Vietnam-Russia: Close Cooperation in Various Fields

 

According to statistics, the two-way trade of the two countries has developed rapidly, from US$350-400 million in the mid-90s to nearly US$2 billion in 2011, an average increase of 17 percent a year, of which Vietnam's exports to Russia increases 25 percent a year. In 2013, the two-way turnover reached nearly US$4 billion and in the first 10 months of 2014, the bilateral trade reached US$2.2 billion.

Vietnam exports to Russia major items such as telephones and accessories, computers, electronic products, coffee and seafood. Among items exported to Russia, telephones and components have the highest turnover followed by computers, electronic products and components.

 

On investment, now Russia is ranked 18th among countries and territories investing in Vietnam with 97 projects, worth nearly US$2 billion. Russia ranks third among countries and territories in which Vietnam has investment, with 17 projects with US$2.4 billion. Especially, the high-level working group on the priority projects of Russia-Vietnam is working very actively and effectively, bringing promising investment between the two countries.

 

Vietnam and Russia are determined to increase trade turnover to US$10 billion in 2020 in parallel with the aim of ensuring equality and mutual benefit in international economic-trade relations.

 

Petroleum and energy are the traditional areas of cooperation, generating big income for the budget of the two countries. In October 2008, Vietnam and Russia have signed a protocol to convert Vietsovpetro Joint Venture into a limited liability company with two members after 2010. The two sides have set up the new ventures, such as Vietgazprom, Rusvietpetro and Gazpromviet to continue cooperation in the oil and gas sector not only in Vietnam but also in Russia and eventually in third countries. Russia continues cooperation with Vietnam in the modernisation and new construction of energy facilities in Vietnam. GAZPROM Group of Russia is also expanding cooperation with PetroVietnam. The two sides are considering extending cooperation to the field of nuclear power.

 

In particular, on 27^th December 2010, Vietnam and Russia signed agreements to continue cooperation in the fields of geological exploration and exploitation of oil and gas in the framework of the Joint Venture Vietnam - Russia, Vietsovpetro (2011-2030). In the 30 years of cooperation, Vietsovpetro has exploited over 193 million tonnes of crude oil, accounting for 76 percent of the mining sector. Until now, Vietnam has signed with Russia a number of cooperation documents in energy fields, namely: Roadmap for Vietnam-Russia cooperation projects in the energy sector; Agreement between the Government of Vietnam and the Government of the Russian Federation on cooperation in the energy sector; Intergovernmental Agreement on Vietnam-Russia cooperation on construction of nuclear power plants in the territory of Vietnam.

 

Cooperation in the fields of military technology, security and defence between Vietnam and Russia continue to be promoted, in which the cooperative purchase of weapons and ammunition continues on the basis of traditional ties in the long-term through contracts to provide weapons for the Air Force, and Navy Force of Vietnam.

In the banking sector, Vietnam and Russia already have gained some development, because on the one hand Vietnam's banks have grown at a high level, but still need to apply new advanced and modern technologies to meet the requirements of integration, on the other hand, Russia is very strong in banking technology, so the search for higher forms of cooperation between the banks of Vietnam and Russia will bring benefits to both sides.

 

In recent years, especially since the official visit of President V.Putin to Vietnam, cooperation in education and training between the two countries has improved considerably. Since the 2010-2011 school year, every year, the Russian government grants 300 scholarships for undergraduate and graduate Vietnamese students to study in Russia. In addition, the number of students studying self-funding is more than 5,000 people. Both parties to promote and establish the Vietnam-Russia University of Technology in Vietnam signed an agreement on mutual recognition of diplomas.

 

Cooperation in the field of tourism is growing; the number of Russian tourists to Vietnam has increased by an average of more than 30 percent since 2006, reaching more than 40,000 visitors / year. Along with the visa exemption from Vietnam for Russian tourists in Vietnam up to 15 days, good quality service and beautiful scenery draws more Russian tourists to visit Vietnam. Moreover in Vietnam, the Vietnamese people are enthusiastic and hospitable, and safety and security for tourists is taken seriously. It also attracted the attention of Russian tourists.

 

According to economic experts, Vietnam and Russia are two markets that can fully complement each other: Vietnam is strong in food production, and special food especially tropical products; Russia has the strengths in machinery, metallurgical equipment, fertilizers, oil and gas. They are advantages in developing bilateral trade.

 

Russia is a huge market; recently, most Vietnamese exports only reached some Russian cities. The Russian market has a high demand for those items that Vietnam is fully capable of exporting. The Russian market is an easy market. It does not require high quality goods as in the US, EU or Japan. Therefore, the goods of Vietnam can easily enter. However, Vietnam goods also need to improve the quality to be able to compete with other countries' goods on the Russian market. The Vietnamese doing business in Russia play an important role in promoting bilateral trade relations. Many commercial centres of Vietnamese are operating very effectively in Russia as: Togi, Red River, Ben Thanh and most recently, the Hanoi-Moscow Trade Centre.

 

However, according to experts, the biggest difficulty is the solvency of the CIS market in general and Russia in particular. Currently the financial ability of many Russian enterprises is limited, not enough liquidity in accordance with international practice, so they often require Vietnamese enterprises to delay payments for 6 months to 1 year. Conversely, when exporting to Vietnam, Russian businesses require payment in advance. Meanwhile, Vietnamese enterprises now lack capital so they often demand payment after delivery.

 

The 2nd difficulty is obstacles in payment for goods between the two countries. At the Bank of Russia it is not easy to open L / C, and charge for L / C is very expensive, while the banks in Vietnam do not support businesses in deferred sales to Russia. This is a big hindrance in trade between the two countries in recent years.

 

Transportation is also an obstacle in bilateral trade relations. The fleet from the former Soviet Union had completely disintegrated, the current transportation is mainly by container, but the cost is high. Exports from Vietnam to Russia are shipped through the port within Europe and then to Russia, or to the port of Vladivostock and follow regular routes to Russia from east to west, so transportation costs are greater than for cargo moved from China, South Korea, Turkey, Iran or India.

 

Besides, the Russian market still applies tariff and non-tariff technical barriers to protect domestic production (eg issue a ban or restrict imports of some commodities such as agriculture - aquaculture, frozen meat). The provisions of the Russian market for imported goods are very tight, regulations on financial management and credit are complex. The exchange of goods between the two countries is mainly made by private enterprises and Vietnamese traders in Russia, so it is quite fragmented and lacks methodology. The Russian government advocates protectionism, increasing import duty and quota, creating non-tariff barriers have limited traditional export items of Vietnam. Obstacles within administrative procedures and customs also cause difficulties for enterprises to enter the market.