Asian Development Bank. The opportunities are there, and the Chamber is the main gateway.

From an individual standpoint, Italy offers a special visa to non-EU entrepreneurs willing to invest at least 500,000 (in a start-up) or one million euros (in a company) in Italy. Is this, in your opinion, a measure capable of attracting a greater number of Vietnamese businesspersons, perhaps even willing to move to Italy?

The measure is a starting point, which can also help Vietnamese entrepreneurs look at Italy as a country in which to invest. Like the previous one, this government is also focusing on attracting foreign investments. The country is attractive for investments and these measures support this fact, especially in the eyes of investors outside the EU who wish to move, even more so if the investment made is substantial. Many countries offer the opportunity to invest and then obtain a passport, so we need to streamline the bureaucracy necessary to obtain a visa to be competitive when compared to European countries that are much more open to granting a permanent visa for investors.

In this sense, a measure aimed at strengthening this new visa policy is the one that offers an advantageous tax regime (100,000 euro per year) to those who transfer their tax residence in Italy. Given the tax regime in Vietnam, can this be a benefit for their entrepreneurs?

The tax regime of Vietnam is not so “aggressive”, we are talking about a tax on companies of 20-22%, but the tax regime put in place by Italy may be an opportunity, given that if you get so far to invest your earnings the investment will probably be important. Surely, in this sense, the measure can be an incentive.

Thank you and all the best.