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    Southeast Asia
     Jul 21, 2005
China, Vietnam find love

HANOI - After centuries of enmity, China and Vietnam are discovering each other as business partners. On Tuesday itself, Chinese and Vietnamese businessmen signed 14 deals totaling US$1.071 billion at a Beijing business forum during President Tran Duc Luong's current visit to China.

Addressing the forum, Vietnamese Permanent Deputy Prime Minister Nguyen Tan Dung, affirmed that his government has been doing its utmost to help Chinese investors and businessmen to seek opportunities for trade and investment in Vietnam. The Vietnamese leader told a gathering of Chinese entrepreneurs that with a population of more than 82 million people, Vietnam is emerging as a large, dynamic and open market on the way to integrate into regional and international markets.

He said Chinese products, including consumer commodities and industrial machinery and equipment, are winning greater prestige in Vietnam and almost all Chinese investors have achieved success in the Vietnamese market. Nguyen welcomed all Chinese businesses and pledged that in addition to the preferential treatments given to all foreign investors and businessmen, the Vietnamese government would work to provide Chinese investors and businessmen with every favorable condition it can in order to ensure their smooth operation in Vietnam.

"We want the Chinese Council for the Promotion of International Trade, the Vietnam Chamber of Commerce and Industry, together with Chinese and Vietnamese border localities to increase their cooperation to accelerate trade promotion and investment, and to organize trade fairs and exhibitions to help each other seek more trade and investment opportunities," Nguyen said.

The head of the Chinese Council for the Promotion of International Trade, Wan Guifei, said the forum provided a good opportunity for Chinese businesses eager to contribute to expanding economic and trade ties between the two countries. He said that China is the world's largest developing country, while Vietnam is one of the fastest growing countries in the region. He also noted that the formation of a China-ASEAN free trade zone would offer a good opportunity for the two to boost economic and trade cooperation.

Vietnam-China trade, which reached a record US$7.2 billion last year, is likely to reach $10 billion by 2007, three years ahead of the schedule set by Vietnamese Prime Minister Phan Van Khai and Chinese Premier Wen Jiabao at a meeting in Beijing last year. Trade, which has grown at an amazing annual rate of 40% in recent years, has emerged as a bright spot in bilateral relations, thanks to many advantages, including the shared 1,643-km land border, and mutual access to the Gulf of Tonkin.

Since the resumption of Vietnam-China economic relations in 1991, the two countries have seen stable and rapid growth in trade, from $32 million in 1991 to nearly $2.5 billion in 2000 and $7.2 billion in 2004. Vietnam exports in great volumes crude oil, coal, coffee, sea products, fruits and vegetables, and footwear to China, while China has registered large increases in the export of pharmaceutical products, machinery and equipment, petroleum, fertilizers, motorbike parts and cars to Vietnam.

Cross-border trade, which has been posing problems for the authorities for years due to the long border, is now gradually being put in order. In addition, official trading channels have been increasing, adding more kinds of goods that previously were only traded in small volumes. A more open payment mechanism at the branches of the two countries' banks in the border area has encouraged businesses to pay through banking services, thus reducing risks and disputes in cross-border trade.

Bilateral trade relations are also expanding in scale, with more Chinese businesses from inland and coastal provinces reaching out to Vietnam, and Vietnamese businesses looking beyond the border to China's coastal provinces and economic zones. The two sides' businesses also shifted from trade to forming joint ventures to manufacture and sell products in the two countries and also export to third countries. The boost in economic and trade ties is attributed to hundreds of talks and meetings between the two countries' enterprises concerning policies, market information and trade opportunities, as well as a great number of product exhibitions held in the two countries, especially in common border provinces. The Vietnam-China Business Forum, established last year, was an especially noteworthy economic cooperation initiative.

At present, China is the second biggest trading partner of Vietnam after the European Union (EU). It is the fourth largest buyer of Vietnam's goods and the biggest seller to Vietnam. Yet the value of two-way trade accounts for just 12% of Vietnam's total trade turnover, and represents only 0.6% of China's. The Vietnam Chamber of Commerce and Industry (VCCI) suggested that to further boost bilateral trade, both countries' businesses should look to long-term contracts on supplying products not only to their countries but also to a third country.

