What Products & Services Is Vietnam Buying From Russia?
Какие товары и услуги Вьетнам покупает в России?
Vietnam has been the beneficiary of a Free Trade Agreement with the Eurasian Economic Union since 2016, as a result of which bilateral trade with Russia has boomed. With now three years of experience and investment in increasing trade infrastructure, Russian exporters and manufacturers considering Asia should be conducting market research activities into the opportunities in the Vietnamese market now.
Vietnam is a good choice for a developing trade partner for Russia, it has a large and increasingly prosperous consumer base of 96 million, spending US$0.6 trillion in 2018, and a GDP per capita of about US$2,750. (Russia’s per capita GDP is about US$11,500). National GDP growth in 2020 in expected to be about 6.5%.
Consumer confidence is also high. Recent reports here by ourselves and here by Societe Generale point to a booming, domestic economy. Hanoi, Ho Chi Minh City and Da Nang are all high-value consumer hotspots with consumer values far above the Vietnamese average.
Current Russian trade trends with Vietnam are also on an upwards path, as we can see in these statistics courtesy of Trading Economics (figures in millions of US dollars) and grew steadily during the course of 2019. Both the Russian and Vietnamese Governments have stated bilateral trade should reach US$10 billion in 2020.
Key imports from Russia, are petrol, oil, steel, fertilizers, and machinery. Major Vietnamese exports include phone components, electronic devices, computers, apparel, and footwear. Food exports include fruits, vegetables, coffee, cashew nut, and seafood.
The Vietnam-EAEU Free Trade Agreement covers more than 90 percent of all traded goods, and has greatly benefited the EAEU’s exports of agricultural and industrial products, and Vietnamese exports of garments, textile products, farm products, and electrical devices.
An additional 5,535 tariff lines were reduced to zero percent in 2019. These focused on items that are input materials for the textiles, footwear, electronics, plastic, fertilizers, and farming sector. Another 3,270 tariff lines were reduced to zero percent for goods such as milk and dairy products, chemicals, automobiles, and spare parts, steel products, rubber products, and electrical appliances at end of 2019.
However, the FTA also provides some protective measures.
According to Article 2.1 in the FTA, the EAEU may apply a trigger safeguard measure for Vietnamese goods in case the import volumes during a calendar year exceeds the trigger level as established in Annex 2 of the agreement. Currently, under this measure, certain products in the textile and garment sector in Vietnam face safeguard duties from the EAEU, which aims to limit the increasing volume of imports to the Union. Since March 14, 2018, duties were imposed on Vietnamese underwear and children’s wear products for nine and six months, respectively.
Traders have to make sure that they do not exceed the trigger levels as defined under the agreement; else, they may face most favored nation rates and not the preferential tax rates as prescribed under the free trade agreement. To reduce trade violations, the Vietnamese government has to ensure that traders are well informed and aware of such measures. In addition, individual governments have to promote the FTA and investments to increase the participation of private firms.
In the last few years, the EAEU has also started to work with other ASEAN member states on trade and investment, and this puts Vietnam in a unique position, as it can act as a supply chain gateway for Russian and other EAEU businesses in the region. Going forward, to achieve their target of US$10-12 billion bilateral trade by 2020 and US$30 billion by 2030, trade between Vietnam and the EAEU can be expected to grow exponentially.
There are opportunities for Russian manufacturers also to compete in the Vietnamese market. Russian truck manufacturer Gaz has recently established operations in the country.
In terms of Russian exports to Vietnam, it should be noted that there are Quality Control standards differences between Russia and ASEAN nations, and Russian exporters should be aware of these. We covered this in the article Quality Control Challenges For Russian Exporters To ASEAN.
Our practice, Dezan Shira & Associates, has offices in Hanoi, Ho Chi Minh City and Da Nang in Vietnam and are familiar with the protocols concerning import/export and can advise on local market conditions. Please contact Maria Kotova at email@example.com for assistance both with local market intelligence and business plan development in addition to corporate establishment, tax advisory and on-going corporate compliance in Vietnam. Our complimentary Vietnam Briefing facility is also be a useful source of business intelligence about the country.
- Import and Export in Vietnam
Vietnam has followed an export-led growth model, combining trade liberalization and policies to attract foreign direct investment to spur exports. This has allowed Vietnam to accelerate growth in recent years, emerging as a clear leader in low-cost manufacturing and sourcing. In this issue of Vietnam Briefing magazine, we examine Vietnam’s import and export landscape and the top sectors for trade. We then look at import and export procedures, including business models, duties, exemptions, and tax rates that traders need to be aware of.
Russia Briefing is produced by Dezan Shira & Associates. The firm has 15 years of experience in assisting foreign companies into India and has 3 offices throughout the country. We have assisted numerous Russian companies into India. For assistance please contact Maria Kotova at firstname.lastname@example.org or visit us at www.dezshira.com. Readers may also refer to our India Briefing website at www.india-briefing.com for further technical advise on establishing and operating a business in India.