[EN] Economic Relationship of Vietnam-Mozambique

1 | A s i a P a c i f i c E c o n o m i c R e v i e w VIETNAM MOZAMBIQUE ECONOMIC RELATIONSHIP UNDER THE VIEW FROM VIETNAM'S POLICY OF INTERNATIONAL ECONOMIC INTEGRATION The product of the Scientific[.]

VIETNAM - MOZAMBIQUE ECONOMIC RELATIONSHIP UNDER THE VIEW FROM VIETNAM'S POLICY OF INTERNATIONAL ECONOMIC INTEGRATION The product of the Scientific Research project is made by Vietnamese and Mozambican students under supervision of MSc Nguyen Thi Phuong Dung (Faculty of Political Theory, University of Science and Technology) Research team: Nguyen Van Hoang, Oraiden Manuel Sabonete, Francisco Eusébio Fernando Tocota, Carlos Mateus Omar (Hanoi University of Science and Technology) -o0o - Abstract: Mozambique is one of the typical countries with good friendship relations with Vietnam in Africa The two countries officially established diplomatic relations on June 25, 1975 The two sides have done a lot of efforts on promoting trade and investment cooperation activities However, economic activities between the two countries are still low, not commensurate with the potentials of each side However, as a country with a population of more than 30 million people, Mozambique is a potential partner for Vietnam in the process of globalization and deep integration with the region and the world Keywords: Economic integration, bilateral relations, Vietnam, Mozambique Introduction The Republic of Mozambique is located in Southeast Africa, with an area of 801,590 km² with a population of 31,255,435 (2020) In recent years, Mozambique has implemented a Look East policy to strengthen cooperation with Asian countries such as China, Vietnam, Japan, and India Despite the geographical return, the difference in language and culture, Vietnam and Mozambique have many similarities Both countries have geo-economic positions facing the two great oceans in Asia and Africa for development The two countries have been through a long period of struggle for national independence Like the Communist Party of Vietnam, the Front for the Liberation of Mozambique (FRELIMO) takes Marxism-Leninism as the ideological foundation and leads the Mozambican people to fight for national independence Besides, Vietnam 1|Asia-Pacific Economic Review and Mozambique are both members of the Non-Aligned Movement The guiding spirit of the member countries participating in this movement is "the independence, sovereignty, territorial integrity and security of non-aligned states", not depending on or relying on any major power bloc, any country Both Vietnam and Mozambique promote "national strength, combined with the strength of the times", is mainly based on endogenous resources Therefore, developing countries themselves must be self-reliant, expand cooperative relations, and limit dependence on big countries Therefore, the two countries established diplomatic relations very early (right after the reunification), which was on June 25, 1975 Economic relations between the two countries have been started since the two countries signed the Trade Agreement in 2003 In fact, after the Resolution of the X Party Congress (2006) emphasized "proactive" and "active" International economic integration, Vietnam joined the World Trade Organization (WTO) At that time, Vietnam actively promoted relations with Mozambique Soon after, a series of Agreements between the two countries were signed, namely: Investment Promotion and Protection Agreement (2007); Agreement on Agricultural Cooperation (2007); Medical Cooperation Agreement (2007); Education Cooperation Agreement (2008); Agreement on visa exemption for holders of diplomatic or official passports (2008); Protocol to establish UBLCP on economic, cultural, scientific, technical and technological cooperation (2008); Protocol on technical assistance in the field of education and training (2008); Minutes of the first meeting of the Intergovernmental Committee (2009); Agreement on the avoidance of double taxation and tax fraud (2010); Agreement on cooperation in crime prevention (2011)… Although Vietnam and Mozambique have great potential and many opportunities for cooperation in trade and investment, the economic relationship between the two countries still faces many difficulties and challenges Therefore, in order for economic cooperation between Vietnam and Mozambique to become effective, it is necessary to strengthen solutions to promote trade and investment between the two countries Status of economic relations between Vietnam and Mozambique 2.1 About commercial activities The 2003 Trade Agreement signed between Vietnam and Mozambique has created a favorable legal framework for import and export activities of the two countries Since then, the 2|Asia-Pacific Economic Review trade turnover between the two countries has