Vietnam - Russia: Still Room for Trade Growth

Vietnam’s statistics showed that in 2013, trade turnover between Vietnam and Russia reached approximately US$2.8 billion, up nearly 7 times from 2000, 2.7 times from 2007 and a 56 percent increase compared to 2010. However, since 2014, the bilateral trade turnover between the two countries has been showing signs of decline: US$2.55 billion in 2014, down 7.6 percent compared with 2013; the first 9 months of 2015 was US$1.6 billion, down 20 percent compared with 2014, a consequence of current economic situation in the world. Raising the bilateral trade turnover to US$10 billion by 2020, therefore, is a challenging target, requiring direct and concrete support from the governments of the two countries.

 

Basically, according to economic experts, the trade relations between Vietnam and Russia was complementary in nature and there was still room to enhance cooperation, this current turnover was not commensurate with the potential between the two countries.

 

There are several reasons for this modest bilateral trade turnover namely: cumbersome customs procedures which are time and cost consuming for businesses, relatively high tariff before the Vietnam - Eurasian Economic Union FTA was concluded; a lack of confidence between businesses of the two sides; Vietnamese and Russian goods have yet to build up well-known brands in each other’s market; Also there are difficulties in payment as Russia is subjected to the sanctions of the US and EU, etc.

 

Regarding investment, currently Vietnam has 17 investment projects in Russia with a total registered investment capital of US$2.5 billion. Meanwhile, Russia has 107 FDI projects in Vietnam with total registered investment of US$2 billion. The most effective Russian projects focused primarily in energy, oil and gas with the participation of big corporations of both Vietnam and Russia (PVN, Rosneft, Zarubezhneft). However, a number of projects haven’t been able to go into operation due to problems in licensing under existing regulations (land application, capital transfer procedures, fire protection and environmental protection licensing, accreditation license, etc). For example the project of the plant assembling and manufacturing bus parts as well as support services invested by Bus Industrial Centre Limited Company in Nhon Hoa Industrial Zone, Binh Dinh province. The project has been granted an investment certificate since 2013 but so far no activities have been put into action due to problems in transferring capital from Russia to Vietnam.

 

Regarding tourism, the number of Russian tourists came to Vietnam recently has been on decline, a direct impact of a sluggish economy, as well as the fall of the ruble. In order to promote the development of tourism between the two countries, Vietnam has unilaterally granted a 15-day visa exemption for Russians travelling or visiting relatives in Vietnam. This is a positive move expressing goodwill of development cooperation in tourism with Russia of Vietnam.

 

According to the participants at the Vietnam – Russia Business Forum, to promote the efficiency of the Vietnam - Russia FTA, the two countries should develop a strategy of economic cooperation to 2015, vision towards 2020, in which investment and trade should be a main focus. The two governments need to review and build specific action plans to implement the FTA between Vietnam and the Eurasian Economic Union following a suitable roadmap. This is an important direction for both sides to deploy the content of economic cooperation promotion, making full use of the advantages after signing the FTA.

 

In particular, there should be activities to propagate the advantages and incentives of the FTA to the business communities of the two countries. It’s also important to have policies on selecting and prioritizing advantageous goods of both Vietnam and Russia to promote trade cooperation and enhance exports and imports between the two countries.

 

In December, an exhibition selling Vietnamese quality goods fair was successfully held in Moscow with the participation of 163 companies in various sectors namely textiles, footwear, handicrafts, food, etc. After the five-day event, many companies had sold out their products. This is a positive indication of the potential for trade cooperation development between Vietnam and Russia in the near future. However, during operation, enterprises have been facing issues in procedures for transportation and export. Therefore, the Vietnamese government should pay more attention to facilitating trade cooperation and bilateral payments between the two countries.

 

According to Bank for Investment and Development of Vietnam (BIDV), Vietnam and Russia have currently completed the legal procedures for a bilateral channel payment in local currencies. Therefore the two governments in the coming time should encourage both business communities to pay in local currencies in commercial transactions.

 

Regarding connecting payment cards, Russia still has some unsolved legal problems. According to Russian company NSPK, data exchange with partners outside the country required approval of the Russian central bank to use encoded card connectors. Russia therefore needed support in approving legal procedures for the implementation of connecting local currency cards.

 

Under the agreement, the two leaders were determined to set trade target of US$10 billion by 2020. This goal would require tremendous efforts from governments as well as business communities of the two countries. Organising frequent exchanges and trade promotion activities between the two countries, thus, hold a practical significance in promoting economic and investment cooperation as well as strengthening the traditional friendship between Vietnam and Russia.