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“We need cooperation in new, strategic formats”
Vladimir Mazyrin on the prospects for cooperation between Russia and Vietnam
Vietnam ceases to be a supplier of agricultural products and gradually becomes a center of high-tech production. Vladimir Mazyrin, head of the Center for the Study of Vietnam and ASEAN of the Institute for Far Eastern Studies of the Russian Academy of Sciences, explains to EastRussia why relations between Russia and Vietnam, which have embarked on the rails of a market economy, are not as good as they were during the Soviet era, in what directions they could develop under countries to continue to increase trade, the exchange of tourists and direct investment.
- Such a meeting was the first for our countries, and the partnership with the Diplomatic Academy, given its focus on supporting other areas of its country's foreign policy, was a surprise. General sessions of “Valday” are usually held at the end of the year with the invitation of foreign experts from different countries. Bilateral meetings were held in a number of Asian countries, and now the turn has reached Vietnam. In this format, this is the first experience, so not everything turned out. But in general, the conversation was about how Vietnam is positioning itself in a complex international situation - the conference was called “in a troubled world”, but very carefully, it would probably be necessary to say “in the context of the cold war”, but the side does not share this definitions. For the first time in many years, it was possible to hold a meeting of experts of such high level on both sides. It is a pity that the very open conversation did not take place. We listened to each other, spoke, but the Vietnamese experts did not go for a discussion of really sensitive topics.
- And what are our sharp topics?
“Such topics are US involvement in South Kazakhstan, Vietnamese participation in the Indo-Pacific region project, refusal of Russian companies to participate in strategic projects of Vietnam and ASEAN, Hanoi’s reluctance to join the SCO, etc. The consequence of these contradictions is the gradual loss of mutual trust. We have been saying for a very long time that this is the main factor in Russian-Vietnamese cooperation. But everything shows that trust is less and less.
- What is the reason?
- In Vietnam, pro-American sentiments are now dominant, which is confirmed by opinion polls by leading world agencies, for example, Pew Research. The choice of Vietnam for the second summit of US President Donald Trump and North Korean leader Kim Jong-un says a lot. Vietnam today is the “beloved child” of the United States, with complete confidence, because it pursues a favorable US policy. There are a lot of reasons, in particular, it affects that now graduates of Western and not high schools of higher education are in leadership positions. And they send children to Western countries to study, and they also find employment in Russia. But the main thing is, of course, economic dependence, and it is equal to openness. Vietnam’s “openness” to the world economy, which the country preaches as part of its deep integration into it, can be assessed with one indicator — the ratio of foreign trade turnover to GDP. In Vietnam, this indicator is now unique: GDP is two times less than trade. This indicator is typical only for small developed economies such as a number of European, Singapore.
- Does that mean transit?
- No, transit, unlike Singapore, is just a small one. It's just that Vietnam has a very active export and import policy: every year it imports a large amount of components and raw materials, and then exports finished goods. For example, they import components, fabrics and accessories, and from them they sew clothes, make smartphones, other microelectronics, shoes, bags, and send them to Western markets, to Russia. Leading transnational corporations supply all this together with technologies and trademarks, and Vietnam, using still cheap labor, which, of course, gradually becomes more expensive, and good organization of production, turns into a supplier of finished goods.
- Carrying out such an economic policy, Vietnam is dependent on partners from the United States and the European Union, this is understandable. And how does this prevent him from being friends with us?
- By and large, it does not interfere with our friendship, but in trade and investment Russia strongly loses competition to more developed countries. And dependence is manifested in the main thing - the decision-making by the Vietnamese leadership, in particular, on key controversial, conflict situations, if Vietnam votes, if not against our resolutions in the UN, then it refrains. And this, albeit de facto, supports the American position.
- How then is it possible to develop bilateral cooperation between Russia and Vietnam?
- One of the main theses of the Russian side, which was voiced at the meeting: we must begin to cooperate in new, strategic formats. This is, say, the concept of “Greater Eurasia” and the creation of a “bridge”, a link between the Association of Southeast Asian Nations (ASEAN) and the Eurasian Economic Union (EAEU), which includes Russia, Armenia, Belarus, Kazakhstan and Kyrgyzstan. The Vietnamese partners did not respond to this. The second possible format is in the framework of the Chinese initiative “One Belt - One Way”. They also do not refuse him, but they are very wary, referring to the fact that a number of countries that are actively involved in the project already have problems with government debt and dependence on China.
- What then suits Vietnam?
