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Friendship in a competitive environment

Russia and Vietnam learn to cooperate in a new way

Russian President Vladimir met in Sochi with the Secretary-General of the Central Committee of the Communist Party of Vietnam, Nguyen Phu Trong. "I expect that my visit will contribute to the further development of cooperation, as well as the resolution of those difficulties that arose both for objective and subjective reasons," the guest from Vietnam told journalists. The sides stressed the need for consistent efforts to increase trade and economic cooperation, primarily through the effective implementation of the EEA free trade agreement, the Kremlin's website said.

Friendship in a competitive environment
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Following the meeting, a number of documents were signed. For example, the leaders confirmed plans to build a Nuclear Science and Technology Center in Vietnam and train Vietnamese students in Russia, the Kremlin's website says. In addition, Putin and Nguyen Phu Chong agreed to expand the zone of exploration and production of oil and gas on the continental shelf of Vietnam in accordance with international law, according to the official summary following the meeting. As a reminder, 2019 will be the Year of Russia in Vietnam and Vietnam in Russia.
The trade turnover between Russia and Vietnam in 2017 grew by 35% and peaked at 1991 year, Russian Foreign Minister Sergei Lavrov said. In 2017, the turnover of Vietnam and the countries of the Eurasian Union in 2017 amounted to 5,9 billion dollars, the bulk of this amount fell to Russia, 5,35 billion. Prior to this, over the past few years, the volume of trade has stagnated at the level of 4 billion. The sharp increase is due to the fact that in 2015 Vietnam signed an agreement on a free trade zone with the Eurasian Economic Union, Lavrov stressed. Recall, the agreement came into force in 2016 year. The growth of trade in fact occurs precisely for those commodity positions for which mutual import duties have been canceled, says Vladimir Mazyrin, head of the Center for the Study of Vietnam and ASEAN. The cancellation of duties has already touched 43% of all commodity items, it should affect 59% of positions.
Russia and Vietnam outlined the desired target in foreign trade turnover back in 2010, during the visit of the then Russian President Dmitry Medvedev to Vietnam: by 2020, the trade turnover should reach $ 10 billion. There are no statistics for 2018 yet, but there is hope that with the further liberalization of trade, trade will grow rapidly, and by 2020 it will reach, if not the target, then at least $ 8-9 billion, Mazyrin says. At the same time, it is time to overfulfill the plan; other countries are still leading in cooperation with Vietnam. Thus, trade with the US and EU countries exceeded $ 50 billion, with China - approached the level of $ 100 billion, recalls Mazyrin.
The main problem of the current state of economic cooperation between Russia and Vietnam is the absence of large mutual investment projects, says Mazyrin. True, the composition of statements after the meeting of the Russian and Vietnamese leaders is encouraging, he adds.
While the main project of Vietnamese investors in Russia is the construction of a number of dairy factories by TH True Milk. Investments are estimated at 2,5 billion. The project has already been implemented in the Moscow region (Volokolamsky district), production was opened by the governor of the region Andrei Vorobyev at the beginning of 2018.
In December it became known that the company received the status of a resident of the Kaluga Special Economic Zone, and will build a similar plant in the Kaluga Region. “The project provides for the construction of a site for milk processing, production of dairy products up to 1 tons per day. The main products are drinking milk, yoghurt, drinking yoghurt, cheese and dairy products. The products will be partially - more than 50% - produced by processing raw milk of our own production, ”said the Agency for Regional Development of the Kaluga Region.
Even earlier, in April 2017, plans were made for TH True Milk to build a third complex in Bashkiria. The authorities of the region promised the Vietnamese investor "assistance in manual mode", first of all it is necessary to find 20 thousand hectares of land. Recall, all TH True Milk projects in Russia - full-cycle projects that provide for their own feed base, which involves the lease of land for the production of feed.
After a visit to Vietnam, Deputy Prime Minister Yury Trutnev learned that another TH True Milk project could be implemented in the Far East. But so far concrete plans have not been announced.
