Promoting Vietnam-Malaysia trade cooperation

14:14 | 26/03/2015 Cooperation

(VEN) - Vietnam is an important market for Malaysia within the ASEAN region. The prime ministers of both countries agreed to increase bilateral trade to US$11 billion by 2015 during a recent bilateral meeting and official visit to Hanoi by Malaysia’s Prime Minister in February 2014. Vietnam Economic News’ My Phung spoke with Faizal Izany Mastor, the Trade Commissioner of the Malaysia External Trade Development Corporation (MATRADE) in Ho Chi Minh City, to have an overview of trade relations between the two countries during last years. Mastor also underlined opportunities for Vietnamese and Malaysian businesses after the ASEAN Economic Community (AEC) is established.

What do you assess about bilateral trade relations between Vietnam and Malaysia?

Malaysia and Vietnam are enjoying a very strong bilateral trade relation where Vietnam is Malaysia’s fourth largest trading partner and Malaysia is Vietnam’s third largest trading partner within the Association of Southeast Asian Nations (ASEAN) region.

Bilateral trade has grown impressively over the last 10 years from US$1.72 billion in 2004 to US$9.04 billion in 2014. Over the last five years, bilateral trade between Malaysia and Vietnam showed an impressive average annual growth of 16.74 percent.

In 2013, total trade increased by 13.52 percent to US$10.25 billion in 2013. For the period of January – December 2014, total trade stood at US$9.04 billion, a decrease of 11.9 percent from the corresponding period in 2013.

In 2014, Malaysia’s exports to Vietnam were valued at US$4.38 billion, an increase 3.6 percent from 2013, while Malaysia’s imports from Vietnam decreased by 22.7 percent to US$4.66 billion.

Major exports to Vietnam include electrical and electronic products, US$1.01 billion, chemicals and chemical products, US$757.17 million, palm oil, US$488.45 million, refined petroleum products, US$329.62 million and metal US$276.63 million.

Major imports from Vietnam were electrical and electronic products, valued at US$1.48 billion in 2014. Other items include crude petroleum US$847.02 million, crude natural rubber US$385.56 million, textiles, clothing and footwear US$231.18 million, non-metallic mineral products US$225.74 million.

In terms of foreign investments in Vietnam, Malaysia is the 8th largest investor with total registered investment of US$10.76 billion by December 15, 2014. Total number of projects is 484.

What are key elements to promote potential trade relations between the two countries?

Market liberalization is one of the key elements to further promote trade relations between the two countries. Followed by the liberalization of Vietnam’s economy, many opportunities have arisen from this emerging market of 90 million people. The large consumer base creates an attractive market and a strong demand for foreign businesses to initiate and further expand their business in the country.

Vietnam’s industrial sectors – and its markets for industrial equipment – have been growing rapidly in the last few years. This is largely driven by increased foreign direct investment in manufacturing, combined with the Vietnamese government’s desire to move beyond labor intensive/light manufacturing into more value-added/technology-intensive industries, creating demand for higher-end manufacturing technologies. Increased pressure among Vietnam-based suppliers to meet higher quality requirements and tighter product specifications by the country’s growing electronics, petrochemical and food processing industries is also fuelling the demand for these technologies.

Enhanced and value added investment incentives play a major role in creating a platform to increase trade and investment relations. In the last few years, the Vietnamese government has championed a number of high-profile investments in key sectors such as petrochemical refining, power generation and heavy industries, which have bolstered demand for a wide range of industrial products. For example, the government hopes to reduce reliance on the export of commodities and instead encourage more onshore processing including downstream manufacturing and packaging of food, chemicals and plastics. The country’s three major refinery investments which are at various stages of developments are good examples of this trend. With an aim to become an industrialized country by 2020, Vietnam’s manufacturing industry has been undergoing major changes as a result of governmental initiatives, WTO commitments and industrial liberalization.

In recent years, Vietnam has also successfully attracted a number of major multinational investors in electronics, pharmaceuticals and consumer goods sectors. This has attracted networks of suppliers and services companies that are generating demand for precision manufacturing equipment, testing instrumentation and other sophisticated industrial tools and inputs. Recent investments from major multinationals include Nokia, Kyocera Mita and an expansion of Samsung’s existing facility. While much of this investment is geared toward export oriented sectors, a number of firms are also eyeing Vietnam’s domestic market for both durable and consumer goods production, with companies like Honda, Yamaha, Hyundai and others who are expanding their Vietnam-based production.

The role of the private sector in both countries is also crucial and important in ensuring the success of further strengthening trade and investment relations between both countries. The private sector from both countries should work closely and form business collaborations and linkages so that the business goals can be achieved successfully and effectively.

Among the ways to further strengthen relations include constant follow up and visit by businesses from both countries, having a local presence in the market and participation in trade events and exhibitions to further create awareness and branding for its products and services in the market.

What are opportunities for trade relations between Vietnamese and Malaysian businesses after an ASEAN Economic Community (AEC) is established?

AEC marked the commitment of ASEAN leaders to build and promote a single market and production base, a highly competitive economic region strengthened by equitable development and a region fully integrated into the global economy.

The implementation of AEC will benefit the people in the region through expansion of trade and investment activities within the ASEAN region, reduction of tariff for goods within the region, provide a greater market access for businesses expansion and promote movement of professionals within the region, which in the end will result in an increased per capita income of the people.

Inpidually, ASEAN member states have small populations and market bases and as such simply cannot compete against larger economies. By combining efforts, ASEAN member states may gain a larger platform for trade and investments, a free movement of talents along with the diffusion of technology, which are essential elements to continued economic growth.

For 2015, among major sectors under the MATRADE’s trade promotion programs in Vietnam are construction and infrastructure, oil and gas, solid waste management, and water supply and treatment. In addition, the privatization of state-owned enterprises (SOEs) in Vietnam will also be a focus for MATRADE in terms of facilitating Malaysian companies and bridging the initiatives to share technology and experience and contribute to economic development in Vietnam.