Doing Business

Russian investment in Vietnam: a brief overview

Trường Lăng

May 26, 2022

Doing Business

Russian investment in Vietnam: a brief overview

Trường Lăng

May 26, 2022

Before the outbreak of Covid 19 pandemic

Before the appearance of Covid-19, Russia ranked 26th largest foreign investor out of 126 FDI countries in Vietnam, with 123 projects up to 933 million USD. Most Russian investment projects focused on the oil and gas, mining and real estate industries. However, the investment inflow from Russia into Vietnam was trickling and limited as the total registered capital even reached below 1 billion USD for overall 123 projects. This means the average size of each project was only slightly above ten million USD. 

In 2019, the number of registered projects amounted to 137, standing at 23 out of 135 FDI countries in Vietnam, with its primary industries remaining oil and gas and mining. The total registered capital marginally increased to 943 million USD. Aside from oil and gas, a modest number of Russian investors were interested in weapons and several civilian fields. Notably, ROSTEC is one of Vietnam’s most prominent and oldest Russian investors in military engineering and technology. In recent years, the company has been expanding its investment in other civilian sectors, namely, healthcare, automotive, and agriculture technology. According to ROSTER, their share of civilian products in the total revenue will exceed 50% by 2025 in Vietnam. 

During the pandemic 

Amid the Covid-19 pandemic, the oil and gas industry worldwide, including Vietnam, was severely affected. The average crude oil price in March 2020 decreased by 20 USD compared to February of 2020. Meanwhile, the average oil price in the first quarter of 2020 declined by 9.1 USD/ barrel compared to the same period in 2019. As a result, the slump in oil prices devastatingly affected the revenue of oil manufacturers worldwide. 

However, in Vietnam, the FDI oil companies from Russia remained stable. In particular, the revenue from oil and gas manufacturing of Vietsovpetro still reached over 1,684 billion USD, over 149% of the yearly plan. Specifically, the state budget revenue reached 922 million USD, up 317 million USD compared to the assigned goal. 

Besides, Russia’s largest independent gas producer-Novatek-has partnered with Ninh Thuan province in Vietnam to develop an integrated NLG (low tonnage liquefied natural gas) energy production project. Further, “giant” Russian oil and gas corporations, namely Gazprom and Rosneft, are expected to participate in diverse projects in Vietnam by 2030.

In the “new normal” and the Russia-Ukraine conflict  

As of February 2022, the total registered capital of direct investment from Russian investors in Vietnam reached 953 million USD with 151 projects, securing its 24th rank over 140 FDI countries. Most of the projects have been directed toward the energy industry, in which oil and gas exploration and production is an essential field in investment cooperation between Vietnam and Russia. Under Vietnamese current economic growth, the demand for energy, especially coal, oil and gas, has been burgeoning. 

Yet, the escalation of tensions between Russia and Ukraine has recently shaken investors, who were concerned about the negative impact of the war on the global economy. In addition, on February 27, the US, the UK, Canada and the EU announced blocking the connection of several Russian banks from the international payment system – SWIFT. This decision will wobble the investment in Russia in other countries, including Vietnam. VnDirect emphasized, “We think that sanctions, including blocking the SWIFT connection of the Russian financial system, will affect Russian investment projects in Vietnam, mostly power and oil and gas projects.” 

What opportunities remain for Russian investors in Vietnam?

At the Vietnam – Russia Business Forum, Vietnamese President Nguyen Xuan Phuc highlighted the potential cooperation between the two countries. The President considered the comprehensive strategic partnership between Vietnam and Russia as a solid foundation for economic growth. Yet, the turnover from both countries was still low, merely reaching over 5 billion USD. Meanwhile, the number of investment projects was limited to only over 150, valued at 150 billion USD.  

State President Phuc assured a stable and favorable political, economic and social context in Vietnam for attracting more Russian investors. The Vietnamese government would continue the training of high-quality human resources and developing infrastructure for other investment corporations. He firmly affirmed that Vietnam would create transparent and predictable policies. 

President Nguyen Xuan Phuc also expressed, “We consider Russian companies in Vietnam not only as foreign investors but also as dear friends. You are an essential element that contributes to the traditional friendship between the two countries.” Vietnam further encourages Russian investors to take strong steps toward investment in other industries besides the oil and gas industry. 

No better time than now is for Russian companies to enter Vietnam. With diverse preferential policies from the Vietnamese government and the close long-lasting relationship between Russia and Vietnam, Russian investors will harvest tremendous benefits if they seize the opportunities. Let leading experts in the industry help you! Viettonkin is proud to have a professional team of well-performed and top-notch consultants who can assist you through the process of starting up a business in Vietnam. 

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