Vietnam-Poland: New Cooperation

Vietnam-Poland: New Cooperation

Although Vietnamese exports to Poland are changing as a result of the application of new quotas and tariffs following Poland’s EU membership, Mr. Zbigniew Pawlik, Polish Commercial Counsellor, in Vietnam believes that bilateral economic and trade relations will continue to develop. Businesses in the two countries are looking for new opportunities and the Polish government continues to provide development credits to Vietnam in shipbuilding and mining.

Polish economy re-emerges

After becoming a member of the EU on May 1, 2004, the Polish economy has experienced greater development. The economic growth rate in the second quarter of 2004 reached 6.3 per cent and it is expected to post a 6 per cent average for the year and in 2005 and 2006. The industrial and service sectors have played an important role in economic growth. Consumption of industrial products in the first half of 2004 increased 15.7 per cent over the same period last year and could reach 17.6 per cent in the second half, including 80 per cent of Polish made automobiles, followed by electronic products and telecommunications equipment. The construction sector will be revitalised after a long period of stagnation. After joining the EU, Poland has become more reliable in the eyes of investors and trade partners, becoming an attractive market for investors and entrepreneurs inside and outside the EU. According to experts, foreign investment reached US$6.4 billion in 2003, and has the potential to reach US$8 billion in 2004 and US$10 billion in 2005. In the first half of 2004, it increased 6 per cent and with the same momentum it could be 7.6 per cent in the third quarter, 10.1 per cent in the fourth quarter averaging 7.5 per cent for the whole year.

The levying of tariffs among EU members has increased teh volume of Polish exports to other EU members. According to statistics, the bilateral trade value between Poland and other EU members in the first half of 2004 increased by 40 per cent or US$59 billion. Polish trade value with EU members accounts for 77 per cent of its total trade value.

However, according to Mr. Pawlik, there remain certain difficulties, such as a high unemployment rate and continued inflation. Although unemployment in the second quarter decreased by 0.1 per cent, it still remains high. Inflation in the second quarter was 4.4 per cent caused by the price hike in petrol and real estate, while the higher price of foodstuff resulted from the big difference in prices between Poland and other countries, such as Germany and Spain.

Positive developments expected

In the first half of 2004, bilateral trade value between Vietnam and Poland stood at US$88 million with Polish exports constituting US$13.5 million, 25.8 per cent less than the same period last year. Polish exports included mainly machines and equipment for shipbuilding in the form of credit agreements, milk powder and medicines. Vietnamese exports to Poland in the first half of 2004 increased by 5.9 per cent, or US$74.5 million. Vietnamese exports included agricultural products (coffee, tea, rice), textiles and garments, footwear and processed foodstuff (instant noodles and spices). While the export value decreased 12 per cent in textiles and garments, and 28 per cent in footwear, it increased 31.6 per cent in agricultural products and 38 per cent in foodstuff.

In light of new developments in Poland, all the agreements signed between the two countries will be replaced by agreements signed between Vietnam and the EU. While Polish exports to Vietnam will see little change, Vietnamese exports to Poland will experience significant shifts. However, in general, it will bring about more positive results for Vietnam.

Firstly, as Poland joins the EU, Vietnam will be presented greater opportunities to tap the 450 million inhabited EU area. Secondly, most tariffs levied on main Vietnamese exports to Poland will be reduced. The import taxes on coffee and tea will remain unchanged while those on instant noodles and footwear will decrease by 5 per cent and garments by 10 per cent. On average, taxes applied to 68 per cent of Vietnamese exports will drop by 3.1-15 per cent, taxes on 28 per cent of Vietnamese will remain untouched, and only 4 per cent of Vietnamese exports will suffer an increase of 0.1-15 per cent. For example, EU quotas will increase the tax rate on Vietnamese rice by 15 per cent.

The structure of Vietnamese exports to Poland will also change.  While non-quota items will increase, quota-limited products will decrease. The main exports constitute agricultural products making up 42.7 per cent (36.3 per cent in 2003), followed by footwear, 23.7 per cent (29.1 per cent in 2003) and textiles and garments 10.7 per cent (14.3 per cent in 2003).

Polish assistance to Vietnam in shipbuilding and mining will remain unchanged and the projects will continue as planed.  Poland and Vietnam are also negotiating on credit for coal mining in Vietnam. According to Mr. Pawlik, Poland will provide a credit of US$90 million to upgrade coal mines in Quang Ninh province. Technical negotiations have been completed, leaving only cost evaluations to be finalised. The two countries will continue negotiations on energy and seek new areas of cooperation.

• Thu Huyen