Economic relations
Development trends in recent years
Over the past five years, Vietnam and Hungary have exchanged a number of high-level visits, including trips to Budapest by the Prime Minister and the National Assembly Chairman of Vietnam, and Hanoi visits by the Hungarian President and Prime Minister.
The two Prime Ministers and the Vietnamese National Assembly Chairman were accompanied by large business delegations. Other events also created good opportunities for the two nations to develop bilateral ties, especially sessions of the Joint Commission for Economic Cooperation as well as mutual visits by ministers, deputy ministers, secretaries of state and other leaders.
After a long standstill, bilateral trade relations have grown remarkably since 2007 when trade value posted a growth rate of 58 percent largely thanks to a big increase in Hungary’s imports. In 2008, Hungarian exports to Vietnam reached 40.6 million USD, pushing two-way trade to 90 million USD, a 20-year record. The latest statistics show that trade between the two countries was able to produce a small growth on both directions ( Hungarian export 41,2 million USD import 50,1 million USD ) in 2009 despite the adverse impacts of the global economic crisis.
Meanwhile, Vietnam’s goods shipped to Hungary include machines, light industrial products such as garments, footwear and others, foodstuffs and drinks.
Along with boosting two-way trade, Hungarian companies, especially small- and medium-sized enterprises (SMEs), have paid due attention to new and closer forms of cooperation. SMEs from Hungary have been keen to set up joint ventures with Vietnamese partners. A number of such joint ventures, focusing on software development and outsourcing, were established over the past three years. Many of the SMEs already opened their joint representative offices in the capital city of Hanoi and the southern largest hub of Ho Chi Minh City. Another representative office is scheduled to make its debut this year to foster the transfer of environmental protection technologies.
Official development assistance (ODA) progamme signed between the two governments has opened up a new chapter in the bilateral relationship. Under the programme, Hungary provides long-term and interest-free loans to fund key public projects in Vietnam.
In 2004, the two governments laid a new foundation for the operations of the Joint Commission for Economic Cooperation, which has operated for dozens of years. Since then, the Commission has convened three biennial meetings in December of 2005 and 2007 and the latest, 11-13 January2010.
Under a decision made at the Commission’s session in 2005, Vietnam and Hungary set up their chapters of the Joint Business Council in June 2007 and April 2008, respectively. These chapters have already organised several visits of business delegations from both countries and help their companies establish direct links.
Outstanding economic cooperation fields
The spheres with high growth potential include safe water supply, water purification, solid and toxic waste treatment, information technology, transfer of new technology (for example: solar-powered battery production), food processing, military technology, security, agricultural technnologies, animal feed production, freshwater fish breeding and infrastructure development (urban public traffic system, vehicle repair and port development).
Environmental protection is also one of the most promising cooperation areas, which topped on the agenda of Hungarian President Solyom Laszlo’s talks with Vietnamese leaders during his visit to the Southeast Asian country in May 2008. It was discussed again during a Vietnam visit in early February 2009 by the Senior State Secretary of the Ministry of Environment and Water, Lajos Olah, and accompanying representatives of leading companies. During their talks with leaders of relevant Vietnamese agencies, the two sides agreed that the participation in Vietnam’s environmental protection projects would open up opportunities for the Hungarian environment and water sector, while Vietnam would have the chance to get access to the state-of-the-art technologies.
Vietnamese Minister of Natural Resources and Environment Pham Khoi Nguyen paid two visits to Hungary, the first in July 2009 and the second in September 2009 when he accompanied Prime Minister Nguyen Tan Dung. As part of the outcomes of the visits, the two concerned ministries signed a Memorandum of Understanding, outlining major cooperation areas, such as climate-related policy making, environmental technology, irrigation development, the use and protection of mineral and thermal water sources, and environmental education and training. During the ministerial-level talks, the two sides also discussed the possibility of cooperation in other fields, including bauxite processing – which is very important to Vietnam.
Energy is considered another important area for cooperation in the future. In a Memorandum of Understanding signed in September 2009, Vietnam and Hungary defined the transfer of technologies and experiences related to renewable energy and energy efficiency, oil and gas exploration and production, and nuclear power as top priorities in the field.
