Vietnam and Russia open doors for heightened cooperation

Vietnamese and Russian companies are increasing cooperation and more and more opportunities are opening to Vietnamese and Russian enterprises to form mutually beneficial partnerships.

The White Tiger oil field, a cooperation project between Vietnam and Russia, started commercial exploitation in 1986 

Vietnamese investment flows back to Russia

TH Group is deploying a dairy farming and milk processing complex in Russia with a total investment sum of about $2.7 billion, far exceeding the initial capitalisation of $500 million. It was constructed in the middle of May 2016 and is expected to be launched at the end of this year.

At the beginning of 2018, the first TH milk products made in Moscow will be available on the market.

In the first stage, TH will build an area to produce materials on 50,000 hectares, housing 45,000 cows, 21,600 of which are dairy cows, and a factory with the capacity of 800 tonnes of milk a day. On top of this, TH also plans to establish a chain of 300 TH True Mart stores all across Russia.

The project is a remarkable milestone in the investment cooperation between Vietnam and Russia. Previously, cash flows in most cases went in one direction from Russia to Vietnam. However, this time there are flows in the opposite direction as well.

During his recent visit to Vietnam, Yury Trutnev, Deputy Prime Minister of the Russian Federation and Presidential Plenipotentiary Envoy to the Far Eastern Federal District, participated in an investment promotion event in Vietnam. Russia also looks forward to inviting Vietnamese investors to join the Russian market, providing many encouraging policies and benefits.

“We all know that Vietnam and the Russian Federation’s relationship has always been amicable. With such a basis of strong friendship, it is more likely that our economic cooperation with transnational investment will breed success for both,” said Trutnev.

After two years of implementing investment promotion policies, the Far Eastern Federal District has attracted 500 new projects, with the total investment of about $60 billion.

“We are very eager to welcome all Vietnamese investors to come to the Far Eastern Federal District,” he said.

In recent years, investment from Vietnam to Russia has increased dramatically, from an accumulated $100 million in 2008 to $2.4 billion at the moment, mostly focusing on oil, commerce, and agriculture. The biggest investment projects from Vietnam to Russia include Rusvietpetro, Gazpromviet, TH TRUE Milk, and Hanoi-Moscow Trade Centre.

Abundant opportunities for cooperation

While investment from Vietnam to Russia has increased dramatically in recent years, investment in the opposite direction is slowly decreasing. In the first five months of this year, Russian businesses only invested $7.2 million in Vietnam, pushing the accumulated Russian investments to roughly $1 billion.

Even the amount of Russian investment to Vietnam is not huge. In addition, most investments are in traditional sectors, such as petroleum. Besides transnational company Vietsovpetro, there are a number of other companies, such as Rusvietpetro, Vietgazprom, and Gazpromviet, that seek business opportunities between Vietnam, Russia, and a third country.

In April 2017 there was a meeting in Moscow between the leaders of the two biggest petroleum companies of Vietnam and Russia, Gazprom and PVN. The two leaders discussed petroleum extraction in Vietnam, as well as petroleum projects in Russia.

Gazprom has actually been participating in the Hai Thach-Moc Tinh Gas Field project in Vietnam since 2003, extracting a total of 6.6 billion cubic metres of gas. In 2016 only, gas output was two billion cubic metres.

Besides, the two leaders also discussed geological exploration at lot No. 112 and No. 129-132 on the Vietnamese coast, the implementation of the Nagumanovskoye oil-gas-condensate field and the Severo-Purovskoye gas-condensate field in Russia, and discussed a potential joint venture in the gas-electricity field and natural gas vehicles (NGV).

Once these agreements become reality, oil and gas cooperation between Vietnam and Russia will cooperate more effectively, opening further opportunities between the two countries.

The Vietnam-Eurasian Economic Union Free Trade Agreement (including Russia, Belarus, Kazakhstan, Armenia, and Kyrgyzstan), which came into effect on October 5, will create huge opportunities for investors of all the participating countries.

The Eurasian market has a total GDP of $2.2 trillion and a population of 183 million people. Vietnam and the Eurasian Economic Union have set the goal of boosting two-way trade revenue to $10 billion by 2020.

President Tran Dai Quang’s visit to Belarus and Russia between June 26 and July 1, 2017 will create more opportunities for strengthening Vietnam’s economic ties with Russia and Belarus.

President Tran Dai Quang started his visit to Russia on June 28.

The Vietnamese-Russian bilateral trade turnover was $2.7 billion in 2016 and $1.37 billion in the first five months of 2017. Vietnamese exports to Russia consist mostly of phones, garments, as well as agricultural and aquaculture products.

Vietnam mostly imports oil, steel, fertiliser, machinery and equipment from Russia.

Currently, Russia ranks 23rd among the 116 countries investing in Vietnam, with 118 projects and a total registered capital of $1.1 billion, focusing mostly on energy, mining, processing, manufacturing, and banking.

Russia continues to be one of the top 10 fastest growing sources of tourism in Vietnam. In 2015, Vietnam greeted 340,000 Russian tourists, 430,000 in 2016, and 150,000 in the first quarter of 2017.  In 2017, Vietnam and Russia officially recognised each other’s market economy.

By Ha Nguyen

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