Vietnam continues to script its success story via economic restructuring and greater integration with the international economic system. The country is now home to an ever-expanding middle-class and resilient economy backed by a young workforce. As a result, economies across the globe are now inclined to have bilateral ties with Vietnam, and Australia is no exception.
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Despite the prevalence of the COVID-19 pandemic, Australia became Vietnam’s 10th biggest trade partner. Both nations are striving to step up trade and investment ties as well as strengthen their relationship pragmatically.
Current Scenario of Vietnam-Australia Trade Relations
During a reception on February 9, 2022, Speaker of the Australian House of Representatives Andrew Wallace expressed his zeal to foster comprehensive ties with the Australia-Vietnam Enhanced Economic Engagement Strategy (EEES) put in place.
Vietnamese Ambassador Thanh also acknowledged Australia’s valuable support provided during the cause of national development over the past 5 decades. He also mentioned Australia’s humanitarian role in providing COVID-19 vaccines as donations to the country.
With both the countries inching towards their 50th founding anniversary of diplomatic relations (1973-2023), officials of the respective countries agreed to bolster the bilateral relationship, especially their legislative ties. They further discussed the introduction of parliamentarians’ groups to shore up the relationship and were optimistic for further exchange of visits by leaders of the two countries in efforts to progress their strategic partnership to new heights.
Exponential Growth in Vietnam-Australia trade
Economic cooperation has always been a topic of utmost priority for both countries. Over the past three decades, bilateral trade between Australia and Vietnam has witnessed significant growth. In 2021, trade between the 2 countries clocked a record figure of USD 12.4 billion, up by about 50% year-on-year.
Vietnam’s export turnover to Australia increased by 23%, therefore clocking USD 4.45 billion, while its imports reached USD 7.95 billion, registering an increase of 70%, according to Vietnamnet.
According to Vietnam Trade Office in Australia, in spite of the prevalence of the COVID-19 pandemic, the exports from Vietnam to the Australian market experienced impressive growth. The country is a prominent exporter of rice, coffee, rubber, pepper, and cashews as well as aquaculture products and various fruits.
In 2021, the export of raw materials and fuels witnessed significant growth in comparison to the year 2020. Product segments like machinery, footwear, textiles, garments, agricultural and spare parts continued to see a spike in exports.
The textile and garment sector registered a growth of 42.23% whereas pepper, rice, vegetables and fruits, and seafood soared by 41.98%, 34.36%, 28.15%, and 16%, respectively.
Due to the surge in Vietnam’s textile and garment industry, the country generates high demand for cotton. Therefore, Australia happens to be one of the top five suppliers globally exporting cotton to Vietnam.
Moreover, to promote bilateral trade and the sale of Vietnamese products in Australia, Vietnam-Australia Trade and Investment Promotion Centre was incepted in Melbourne. Both the countries are members of comprehensive free trade agreements, including the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), the ASEAN-Australia-New Zealand Free Trade Area (AANFTA), and the Regional Comprehensive Economic Partnership (RCEP), according to TheDiplomat.
Prospects of Vietnam-Australia Trade Relations
During the formulation of the Enhanced Economic Engagement Strategy, Hanoi and Canberra agreed to double the investment between the countries by 2025 and revive each other’s economies from the COVID-19 pandemic. This strategy is the first long-term plan that Vietnam has signed that is aimed at tapping new opportunities for economic development and effectively dealing with economic barriers and coercive economic practices.
Moreover, the Australian government is focused on providing the required boost to the country’s development. It involves a gamut of measures like boosting Vietnam’s existing development co-operation programs, deploying advanced technological solutions, and aiding the country to leverage various financial channels to realize its aspiring goals.
Vietnam-Australia Business Opportunities: Why Australian Investors should expand to Vietnam?
Australian suppliers enjoy geographical proximity to Vietnam than other suppliers in the western countries. It helps them to respond to any demand from the Vietnamese market instantly, and vice versa. There is a demand for imported products such as beef and poultry, dairy products, fruit and vegetables, wheat and other grains, as well as processing equipment, technology, and other machinery.
Moreover, Vietnam’s GDP registered a growth rate of 5.2% in the 4th Quarter of 2021 in a display of robust economic performance. By 2030, the country is expected to be transformed into a modernity-oriented industrialized country among the top three in ASEAN. As a fast-growing economy and Southeast Asia’s third-largest market, the country has set the stage for international investors to expand their business in Vietnam.
Following are the top compelling reasons to invest in Vietnam:
- Sustainable Investments: The country has the largest solar power capacity installed in Southeast Asia and has the goal of achieving carbon neutrality by 2050.
- Young and Inexpensive Workforce: Vietnam’s Minimum Wages stood consistent from 2020 to 2021, at USD 192 per month. Despite the aging population, the majority of the workforce still had a young medium age of 32.5 in 2020.
- Government Incentives: Businesses are encouraged to leverage tax incentives provided by the government in the form of preferential tax rates and tax holidays.
- An ideal location setting: Vietnam shares international shipping lanes and borders with China. Moreover, the main cities like Hanoi and Ho Chi Minh City are very strategically located.
- Lucrative trade agreements: Vietnam has several trade agreements like EU-Vietnam Trade Agreement, ASEAN Free Trade Area, UK-Vietnam Free Trade Agreement, etc. to allow economic integration with regional and international partners.
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