Trade relations between Vietnam and Russian federation



On 30/01/1950, the Democratic Republic of Vietnam and Russian Soviet Federative Socialist Republic officially established diplomatic relations. On 16/06/1994, Vietnam and Russian Federation entered into an Agreement on basic principles of friendly relations between the Socialist Republic of Vietnam and Russian Federation, which would lay groundwork and legal basis for relations in the new development stage. On 01/03/2001, Vietnam and Russia signed a Joint Declaration on strategic partnership relations. On 27/07/2012, Vietnam and Russia made a Joint Declaration on enhancing the comprehensive strategic partnership relations more greatly. In this essay, we will mention an overview of Russian economic situation, investment situation of Russian Federation in Vietnam as well as Vietnam’s investment in Russian Federation to clarify trade relations between two countries.

1. Overview of Russian Federation’s economic situation

Russia is the 9^th largest economy in the world with GDP in 2011 of 1,885 million USD (according to IMF). Russia is a member of BRICS, industrial countries with rapid growth. In the stage 2000–2008, GDP of Russia increased by 7 %/year. Due to impact of global economic — financial crisis, GDP in 2009 decreased by 7.9 %/year, GDP in 2010 only increased by 4 %. Russian economy in 2011 grew by 4.2 %, inflation rate is 6.1 % and unemployment rate is 6.3 %.

GDP structure of Russia in 2011 is as follows: agriculture 4.2 %, industry 37.1 % and service 58.8 %. Russia economy mainly bases on natural resources processing and exploitation with main economic sectors such as: oil and gas, mine ores, metallurgy, chemicals etc. Russia is the world’s largest crude oil production country. In 2011 Russia achieves oil output of 511.4 million tons, ranks second in gas production in the world with 670.5 billion m3 and holds the leading position in producing steel, nonferrous metal, fertilizer etc. In 7 first months of 2012, GDP of Russia increased by 4.4 %; industrial production increased by 3.2 %, agricultural production increased by 2.1 %; basic investment increased by 10.2 %; inflation rate increased by 4.1 %. As anticipated, in 2012 the capital flow out of Russia is about 50 billion USD.

Russia has many big groups such as Gazprom, Lukoil, Rosneft, TNK-BP (oil and gas); Norilsk Nikel, Rusal, Severstal (metallurgy) etc.

Trade. The Russian trade policy still has the high protection, especially for sensitive goods such as cars, iron, steel and agricultural products etc. In 2011, total trade turnover of Russia achieved 821.3 billion USD (43.3 % GDP), in which export achieved 516 billion USD and import achieved 305.3 billion USD. In 7 first months of 2012, total trade turnover achieved 67.6 billion USD (increased by 5.7 %), in which export achieved 40.8 billion USD, import achieved 26.8 billion USD. Main trade partners of Russia are EU (48 % of turnover), China (9 %) etc. Main export lines of Russia include mineral oil and gas, machines and equipments, metal products, weapons, fertilizer etc. Main import lines of Russia include machines and equipments, cars, agricultural products, garments etc. Russia has been a member of Common Economic Space together with Belarus and Kazakhstan (since 01/01/2012), completed the WTO negotiation in December 2011 and is going to join OECD.

Investment.Until end of 2011, Russia attracted 347.2 billion USD of foreign investment, in which direct investment accounts for 40.1 %, indirect investment accounts for 2.8 %, other investment forms accounts for 57.1 %. Foreign investment in Russia in 2011 achieved 190.6 billion USD, increasing by 66.1 % in comparison with 2010. Big investors in Russia include Cyprus (accounting for 22.5 %), Holland (14 %), Luxembourg (10 %) etc. Attractive investment fields are processing industry, mine ores, retail etc.

Total value of investment in foreign countries of Russia until end of 2011 is 106.7 billion USD, in which direct investment accounts for 51 %, indirect investment accounts for 5 %, other investment forms account for 43 %. Russia makes main investment in countries: Holland (25.4 %), Cyprus (24.5 %), USA (7.7 %) etc.

ODA policy. Official development assistance (ODA) maintains 500 million USD/year mainly through multilateral mechanism for the purpose of hunger elimination, epidemic disease prevention etc.

According to “Theoretical point on Russia’s participation in international development support” adopted in November 2007, Russia set a target to spend 0.7 % GDP on development assistance, in which 70 % of assistance for bilateral purpose and 30 % of assistance for multilateral purpose. The region order with Russia’s assistance priority is as follows: SNG, Asia Pacific, Africa, Mideast and North Africa, Latin America. The field order with Russia’s assistance priority is as follows: energy (especially electrical energy), medicine, education etc. However, up to now, Russia hasn’t had legal regulations to perform this theoretical point. Russia is considering establishing the Development Assistance Agency similar to other countries in the world.

