The Socialist Republic of Vietnam plays an important role interms of its geographical location which makes the country more attractive in the South East Asia. In parallel, this position positively influence the country's economy. Deputy Director of the European-American Market Department and the Ministry of Industry and Trade of the Socialist Republic of Vietnam Ms. Nguyen Khanh Ngoc answered Eurasia Diary's questions on the current economic ties and future prospects of cooperation between Vietnam and Eurasian Economic Union (EAEU).
Free trade zone between the Eurasian Economic Union and Vietnam
The Vietnam – Eurasian Economic Union Free Trade Agreement (The VN – EAEU FTA) was initiated from March 2013 in Hanoi. Having been approved by the President, the Prime Minister of Vietnam and leaders of five member states of the EAEU signed the VN – EAEU FTA on May 29, 2015 in the Republic of Kazakhstan. After each side had completed internal approval procedures, the VN – EAEU FTA took effect from 5th October, 2016.
Since the VN – EAEU FTA took effect, bilateral trade between Vietnam and EAEU has increased positively. According to statistics of the General Department of Vietnam Customs, import – export turnover between Vietnam and EAEU reached 3.04 billion USD in 2016, increasing by 23% compared to 2015, of which Vietnam’s export reached 1.77 billion USD, an increased of 10%. EAEU’s export to Vietnam reached 1.27 billion, an increased of 45%. In general, Russia makes up approximately 90% in total trade turnover between Vietnam and EAEU.
The export of Vietnam to EAEU
Since the VN – EAEU FTA took effect to late July 2017, Vietnam has provided 9,908 Certificates of Origin form EAV (C/O EAV) for export goods of Vietnam to EAEU with total turnover reaching 354.3 million USD. Most of export products from Vietnam comprise of textile; footwear; seafood; agricultural products; mobile phone and electronic components.
The import of Vietnam from EAEU
According to statistics of the General Department of Vietnam Customs, the import goods applying special preferential import tax rate have tended to increase since the VN – EAEU FTA took effect until now. To be specific, in the last three months of 2016, 25 types of goods applying to C/O EAV reached 44 million USD in total turnover, which is an equivalent approximately 12% in total import turnover from EAEU. In the first seven months of 2017, there were 65 types of goods reaching 305 million USD in total import turnover, equivalently above 23%.
To strengthen the economic and commercial cooperation between Vietnam and EAEU and to utilize effectively the engagements in the VN – EAEU FTA, active engagement and attention of the business community play a critical role. So far, enterprises of both sides have been actively engaged in business conferences to spread information about the VN – EAEU FTA. Moreover, enterprises’ participation in fairs, exhibitions and forums also become more active and positive.
The appropriate authorities of Vietnam and EAEU are actively implementing contents of the Vietnam – EAEU FTA in many non-tariff sectors such as: trade defense; rule of origin; customs management; technical barriers to trade (TBT); food hygiene and safety methods; sanitary and phytosanitary measures (SPS); government procurement; intellectual property; sustainable development; ... to optimize the bilateral trade between Vietnam and EAEU. In addition, within the bilateral framework, Vietnam and member states of EAEU also signed new agreements to create opportunities for enterprises to penetrate into each other’s market.
Joining the Eurasian Economic Union in the future
The countries which share similar economic conditions often want to unite for greater power and influence in the world arena (the European Union is a classic example of trade union). With the same logic, countries of the former Soviet Union have the tendency to associate, leading to the creation of the Eurasian Economic Union.
The model of EAEU bears great resemblance to that of the European Union. Because Vietnam and EAEU economies are more complementary than homogeneous, there is less immediate need for association. Furthermore, due to geographical distance, which is usually one core criterion in the formation of regional trade union, Vietnam is less suitable as a candidate to the EAEU. Nevertheless, Vietnam has a long-standing interest in increasing trade with EAEU countries. Thus, the VN-EAEU FTA was born to make up for the obstacle posed by geographical distance.
So the main purpose of Vietnam-EAEU FTA is to smooth the flow of goods from one country to another and to create advantages for goods and investments which are strengths of each country.
Investment projects between Vietnam and the Eurasian Economic Union
Vietnam-Russia Senior Working Group on Priority Investment Projects (the Working Group) was established under the decision by the two countries' leaders in 2012. There are a total of 17 projects within Vietnam-Russia Priority Investment Project List in the fields of oil and gas, transportation, agriculture, electricity, construction, industry and high technology. These are key projects in the Vietnam-Russia cooperation, which are of high socio-economic importance and need attention and support from the two countries' governments.