increased, showing that the trade cooperation relationship is growing About export turnover Chart of import and export turnover of Vietnam – Mozambique period 2011 – 2018 cu rren cy: Mi l l i on US D Import Total turnover 2014 71.9 64.9 75.7 107.6 101 72.3 28.7 2013 6.5 2012 18.9 15 2011 21.9 16.4 59.6 66.1 78.6 97.5 112.6 90.7 100.6 85.6 71.6 88 140.6 179.5 Export 2015 2016 2017 2018 Source: General Statistics Office The period 2011 - 2013 shows that the total import-export turnover between the two countries has a stable growth, specifically, the total turnover in 2012 increased by 14.3% compared to 2011 and the total turnover in 2013 increased by 11.9 % compared to 2012 However, the following years showed a decrease in total turnover Specifically, the total turnover of 2014 and 2015 were both below 100 million USD, lower than the total turnover of the two countries achieved in 2013 (112.6 million USD) The next period from 2016 to 2018 shows that the total trade turnover between the two countries has improved In particular, the import turnover of goods from Mozambique has increased significantly in these three years However, on the side of Vietnam's export turnover, it saw a slight decrease, from 72.3 million USD in 2016 to 71.9 million USD in 2017 and 64.9 million USD in 2018 At the end of 2018, while the two-way trade turnover of Vietnam and Africa reached more than 6.6 billion USD, the trade turnover between Vietnam and Mozambique only accounted for 2.1% 3|Asia-Pacific Economic Review In general, import and export activities between the two countries have not shown a clear growth over the years and are not commensurate with the potentials of each country About the structure of the industry According to annual data from the General Statistics Office, the main Vietnamese exported items to Mozambique are rice, textiles, iron and steel products, cement, clinker, machinery and equipment, spare parts, wires and cables… Specifically, in 2018, out of a total of 28 items, rice accounted for 37% highest in exports to the Mozambican market Vietnam's rice export output is 42,699 tons, equivalent to USD 24,164 million With this production level, Mozambique ranks 13th among the countries that most export Vietnamese rice Next is textiles, accounting for 21% (equivalent to 13.949 million USD) After that, iron and steel products accounted for 14% and cement and clinker accounted for 8% in the structure of export industries to the Mozambique market For Vietnamese goods imported from Mozambique, according to the General Statistics Office over the years, the main items are cashew nuts, coal, animal feed & raw materials, wood, ores and other minerals, and stone In particular, in 2018, the most exported product from Mozambique to the Vietnamese market is cashew nuts with the proportion of 67%, with a total value of 50,331 million USD Ranked second is coal which accounted for 15% (equivalent to USD 11,666 million) and animal feed & raw materials 10% (USD 7,578 million) These are the items Mozambique has an advantage Looking at the structure of import and export items between the two countries, it can be seen that the products are still less diversified, mainly focusing on agricultural products (rice, cashew nuts) The value of items is still small and fragmented, and the comparative advantages of the two countries have not been effectively promoted However, it can be seen that the two countries have made efforts to exploit their comparative advantages in agriculture On the Vietnamese side, this activity is consistent with the Party's policy of "maximizing our country's comparative advantage" from Resolution No 07NQ/TW issued on November 27, 2001 on International economic integration It is from the policy of this Resolution that Vietnam is no longer passively waiting for foreign direct investment (FDI) or import-export, Vietnam has been "active" with Mozambique to sign the 2003 Trade Agreement foundation for future commercial relations 4|Asia-Pacific Economic Review 2.2 About investment activities Besides commercial activities, investment activities between Vietnam and Mozambique have many highlights in the fields of telecommunications, agriculture, oil and gas and mining As in 2020, Mozambique is currently ranked 11th out of 72 countries and territories where Vietnam has investment activities The first one is the telecommunications investment joint venture Movitel joint venture is a product of cooperation and investment between Viettel Group and SPI and Investspar companies of Mozambique Movitel started building the infrastructure in 2011, initially with a total of 12,500 km of fiber optic cable and 1800 antennas supporting 2G and 3G services In May 2012, Movitel mobile network was officially opened in Maputo, Mozambique Total investment capital is over 600 