Promoting cooperation with Middle East, Africa

3:10:50 PM | 9/17/2019

The Meeting with Vietnamese Ambassadors to Middle East - African countries in 2019 took place in Hanoi on September 9. It was designed to carry out the Project on developing Vietnamese relations with Middle East and African countries from 2016 to 2025, maintain and promote cooperation momentum with these regions.

On the sidelines of “Payments in trade-investment transactions: Reality and Solutions”, Vietnam Business Forum has a brief interview with Mr. Hoang Quang Phong, Vice President of the Vietnam Chamber of Commerce and Industry (VCCI). Thu Huyen reports.

What do you think about potential and opportunities for business cooperation with Middle East and African countries?

Vietnam and Middle East - African countries have fine traditional friendships. With more than 200 documents signed between the two sides, the bilateral trade and investment cooperation has been on the constant rise. The two-way trade value rose by 3.5 times, from US$5 billion in 2010 to US$18 billion. Foreign investment of the two sides also achieved encouraging results, reaching over US$5.5 billion. Vietnam’s telecommunication investment projects in Africa have helped local people access telecommunications services and expand opportunities for global digital connectivity. Cooperation in agriculture, energy, transportation, labor and expertise exchange are also bright spots of two-way cooperation.

However, these figures are still shy of the potential generated by ​​70 countries with 1.6 billion people, spanning over 36 million square kilometers. These regions account for only 3.5% of Vietnam’s total exports of US$480 billion in 2018. I think Middle East-Africa markets are very potential and businesses and economies of both sides expect stronger business cooperation. In the coming time, after this event, if all levels and sectors continue to take more drastic and more concrete actions to provide more favorable conditions for businesses, I believe that economic and trade cooperation results in many other fields will certainly increase.

What should be done to improve the trade ties?

In my opinion, one of the reasons for the modest trade ties is that Vietnamese businesses face difficulties like far distance, rugged transport conditions or risky payment conditions. And most of them are small and medium-sized.

Therefore, there is a need for fiercer coordination of management agencies as well as business associations. Businesses need more efforts if they want to explore Middle East - African markets.

Many businesses think that payment is a bottleneck in cooperation between Vietnam and Middle East-African countries. For you, how should we solve this issue?

I totally agree with practical remarks made by Viettel, Hapro and BIDV that they will still experience difficulties if businesses and authorities of the two sides don’t work together to solve them. Geographical distance, payment conditions and intermediary cash culture are posing risks to many Vietnamese enterprises when they invest in Middle East-African countries.

To realize opportunities, it is necessary to have a more radical study on partners so as to convince them, gain their trust and initiate specific conditions in contracts with them. We also need to study whether modern payment methods, prepayment to delivery instead of payment after delivery are possible? Another factor is to enhance the capacity and likelihood of bank cooperation and connectivity to open branches and central banks and governments must have channels of exchange, actualized by cooperation agreements through intergovernmental cooperation committees to tackle this bottleneck. This is not a new but long-existing issue and if it is not solved, the opportunity for good political relations between the two sides may disappear as well as their peoples are unlikely to benefit from this good relationship. I hope that, with high political determination, governments and payment institutions of the two sides need to join hands to find a way to go through this bottleneck.

Thank you very much!

Mr. Mothudi Bruce Rabasha Palai, Ambassador of Botswana to Vietnam

In my opinion, it is necessary to liberalize financial resources and find out financial solutions of the Middle East, use Vietnam's experts and technological resources to handle development challenges in Africa.

In addition, Vietnam and the Middle East - Africa regions should endeavor to find a common ground for cooperation, promote trade and investment cooperation on the principles of fair and win-win participation.

Mr. Nguyen Tien Vuong, Deputy General Director of Hanoi Trade Corporation (Hapro)

Due to peculiar customs and economic conditions, the method of payment in this area is still not stable. Many African customers do not want to use letter of credit, the most secure form of payment today, but they use the late payment method or 20-30% deposit, and pay off after receiving all goods.

Besides, if risks emerge to push up goods prices or buyers refuse to receive goods and settle payment, companies will suffer from damage.

In fact, the Middle East market is accepting three forms of payment: Money transfer, collection and letter of credit. Middle Eastern businesses are quite reputable in their transactions and they require strict merchandise quality. Meanwhile, deferred payment is favored in the African market. African businesses are also financially weaker and they do not like to open letters of credit.

Ms. Aissata Kone-Sidibe, Chair of Leadership Club of African Banks

The fact that Vietnamese banks have very little relationship with African partners is one reason for information shortage of lending policies and exchange rate regulations. And, this reality troubles businesses. I hope that banks in Vietnam will soon strengthen their presence in Africa. Through cooperation with African banks or intermediary institutions, the two sides will work together to build cooperation mechanisms to facilitate rapid settlement of payments in order to create confidence for their enterprises.

In addition, Vietnam and African and Middle Eastern countries need to actively negotiate and agree on free trade agreements, thus having a clear, transparent legal framework to promote proper cooperation relations for the two sides.

Ms. Luong Thi Bich Diep, Deputy General Director of LaviFood JSC

Payment is a barrier to investment cooperation with Middle East - African countries. For a long time, countries in these regions have been accustomed to deferred payment rather than letter of credit (L/C) guaranteed by relevant agencies, the similar way and habit to what Vietnamese people have been doing it for a long time. Last but not least, current banking systems in Vietnam and Middle East - African countries are incompatible and it takes a lot of time to wait for payment and handle a lot of procedures and documents, especially in payment with Central African and North African countries.