An economic corridor linking China's southwestern Yunnan province with Vietnam's northern provinces and cities is expected to provide further impetus to bilateral business ties. The corridor, running from Kunming city of Yunnan province through Vietnam's Lao Cai province, the Vietnamese capital of Hanoi, and the port city of Haiphong to Vietnam's Quang Ninh province, is one of the three economic projects to be established under an agreement reached by the Vietnamese Prime Minister and Premier Wen at their meeting in Beijing last year. Another economic corridor will connect Nanning of Guangxi province, Lang Son province, Hanoi, Haiphong and Quang Ninh province, while an economic belt will encompass the Tonkin Gulf.

The Kunming corridor will help implement Vietnam's policies on pushing socioeconomic development in its northern mountainous provinces, considered the country's major target for 2001-10. The corridor will also assist China in carrying out its strategy to "open up" the west - an important part of the country's overall economic development plan. According to Dr Nguyen Van Lich, Director of the Trade Economy Institute under the Vietnamese Trade Ministry, the corridor will become even more important once the ASEAN-China Free Trade Area is formed.

The building of the corridor involves developing trade and economic ties, investment, technical cooperation, tourism, cross-border economic exchange, and land, railway and water transportation. The two countries agreed to focus first on transport infrastructure, not only to meet the increasing demands of trade between the two countries but also to serve the transit needs of China and ASEAN member countries. Railways and roads connecting Kunming with Lao Cai, Hanoi and Hai Phong will be upgraded and a new highway linking Kunming to Lao Cai, Hanoi, Haiphong and Quang Ninh will be built, followed by a trans-Asia railway line.

The two sides are coordinating to promote cross-border trade and transit trade. Yunnan's key exports are electro-mechanical products, telecommunications equipment and chemicals, while Vietnam mainly exports agro-forestry-aquatic products and minerals. Tourism in the corridor also has great potential, as the area boasts many famous landscapes. The two sides hope to attract tourists from Europe, the Chinese mainland and Vietnam, with tours highlighting the two countries' original cultural and ecological features.

A glorious example of the fruits of Sino-Vietnamese cooperation is the Thai Nguyen Steel Complex in Vietnam, which last year produced 430,000 tons of rolling steel, 300,000 tons of steel ingot and 210,000 tons of pig-iron, grossing a turnover of VND2,500 billion (US$157 million). Its products have gone to almost all key projects in the country, occupying a firm foothold in the market. The steel complex, located about 80 km north of Hanoi, was built with Chinese assistance in 1959.

At the end of 2001, the first phase of an extension project of the Thai Nguyen Steel Complex was completed with a total investment of nearly $46.7 million, with China contributing $22 million. The second phase of the extension (2005-2007), with a total investment of $200 million, aims to raise the complex's capacity to 750,000-1,000,000 million tons a year.

The Ha Bac Nitrogenous Fertilizer Factory, another gift from China to the Vietnamese people in the 1960s, has markedly contributed to Vietnam's development. Producing nearly 2 million tons of fertilizer for Vietnam so far, the factory over the past four years has had an average annual growth rate of 18%. The growth rate was achieved thanks to a $32 million investment from the Chinese partner to raise the factory's capacity to 150,000 tons a year.

Other major projects jointly carried out by Vietnam and China include the Sin Quyen copper project, the Cao Ngan thermal power project and the Dac Nong bauxite project. In addition, the Chinese government has decided to provide 150 million yuan (US$18 million) as non-refundable aid to help build a Vietnam-China Friendship Palace. In the 1992-2004 period, China pledged $312 million of official development assistance for Vietnam, including $50 million as non-refundable aid for the upgrade of a number of Chinese-funded industrial projects in Vietnam.

(Asia Pulse/VNA)

Vietnam's trade deficit with China nears US$2bn (Jun 1, '05)

The price of Asian conflict (May 24, '05)

Vietnam maintains high export growth rate (Apr 30, '05)

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