2. Investment situation of Russia in Vietnam

According to the statistics of the Foreign Investment Agency until end of September 2015, the Russia Federation ranks seventh among 105 countries and territories investing in Vietnam with 114 valid investment projects and total registered investment capital of 1.961 billion USD.

Classification according to sectors. Investors of Russia Federation mostly invest in the field of processing, manufacturing with 37 projects and total investment capital of 1.13 billion USD (accounting for 58 % of total investment capital). The second position is mine ores with 07 investment projects and total investment capital of 581.2 million US (accounting for 30 % of total investment capital). The third position is real estate business with 03 projects and total investment capital of 72.73 million USD. The remaining invested fields are agriculture, forestry and fishery; wholesale, retail, repair etc.

Classification according to investment forms. Investment capital of the Russian Federation is mainly 100 % ODA capital and business cooperation contract capital. Investment with ODA ranks first with 72 investment projects and total investment capital of 1,267 billion USD (accounting for 64 % of total registered investment capital); the investment according to business cooperation contract form has 4 projects with investment capital of 381.26 million USD (accounting for 19 % of investment capital), the next position is investment according to joint-venture form with 36 projects and total investment capital of 256.43 million USD (accounting for 13 % of total investment capital). The remaining is investment according to joint stock company form.

Classification according to investment regions. Up to now, the Russian Federation has had projects at 26 local regions, concentrated at convenient areas. Binh Dinh ranks first with 01 project and total investment capital of 1 billion USD; offshore oil and gas projects include 6 projects with total investment capital of 531.2 million USD; Hanoi ranks the next position with 29 projects and total investment capital of 131.9 million USD; the remaining is projects at other regions.

Some big investment project of Russia in Vietnam:

– Bus Industrial Center Company Limited Project, licensed on 12/04/2013 with total registered investment capital of 1 billion USD, with the target of building the factory of assembling and manufacturing components of bus and other support services in Binh Dinh.

– Gas and oil contract No. 129,130, 131, 132 signed on 28/10/2008 licensed on 04/02/2009 with total registered investment capital of 328.2 million USD, the investor is GAZPROM AND ZARUBEZHNEFTEGAZ companies, the target of the project is to exploit gas and oil etc.

3. Investment situation of Vietnam into the Russian Federation

At the beginning of 80s of the 20^th century, the first joint-venture of Vietnam — Soviet Union economic relationship is Vietsopetro Joint-Venture Company in the field of exploiting gas and oil. This joint venture is the symbol of two regimes namely Soviet Union and Russian Federation. Up to end of September 2015, Vietnam has had 18 investment projects in Russia with total new investment capital and capital increase of 2.4 billion USD, in which there are some typical projects such as:

– The Rusvietpetro Joint-Venture Company project with total registered investment capital of 2.02 billion USD licensed on 15/10/2008 invested by Vietnam Oil and Gas Group (Petrovietnam) at Nhenhexky Autonomous Region, Russia with the target of exploring and exploiting gas and oil.

– Rusvietpetro Joint-Venture Company Project with total registered investment capital of 125 million USD licensed on 05/03/2013 invested by Vietnam Oil and Gas Group (Petrovietnam) at Nagumanov Mine, Orenburg, Russia with the target of exploring and exploiting gas and oil.

– Hanoi-Moscow Trade Center Investment Joint Stock Company Project with total registered investment capital of 190 million USD licensed on 16/04/2008 invested by Hanoi-Moscow Trade Center Investment Joint Stock Company at Km 94, Makad Road, Moscow, Russian Federation with the target of constructing the Center for culture, sport and trade, hotel and office for rent.

Conclusion. In about quarter of the century, foreign investment in Vietnam has gained important achievements, made a great contribution to economic growth, promoted transfer of economic structure according to orientation of industrialization, modernization, expanded the export markets and remarkably increased income to the State budget, made position and influence for Vietnam to integrate with the region and world economies. In the context of severe competition in attracting foreign investment capital in the region and world, Law on Foreign Investment has become an important lever in attracting foreign investment capital into Vietnam, especially in trade relations between Vietnam and the Russian Federation. In the current stage, investment and cooperation between both parties are being promoted and strengthened, which contributes to relations development between two countries.

References:

1. Law on Investment of the Socialist Republic of Vietnam dated 26/11/2014.
2. Decree 118/2015 ND-CP dated 12/11/2015 by the Government regulating in details and instructing implementation of Law on Investment 2014.
3. Decree 15/2015 ND-CP dated 14/02/2015 by the Government regulating in details and instructing investment implementation according to public — private partner.
4. Free trade agreement between Vietnam and Russia/Customs Union in October 2010
5. Free trade agreement between Eurasian Economic Union and member countries of the Union.