Vietnam, Russia Seek to Boost Annual Bilateral Trade Turnover to US$10 Billion by 2020
Op/Ed by Chris Devonshire-Ellis
Vietnamese Foreign Minister, Anh Dung, has stated that he wishes to see Vietnam-Russia bilateral trade hit the US$10 billion mark next year, among growing positive results after Vietnam agreed a free trade agreement (FTA) with the Russian-led Eurasian Economic Union (EEU) in 2016.
The Eurasian Economic Union is a free trade area that includes Russia in addition to Armenia, Belarus, Kazakhstan and Kyrgyzstan. It effectively sits between the EU and China, and yet has been developing more Asian interest following EU sanctions imposed on Russia.
The impact on Vietnam has been a marked increase in investment from Eurasian Economic Union (EAEU) members and especially from Russia, where the agreement has helped spur investments in Vietnam’s auto and other industries.
Anh was speaking at the Far Eastern Economic Forum in Vladivostok, at which Dezan Shira & Associates personnel Chris Devonshire-Ellis and Maria Kotova were both representing the firm, which itself has operations guiding foreign, including Russian investors into Vietnam. The firm also maintains offices in Hanoi, Ho Chi Minh City, and Da Nang.
Anh stated, “In the field of trade, Vietnam needs to increase traditional products, such as agricultural, seafood, rubber, textiles, wood and wood products and expand the export of computers, electronics, and phones of all kinds. In turn, we are ready to import Russian raw materials, such as iron, steel, coal, fertilizers and so on.” He added that Vietnam also intends to “Attract Russian investment in areas where Russia has advantages, such as energy, mining, engineering, and processing.”
Vietnamese Deputy Prime Minister, Trinh Dinh Dung, was also speaking at the event, and noted that EAEU-Vietnamese bilateral trade doubled in 2018, and that vehicle assembly operations involving autos and especially tractors from Belarus had performed well under the FTA.
He expressed interest in increasing the scope of the FTA by expanding it to include textiles and agricultural products and expressed satisfaction at a trade relationship that until the FTA was signed, had been in very low, million-dollar trade figures. He said that Vietnam was committed to develop more room for Russian trade expansion into Vietnam and suggested that “Vietnam is Russia’s bridge to ASEAN.”
Russian investors have been cautious about investing in Asia, which is still a relatively new territory for the country. However, the Vietnam experience is proving to be a model testing ground for Russian and EAEU investors into the country, where Trinh suggested “There is plenty of room for growth.”
The Vietnam-EAEU FTA also provides Russian companies with access to ASEAN markets, which comprise the major Asian economies of Indonesia, Malaysia, Philippines, Singapore, and Thailand along with smaller markets, such as Cambodia, Laos, and Myanmar. Vietnam as a member of ASEAN allows for reduced tariffs with these nations, while ASEAN itself also has an FTA with China and India.
Establishing a Vietnamese subsidiary gives Russian owned businesses access to each of these markets – subject to local sourcing content controls. The country also has free trade and economic processing zones, which can allow additional production on imported Russian and ASEAN sourced components to be carried out free of duties and value-added tax (VAT), thus making Vietnam an attractive option for Russian businesses looking to sell products in Asia.