- The format that Vietnam is now completely satisfied with is the Trans-Pacific Partnership (TTP), which was first formed by 12 countries, including the US, but the latter came from there with Donald Trump. And Hanoi is ready to participate in the project that ASEAN is promoting, this is the Comprehensive Economic Regional Partnership. It contributes to strengthening the Asiaocentricity of East Asia, encompassing ASEAN plus three northeastern neighbors (Japan, China, South Korea), plus Australia, New Zealand and India. The United States and Western countries are not there, but there is no Russia.
- And our free trade agreement with Vietnam How does it work?
- The agreement between Vietnam and the EEU is generally successful. The EEU has only one free trade agreement with Vietnam, and this is the model for all subsequent agreements of this type, primarily with other ASEAN members. But in general, Vietnam participates in 16 free trade zones and is ready to participate everywhere. It has a signed free trade agreement with the European Union, but it has not been ratified: the European Union has many claims to Vietnam in the political sphere, and, in general, there is no complete agreement between the EU members.
- Such openness of the country to any form foreign tradeAre partnerships a dependency?
- Vietnam does not fear anything in this regard, as he states, and, in general, he still receives mostly dividends. Although, as I believe, this creates possible problems: close tomorrow one of the key partners for yourself is the Vietnam market or Vietnam from it - and there will be a crisis, or at least a serious blow. And such a development is likely. For example, Americans have banned their partners from buying products from the Chinese corporation Huawei. And if something like this happens, say, with Samsung, which is now the main investor in Vietnam? There are already hints of this, by the way. The United States imposed increased duties on imports of steel and aluminum from China. China has transferred part of the finishing production in Vietnam. And the country, although the Americans thought for a long time, received restrictive duties for Vietnamese products, because everyone understands that these are actually Chinese products. Steel products are not among the top positions in Vietnamese exports. And if you hit the leading positions? Hanoi understands this and is extremely cautious.
- What are the prerequisites for such a development of events? Vietnam love, as you say, in the USA?
- There is a serious problem between the USA and Vietnam - this is the status of the non-market economy of Vietnam, one of the criteria of the World Trade Organization. When Vietnam was accepted into the WTO in the 2007 year, a transition period was set up to the 2018 year, when the Vietnamese economy should have been given market status. But they did not assign it - the United States is holding back this decision, which entails economic and reputational losses. They demand from Hanoi to open more and liberalize the economy, first of all, to carry out reforms that limit state intervention in the economy.
- What is the attitude of the private and public sectors of the Vietnamese economy now?
- The ratio over the years of reform has changed dramatically in favor of the private sector. From an almost complete state monopoly, the country is moving towards a loss of state positions in the economy, and this process is dictated by the United States and its allies. Today, the private sector creates 43% of GDP, the state only 29%, the rest is foreign (18%) and the cooperative business. Small-scale production and especially the services sector, as well as capitalist enterprises are growing, thanks to this, by 2025, the share of the private sector can grow to 55% and by 2030, to 60-65%. But international organizations, of course, require that the public sector reduce as much as possible.
- Is Vietnam's economy generally growing well?
- According to preliminary data, more than 7% growth over 2018 a year is more than in China. And this economy is becoming more and more market-based; from the socialist in Vietnam, there remains only a great deal of state attention to the social sphere: secondary education is free, higher education is also free, medicine is free, although the share of paid services is growing. It turns out that there is a correct combination of market mechanisms and state participation - a reasonable, active intervention. But there are signs of a market economy. For example, the gap in income 20% of the poorest and richest population is already 8-10 times. In general, the psychology of the Vietnamese in the spirit of the requirements of the market is becoming more and more pragmatic: "Who will give more, then let us go." They already have several dollar billionaires, and they made their initial state mainly in Russia, in the 1990-s, in the Vietnamese clothing markets in large cities. The country's population will soon reach 100 million, GDP at purchasing power parity - over 600 billion, which already allows us to classify the economy on a world scale at least average. In the coming 20 years, according to all forecasts, the Viet will enter the top 20 - the world's economies.
- But in the international arena, Vietnam continues to be considered a non-market state?
- This is an element of political pressure. Now there are approaches that make the cooperation of US partners with non-market states unprofitable. For example, the Americans recently entered into a free trade agreement with Mexico and Canada, which explicitly states that if participants sign agreements with countries with non-market economy status, the United States has the right to withdraw from this agreement, since other methods of interaction should be applied to them.
- It turns out, the more actively Vietnam participates in integration processes, in trade with developed economies, the more does it depend on them?
- Dependence, in general, is growing rapidly. I think this played a role in the decision of Vietnam to abandon the creation of nuclear energy with the participation of Russia - the area where our states could cooperate. Those. The decision was made not without pressure from the West.
- And in the military-technical cooperation, we hold the position?
