Workers at a seafood factory in southern Vietnam. The seafood industry is one of the Vietnamese sectors hard-hit by the ongoing conflict in Ukraine. VIET NAM NEWS
The West cutting Russia off the Society for Worldwide Interbank Financial Telecommunication (SWIFT) and imposing heavy sanctions is unlikely to produce a significant impact on Vietnam and Vietnamese businesses, said industry experts and banking regulators.
“As Russia and Ukraine account for less than 2 per cent of the global economy, the ongoing conflict likely won’t hurt the world’s economic recovery in a significant manner. However, cutting Russia off from SWIFT will hurt its ability to export oil, and in effect drive global oil prices up slowing down the recovery process,” said Tu Tiet Phat, director-general of Asia Commercial Bank (ACB).
Export-import turnover between Vietnam and Russia was $35 billion ($4 billion with Ukraine) during 2021, according to a report by the Ministry of Industry and Trade.
As Russia isn’t among their key markets, Vietnamese businesses are not severely affected. In addition, firms can still find ways for transactions via a third-party bank, though this is slower and more costly, according to experts.
Vietnam’s main exports to Russia include seafood, vegetables, fruits, nuts, coffee, tea, pepper, rice, handicrafts, rubber, wood furniture, footwear and electronics.
The Southeast Asian country imports from Russia large amounts of wheat, fertiliser, oil and chemicals, pharmaceutical supplies, steel and heavy machinery.
Rising global oil prices, however, would hurt Vietnam’s effort to ramp up its economic activities, said Professor Quoc Phuong.
“Prior to the conflict, the tension between Russia and Ukraine had driven oil price to over $100 per barrel. With no end in sight, there is no telling how high oil prices will go,” he said.
Phuong advised the government to preemptively cut back on fees and taxes to keep gas prices in the domestic market down while making preparations for different scenarios.
“We won’t be seeing major direct impacts on Vietnam’s economy in the short run but we should be very concerned over rising oil prices and the long-term effects of sanctions imposed on Russia,” he said.
Truong Dinh Hoe, general-secretary of the Vietnam Association of Seafood Exporters and Producers (VASEP), however, claimed the conflict would hurt Vietnamese seafood exporters as European retailers would find it difficult to conduct business in Russia and Ukraine.
Hoe said Vietnamese businesses must act now to diversify their markets and make financial preparations as transportation costs would likely soar even higher.
The timing was also bad as Vietnamese seafood exports to Russia had been on the rise, growing by 21 per cent year-on-year in 2021, and started to gain popularity among consumers.
Professor Vu Thanh Liem, former deputy director of the General Statistics Office of Vietnam, said the conflict was not without opportunities for businesses to work with.
Liem said Russia had been making an economic pivot in recent years, away from the European markets and towards Asian markets, of which Vietnam is a major one.
Heavy sanctions on Russia would also disrupt supply in Western markets and open doors for Vietnamese suppliers, especially in food and energy.
Vietnam might be able to take this opportunity to ramp up trade with not just Russia but other affected economies, he said.
VIET NAM NEWS/ASIA NEWS NETWORK