On the basis of the time-honoured relations, new forms of agricultural cooperation have taken shape, particularly in animal husbandry, freshwater fish breeding and animal feed production. In addition to cooperative ties between research institutes, businesses have also paid more attention to this area. Some of them are considering to invest in projects to process high-quality agricultural products to meet growing demands of the Vietnamese market and for exports.
In terms of security, a number of delegations from the Ministry of Public Security and other concerned agencies of Vietnam visited Hungary in recent years to explore the possibility of cooperation. Hungarian companies also transferred technological solutions to Vietnam.
The traditional friendship is regarded a good foundation for the two nations to step up cooperative ties in security, which requires a high level of mutual trust. With these factors, Vietnam and Hungary expect to see progress in this field in the years to come.
Tied aid credits
With the admission to the European Union, a new chapter has opened in Hungary’s international development assistance policy. Hungary started to appear on the international arena as a donor. Thanks to their traditional friendship, the Hungarian government considers Vietnam a priority in its aid policy. Besides different forms of assistance, the signing of tied aid credit agreements has helped implement the country’s commitment. Tied aid credit is an instrument that has been applied by many other EU members. The recipient, in this case Vietnam, receives aid in accordance with its development priorities and, at the same time, the donor’s companies may get involved in projects where they would not have a chance without financial support.
During his visit to Vietnam in the summer of 2005, the Hungarian Prime Minister proposed a possibility of tied aid credits. As a result, by late 2009 two agreements on the provision of credits worth 95 million EURO in total were signed between the two governments with preferential conditions. Hungarian companies selected in accordance with public procurement rules can implement the projects which use Hungarian tied aid sources. At least 50 percent of the credit must be used to buy goods or hire services from Hungary and the rest may be spent on goods and services from Vietnam or other sources. Thanks to this structure, Vietnam can implement investment projects to boost the socio-economic development and acquire modern technologies while Hungarian firms will have chances to set foot in the Vietnamese market. Projects mentioned in the agreements between the two governments include:
- A project to provide safe water for people in Quang Trach district, Quang Binh province
- A project to provide safe water for people in Cam Xuyen district, Ha Tinh province
- A project to develop the basis for a population register system
- A project to establish a 500-bed tumour hospital in Can Tho City
By early 2010, all the projects are under preparation.
Prospects of economic relations
We can believe that the positive trend of the past period will continue in the future. Existing good relations between state agencies and companies will ensure a proper foundation. The health sector and pharmaceutical industry will still be important pillars of the relations, because of the pharmaceutical exports from Hungary and due to the construction of the Can Tho Hospital funded by Hungarian tied aid credit.
In addition, a cooperation agreement signed between the two countries’ Health Ministries in May 2008 has focused on vaccines and bio-products and encouraged the establishment of joint ventures in pharmaceutical production and vocational training.
At the meeting of the Vietnam-Hungary Joint Commission on Economic Cooperation in January 2010, the two sides affirmed their commitments to support and consolidate the bilateral cooperation between the two governments and the multi-party cooperation among companies.
Areas of priority will be trade, investment and finance, energy and infrastructure, environmental protection and irrigation, security and defence technology, computer science and information, transport and tourism, agriculture, fishery and foodstuff, health, science and education, and technology transfer.
State agencies will encourage and create conditions for businesspeople to attend meetings on investment and trade and exhibitions as well as to set up sustainable relations with each other. The two countries’ governments will continue encouraging the development of tourism relations on the basis of a tourism programme signed in July 2005.
The two governments will encourage Vietnamese companies to increase their presence in Hungary by helping them penetrate into the EU market of 450 million. Located in the heart of Europe, Hungary offers favourable conditions to establish logistics and goods distribution centres, suitable for serving the whole Central European region.
Recognising common interests, more and more Hungarian and Vietnamese companies are likely to link with each other to set up joint ventures, not only in Vietnam and Hungary, but also in other Indochinese countries, e.g. in Laos and Cambodia, that are important for the expansion of Vietnamese companies. Together with increasing goods exchanges, this process can open up new prospects for the economic relations between our countries, offering long-term and mutually beneficial cooperation between Vietnamese and Hungarian companies in the world of globalisation of the 21st century.
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