million USD, of which Viettel contributes over 70% By 2020, Movitel has become the leading telecommunications network in Mozambique with over 4.5 million subscribers, covering more than 85% of the population in all 11 provinces, down to the district level Movitel is not only a very effective project in economic cooperation between the two countries but also realizes the policy of international economic integration of our Party, associated with knowledge economy and national security In the context of the modern Industrial Revolution with the strong development of telecommunications, internet, and IoT, the problem between countries is to be self-sufficient in telecommunications, network security and digital transformation Movitel joint venture project brings information infrastructure foundation, digital autonomy to Mozambique and effectively brings international economic integration to Vietnam according to the policy of the Party The second one is a cooperation project in the field of agriculture Agriculture is one of the four key sectors identified by the Government of Mozambique Therefore, Mozambique also has policies to encourage businesses to invest in agriculture Up to now, Vietnam and Mozambique have had many bilateral cooperation projects, sharing experiences and training techniques for agricultural and fishery development Typically, the project "Cooperation in research and development of food crops in Mozambique" Vietnam's Ministry of Agriculture and Rural Development has sent many delegations of experts to participate in Mozambique's food security programs as well as cooperate in sharing experiences and training in agricultural and fishery development techniques The project has researched 10 rice varieties that can increase yield 4-5 times, in order to support Mozambique to solve the problem of food security 5|Asia-Pacific Economic Review Third, cooperation projects in the field of oil and gas In 2009, Vietnam National Oil and Gas Group (Petrovietnam) and Mozambique National Petroleum Corporation (ENH) signed a cooperation agreement in the field of oil and gas The agreement was signed within the framework of the visit to Mozambique from November 30 to December by Petrovietnam's leaders to create conditions for Petrovietnam and ENH to expand investment, exploration and production activities in oil and gas in Mozambique, Vietnam and thirty countries in Africa Fourth, mining investment project In 2018, GPM Binh Thuan Co Ltd with more than 30 Vietnamese mining experts implemented the first phase of titanium mining investment project in Zambezia province (joint venture with local Tazette company, total project value over $100 million) In fact, investment cooperation activities between Vietnam and Mozambique in the current period are still modest, not diversified in investment fields However, through investment cooperation in the fields of agriculture, oil and gas, mining and telecommunications, these projects have realized our Party's policy on international economic integration associated with national security and national security room, independent and autonomous Because currently, besides traditional security challenges such as the issue of territorial sovereignty, sea and islands, nontraditional security challenges such as food security, energy security, cyber security focused attention by interested countries, especially countries that are members of the Non-Aligned Movement 2.3 Advantage and disadvantage Advantage The first advantage in the bilateral economic relationship between the two countries is the political relationship between the two countries with a long tradition This is an important foundation for the expansion of economic relations between Vietnam and Mozambique Secondly, Vietnam has a comparative advantage in agricultural production with products such as rice, pepper, dragon fruit, pangasius, basa fish, shrimp These are Vietnamese products with a long tradition, specialized, cheaper costs than products of some countries present on the Mozambican market Thirdly, Mozambique has an important strategic position in the South of Africa, with abundant resources (minerals, petroleum, timber, seafood ) This is also a potential investment opportunity for Vietnamese businesses in the Mozambican market 6|Asia-Pacific Economic Review Disadvantage Besides the advantages, the bilateral relationship between the two countries also faces many barriers such as differences in cultural characteristics, consumer tastes, remote geographical distances, etc These difficulties make businesses difficult Both sides are still cautious in trade and investment activities In addition, Vietnamese goods in Mozambique account for a very small proportion, are not diversified, are not known to many Mozambicans (accounting for about 0.15% market share in