The development of joint projects is often hampered by the sanctions regime under which Russian companies operate, recalls Mazyrin. So, in the summer, Alexei Mordashov, Chairman of the Board of Directors of PJSC Power Machines, asked the Russian government to help overcome difficulties in the construction of the Long Fu-1 TPP in Vietnam. Difficulties arose due to the fact that the "Power Machines" are under US sanctions. "Power Machines" could not receive export revenue under the contract in the amount of 102,3 million dollars. International banks refused to carry out the transfer, and the counterpart in Vietnam does not have the authority to transfer the calculation into rubles or another currency and make the transfer independently.
A serious problem was Vietnam's refusal to build Ninthhuang-1, the Russian company Atomstroyexport was to build. In December 2011, work began on the preparation of the site. But in August 2015 the main stage of construction was postponed for 2020 year, and in 2016 year Vietnam refused the project. It is important to emphasize that this was not a gesture towards Russia: Vietnam completely abandoned the plans for the development of nuclear power, the same was denied to Japanese partners, said the head of the board of directors of Vietnam Electricity, Zuong Quang Thanh. The reason was the outstripping development of alternative energy sources, which is accompanied by a decrease in the cost of kilowatt-hours produced at wind, solar and tidal stations. "Nuclear power is now less competitive than other energy sources, there is no immediate need for it," said Zuong Quang Thanh. The cost of the whole project was estimated at 8-10 billion.
For many years, the symbol of cooperation was the company Vietsovpetro, which extracted oil and gas on the shelf of Vietnam. Currently, the fields that provided a high level of production (Vietnam at the peak exported up to 15 million tons of oil) were depleted. Russian and Vietnamese experts are exploring other sites, but for now it's too early to talk about increasing production to previous levels, Mazyrin says, especially since the cost of mining in the poor and heavy fields is much higher. There are also political difficulties, the expert says: a number of deposits are in disputed (with China) waters. China hinders the activities of foreign, including Russian, companies, it comes to damage to property, says Mazyrin. "Much depends on the position of Vietnam. Previously, the country's leadership actively defended its right to work in these waters, what will happen next, we'll see, "the expert sums up.
While not forgiving, weapons
Difficulties with currency payments forced Rosoboronexport to declare a gradual refusal to settle in dollars, the head of state-owned company Alexander Mikheev made this statement in August.
Russia for Vietnam is still the main buyer of weapons. The share of Russia in Vietnam's military market is stable and amounts to 88%. As a result of 2017, Vietnam remains the third largest buyer of military equipment for Russia, the increase in purchases was 16,1% by the year-ago period, Vietnam occupies 10% of the structure of Russian military exports, according to the Stockholm International Peace Research Institute.
BUT soon Russia will have to compete for the Vietnamese market, Mazyrin points out. Vietnam concluded an agreement with the United States that, after the lifting of the embargo, the country will buy arms in the US totaling 100 million dollars, annual deliveries will amount to 10-15 million dollars. "This is still miserable compared with supplies from Russia, and it is not clear how the Vietnamese will be able to dock the Russian and American standards of weapons," Mazyrin said. "But it is obvious that competition is intensifying."
In general, Russian-Vietnamese relations are on the rise, and the most important indicator is the growth in trade turnover, Mazyrin says. In addition to classical trade, the tourism industry is becoming increasingly important. The flow of Russian tourists to Vietnam has exceeded 600 thousand people per year, while there is still a timid but reverse flow of Vietnamese tourists to Russia. "Given the fact that the path is trampled by Chinese tourists, and the welfare in Vietnam is growing rapidly, tourists from Vietnam will be more and more," says Mazyrin.
The expert will also bring pleasant surprises, the expert believes, and the list of issues raised by the leaders of the two countries gives hope. First of all, Vietnam is interested in energy projects, Mazyrin points out. "These are expensive, large-scale projects, the implementation of which will make a significant contribution to the statistics," the expert points out. Russia previously lost virtually all tenders in Vietnam to China, but now Vietnam is growing disappointed with cooperation with Chinese companies. Chinese partners, as a rule, double the cost of contracts in the course of construction, there are problems with terms and quality, says Mazyrin. Against this backdrop, the return of trusted Russian partners looks almost inevitable, the Vietnamese press is widely discussing such an opportunity.
Finally, the arrival of a large Vietnamese investor in the agro-industrial complex in Russia is only the first swallow, Mazyrin believes, the successful implementation of such a large-scale project will open a green street for many other investors.
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