Huge potential for expanded trade with Russia Vietnamese Russian trade has been sluggish in recent years, but is expected to rebound strongly when a Free Trade Agreement (FTA) between Vietnam and the Customs Union (VCUFTA) comes into effect later this year. Speaking of the VCUFTA, Deputy Minister of Industry and Trade Do Thang Hai says final negotiations are underway and he expects Vietnamese exports to Russia to experience exponential growth once the trade pact is signed later this year. Stable two-way trade turnover Two-way trade turnover between the two nations, though far below its potential, did manage to hit US$2.76 billion last year, a year-on-year increase of 13.6%. Of the figure, Vietnamese exports to Russia were US$1.91 billion, up nearly 18% while imports were US$853 million, up 2.7%. In the first seven months of this year, Vietnamese exports to the market declined slightly to US$960.4 million due to the political stability in the country. However, the downturn is expected to only be temporary, with the value expected to bounce back when Russia’s economy regains its stability. Tran Bac Ha, President of Board of Directors of the Bank for Investment and Development of Vietnam (BIDV), says Russia has high and stable demand for light industrial products. Currently, some Vietnamese products exported to Russia enjoy lower taxes by 30-50%. Furthermore, goods exported to the country should also benefit from an additional 25% tariff reduction when the VCUFTA comes into effect, Ha said adding another incentive of the trade agreement is that Russia represents a gateway for Vietnamese products to penetrate other countries in Northern America and Europe. In addition to trade, Russia offers a huge investment opportunity for Vietnamese businesses. Vietnamese businesses have invested US$2.4 billion in 17 Russian projects, principally in oil and gas exploitation, food processing, garment and footwear. BIDV and the Vietnam National Textile and Garment Group (Vinatex) plan to develop a light industrial complex on 1,000ha in Moscow. In the first phase, Vinatex plans to construct a garment factory at the complex. Moscow is also offering incentives in terms of tax abatements and reduction along with reduced land rent and visa exemptions for Vietnamese workers. While BIDV has also agreed to issue loans worth of 75% of investment project’s value with preferential interest rates of 1.5-2% lower than the normal rate. Long-term investment opportunity in Russia Russia has high demand for products of Vietnam’s strength like garment, footwear, handicrafts, processed food, agricultural products, seafood and construction materials. The two countries are expanding cooperation in agricultural product processing and automobile assembling. In recent times, some businesses have invested in setting up goods distribution centres in Russia, providing a foundation for long-term operation in the lucrative market. The Russian Government has offer incentives aimed at stimulating the light industry’s growth such as reducing import tax and giving preferential taxes for investors, including Vietnamese. Experts warn that to conquer the market, Vietnamese businesses must overcome a number of formidable challenges, such as poor payment methods, fierce competition, fake and contraband goods and legal risks. Deputy Minister Hai says to accelerate trade and investment in Russia, the two governments should devise a better mechanism for businesses to make payment by local currencies and support the establishment of the Vietnamese Investors Association in Russia. VOV