- On the one hand, now everything seems to be good: over 80% of the country's armament is ours. On the other hand, the Kalashnikov concern recently lost a tender to re-equip the Vietnamese army with Israelis. And this is a bell. The Americans lifted the ban on the supply of lethal weapons to Vietnam. And it begins: second-hand patrol vessels began to be offered to strengthen the Vietnamese coast guard. Vietnamese are ready to take them, the question is one thing: in debt, as a gift? But they already participate in joint exercises and training programs with the USA. So the process has begun. And if we lose Vietnam also as a market for the supply of armaments, which is then to say.
- If we talk about the Russian-Vietnamese trade, what do we buy, what is Vietnam from us?
- Thanks to the free trade agreement, the trade turnover increased to $ 6,1 billion dollars for 2018 a year, and by 2019-2020 the target was set at $ 10 billion. unlike Russia. And the "explosive" growth in trade was achieved mainly due to Vietnamese exports: Russia sells less than it buys, already by $ 2 billion. What we import by two thirds is complex engineering products: computers, smartphones, tablets, office equipment. Compared with the situation 10-year-old, when the products of the agro-industry and light industry prevailed, there are significant changes.
- But all this under foreign marks?
- However, it is considered Vietnamese products.
- And what are we in return?
- Thanks to the abolition of import duties - increased supply of agricultural products - grain, meat. In industry, too, raw materials and petroleum products, fertilizers, cement, coal, steel billet, for example, are mainly exported.
- And weapons?
- Military supplies are a separate topic. We include military equipment in our statistics, Vietnam does not. Therefore, sometimes there are discrepancies in the billions of dollars. One submarine with weapons is more than half a billion dollars.
- Maybe in the field of tourism we are still not working closely together?
- In 2018, Vietnam received more than 15 million foreign tourists, of which 600 thousand from Russia. Over the past five years, the number of visits by Russians has doubled. The order of 10% of GDP in Vietnam is created by the tourism industry. Everything is developing very well with Russian tourists: at first they were driven only by our major tour operators, now many are traveling independently. The Vietnamese are oriented towards demand, even direct flights are opening from Vladivostok.
- Reverse flow is also growing?
- With the growth of the welfare of the Vietnamese - yes. All this is very interesting to them: Moscow, St. Petersburg. Of course, they have not yet reached Baikal or the Far East.
- Is educational tourism in this sense still our opportunity?
- We will give in 2019 about 1 thousand of budget places for students from Vietnam. They go mainly to technical specialties - not humanitarian, not economic. True, taking into account that we built the whole cultural base in Vietnam: ballet, theater, cinema - they are also going to cultural specializations, but in these areas too, people are being replaced by graduates from other countries. If you count everyone who, since the preliminary year of language training, is in Russia, it turns out that we have about 5-6 thousands of Vietnamese students. In other countries, primarily in Australia, USA, Japan, learns, according to the roughest estimates, 10 times more. In Australia alone there are 25 thousand, in Japan - 20 thousand.
- Russia is investing in the economy of Vietnam is also no longer like the USSR?
- In investments, we are somewhere in the second ten countries. A year in the Vietnamese economy comes foreign direct investment of about $ 20 billion, the accumulated volume of Russian - about $ 2 billion.
- How to make Vietnamese investments in Russia grow at the same pace as tourism? How to stimulate them?
- In general, if we have strategic cooperation, then investments should be directed to strategic sectors. And Russian capital, in fact, is not present in any of Vietnam’s strategic sectors, apart from the extraction and processing of oil and gas, even in the traditional energy sector. Vietnam approaches this more creatively, for example, it makes, and on a private basis, the largest, even by Russian standards, investment in milk production in the Moscow region and several other regions, including in the Far East. There are oil and gas production projects in Russia, which is very interesting for Vietnam, since hydrocarbon reserves in the country are depleting: 10 years ago, our joint company, Vietsovpetro, produced 14-15 million tons per year, in 2018 year - 4 million, although discovered, as reported, a new promising field. In any case, Russia and the EEU provide $ 6 billion in trade turnover from 450 billion to Vietnamese merchandise trade, and the US more than $ 60 billion. But it is clear who "dictates fashion". There were attempts to sell the Russian regional aircraft Sukhoi SuperJet-100 to Vietnam, but they did not end with anything. At the same time, during the last summit of the leaders of the DPRK and the USA in Hanoi, the Vietnamese signed another contract for the purchase of 100 Boeing for $ 12 billion.
- If you take psychology, the national traits of the Vietnamese are similar to the Chinese?
- Yes of course. In cultural and civilizational terms, these are close nations. The Vietnamese are persistent, hard-working, creative, very ambitious, capable, as history shows, to solve problems of any complexity.
- So, to negotiate in terms of developing business relations with themtoo long and difficult?
- Of course.