Mozambique's import turnover) and are still subject to competition fiercely from China, Japan, the US, India, especially Brazil and Portugal because these countries enjoy preferential tax policies in the Community of Portuguese-speaking countries (CPLP) In addition, the complicated situation of the Covid pandemic around the world has greatly affected the import, export and transportation of goods between Vietnam and Mozambique Recommendations to promote economic relations between Vietnam and Mozambique From the status of economic relations between Vietnam and Mozambique to the advantages and difficulties that the two countries will face, here are some suggestions and recommendations to promote economic relations between the two countries 3.1 Recommendations to the Governments of the two countries Firstly, in order to strengthen trade promotion, in the upcoming time, Vietnam and Mozambique need to step up the negotiation and move towards signing a Free Trade Agreement (FTA), or the principle of most-favored nation treatment (MNF) and the National Treatment Principles (NTP) to promote import and export activities Second, in order to strengthen investment promotion, in the upcoming time, the two governments should increase the exchange of delegations at all levels, and come up with favorable policies to create conditions for businesses to survey and access markets and explore cooperation opportunities between the two countries Third, strengthen people-to-people exchanges between the two countries This is the social foundation, the source of strength for the relationship between the two countries, also very important for the consolidation of trust, mutual understanding, friendship and cooperation of the people from the two countries 3.2 Recommendations for businesses of the two countries 7|Asia-Pacific Economic Review Firstly, with Vietnamese enterprises having trade and investment activities in the Mozambican market, these enterprises continue to promote the achievements gained over the years However, it is also necessary to have innovative thinking and develop appropriate strategies for each development stage That is the lesson that Viettel has successfully applied when the company is developing in the Mozambican market Secondly, for businesses wishing to exploit the markets in Vietnam and Mozambique, for effective trade and investment activities, businesses of the two countries should actively research thoroughly information about the market as well as the laws and policies of the two countries Third, strengthen the proactive connection between businesses of the two sides Because not only governments, but businesses must also be active and dynamic in connecting and exchanging through economic forums and conferences 3.3 General recommendations for Vietnam - Mozambique relations The Vietnam-Mozambican relationship is a cooperative relationship with a long history, common interests, and effects for each country in the context of complicated economic and political developments in the world This is a relationship based on the common foundation of historical characteristics (both independent colonies), ideological characteristics (MarxismLeninism) and economic characteristics (developing countries, starting from agricultural sites) Therefore, not only in the economic field, but the two countries also need to promote cooperation activities in science, technology, culture and education References: Ministry of Industry and Trade (2020) Vietnam import and export report 2019 Industry and Trade Publishing House, p 237 General Statistics Office (2020) Export of Vietnamese goods 2018 Statistical Publishing House, pp.45, 461 - 462 Le Quang Thang (2020) Trade cooperation relationship between Vietnam and the Republic of Mozambique Journal of African and Middle Eastern Studies, April 2020 issue, pp.40-44 Tran Huu Dong (2015) Introduction to the country Mozambique See 05/03/2021 8|Asia-Pacific Economic Review Trade Agreement between the Government of the Socialist Republic of Vietnam and the Government of the Republic of Mozambique dated November 14, 2003 View May 1, 2021 Strengthening trade relations between Vietnam and Mozambique 2016 See May 1, 2021 9|Asia-Pacific Economic Review ... 8|Asia-Pacific Economic Review Trade Agreement between the Government of the Socialist Republic of Vietnam and the Government of the Republic of Mozambique dated November 14,... international economic integration of our Party, associated with knowledge economy and national security In the context of the modern Industrial Revolution with the strong development of telecommunications,... brings international economic integration to Vietnam according to the policy of the Party The second one is a cooperation project in the field of agriculture Agriculture is one of the four key sectors