In addition, it is important to emphasize that Vietnamese government in March 2016 signed respective Protocols on supporting the production of motor vehicles in Vietnamese territory with the Russian Federation Government and Belarusian Government, allowing some Truck and Bus Joint Venture to enjoy certain tariff-free import quota for the purpose of market exploration. This is an agreement implementing a clause in priority investment projects within the framework of VN-EAEU FTA.
Trade turnover between Russia and Vietnam
In 2016, the trade turnover between Vietnam and the Russian Federation reached 2.7 billion USD (up 26% compared to 2015), of which Vietnam's exports to Russia reached 1.6 billion USD (up 12%), Vietnam's imports from Russia reached US $ 1.1 billion (up 51%). In 2016, Vietnam's economic competitors in Russian market all had lower export growth than Vietnam, namely with China of 2.5%, Indonesia of 5.9%, Thailand of 23.3%. In the first 10 months of 2017, Vietnam - Russia trade turnover reached 2.84 billion USD (up 27% over the same period in 2016), of which Vietnam 's exports to Russia reached 1.79 billion USD (up 33%), imports reached $ 1.05 billion (up 17%).
The Vietnam’s main imports from Russia in recent years are petroleum, steel, fertilizers, machinery and equipment. The main exports to Russia include phones and components, computers and electronic products, textiles, footwear, seafood, coffee, cashew nuts, rice, and vegetables.
To make good use of tariff reductions under the VN-EAEU FTA and gradually reductions of non-tariff barriers, Vietnam and the Russian Federation will actively implement The Agreement on the Application of Sanitary and Phytosanitary Measures (SPS Agreement), facilitating the trading of agricultural products between the two countries.
According to the Foreign Investment Agency under Vietnam's Ministry of Planning and Investment, as of the end of September 2016, the Russian Federation has 112 direct investment projects in Vietnam with a total registered capital of $1.02 billion, ranked 23rd among countries and territories investing in Vietnam. The Russian Federation's investment projects focus on the field of oil and gas, manufacturing, mining, transportation, telecommunications, aquaculture and fishing. Vietnam has 18 investment projects to Russia with total new investment capital and capital increase of USD 2.4 billion, mostly investment projects from Rusvietpetro Joint Venture, the Hanoi-Moscow Trade Centre Investment Joint Stock Company and the Moscow Dairy Farm and Milk Processing Complex.
The Russian Federation has a strong industry, especially in the fields of mineral extraction and processing, electricity, automobile manufacturing, machine manufacturing, chemicals, etc. Thanks to this agreement, Vietnam also has the opportunity to promote and expand its investment in the union's member countries in the light industry, processing industry, oil and gas exploitation, etc.
Trade turnover between these Vietnam and Belarus
The structure of imports and exports between the two countries is complementary. Vietnam’s exports to Belarus are mainly phones and components, seafood, vegetables and some other commodities. Meanwhile, Vietnam imported from Belarus mainly Kali fertilizer, machinery - equipment - spare parts, trucks, plastic materials, under 12 seats automotive CKD, SKD components...
The Vietnamese side is committed to creating favorable conditions for Belarusian businesses on the basis of the principles of market economy and mutual benefit. Vietnam also affirms the desire to strengthen the cooperation with Belarusian companies in the fields of machine manufacturing, engines and vehicles production (cars, trucks, tractors, excavators, agricultural machines, etc.). Particularly, priority should be given to the transfer of technology and the training of skilled workers in Vietnam. Belarus promotes industrial cooperation with Vietnam because of the desire of Belarusian companies to enter the ASEAN market with a total population of over 625 million.
Trade turnover between Vietnam and Kazakhstan
The structure of imports and exports between the two countries in recent years is almost unchanged. Vietnam's export includes mainly telephones and components, computers and components, agricultural produce, seafood, machinery parts, iron, and steel. Vietnam imports from Kazakhstan products such as metals, ores, and minerals.
Currently, Vietnam has one investment project as a real estate business by Long Phu Real Estate Company. This is 100% FDI project with a scale of US $ 26.48 million is in the city of Astana since January 2015. Kazakhstan investment in Vietnam reached US $ 400,000 with the Bolat Duisenov's wind power investment project. In addition, Petrovietnam Oil and Gas Group (PVN) and KazMunayGas (KMG) have cooperated in oil and gas exploration, production and services for many years, but there is no project implemented so far.
In the coming time, Vietnamese and Kazakh enterprises will actively seek opportunities to expand and develop further bilateral cooperation in the strengths of each side, especially energy, oil and gas, minerals extraction and processing, telecommunications, construction.
Linh Tong
Representative journalist of IEPF in Budapest
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