Hanoi (VNA) – For years, Australia has supported Vietnam’s growth. Going forward, new demand-driven opportunities look to provide grounds for the next stage in the Vietnam - Australia relationship, according to HSBC.
Prime Minister Pham Minh Chinh (second from left) and his Australian counterpart Anthony Albanese exchange the joint statement on upgrading Vietnam-Australia ties to Comprehensive Strategic Partnership. (Photo: VNA)
On the occasion of Prime Minister Pham Minh Chinh’s official visit to Australia while attending the special summit to celebrate the 50th anniversary of ASEAN-Australia Dialogue Relations, HSBC’s global research team launched its report analysing relations between the two countries.
According to bank experts, 2023 was a year full of high-level engagements for Vietnam, as it upgraded its diplomatic relationships with both the US and Japan to comprehensive strategic partnerships. After signing an updated ASEAN-Australia-New Zealand Free Trade Area (AANZFTA) agreement in August 2023 and celebrating the 50th anniversary of establishing diplomatic relations, Australia looks set to be next.
Bilateral trade has boomed over the decade, more than doubling to 13.8 billion USD in 2023. That said, part of the expansion in trade value since the pandemic has been due to high global commodity prices. In particular, two categories stand out - coal and cotton.
Vietnam is now Australia’s single largest cotton export market, accounting for 40% of its total exports, doubling its share from 2020. Likewise, Australia accounts for nearly 40% of Vietnam’s cotton imports. While as a percentage of total exports (15%), Vietnam’s textile and garment industry has seen its share dwindle in recent years as electronics shipments have risen to 35%. It is expected to remain a tailwind for Australian cotton exporters.
According to HSBC, the boom in trade is not solely in manufacturing. Vietnam’s structural rise in household discretionary spending has also lifted demand for certain Australian exports. In particular, Australia’s beef exports have boomed, thanks to the elimination of tariffs under the AANZFTA in 2018. What is even more encouraging is the potential of Vietnam’s beef consumption. According to OECD-FAO, Vietnam is expected to consume the most beef per capita in ASEAN by 2030, leaving room for further trade flows.
Vietnam is now Australia’s single largest cotton export market, accounting for 40% of its total exports. (Photo: VietnamPlus)
The relationship is not as one-sided as the above might suggest, however, as Vietnam’s exports to Australia are also expanding. Agricultural goods are leading the way, with nuts and seafood making up the majority. Australia’s imports of cashew nuts come almost entirely from Vietnam, according to ITC data.
To further leverage trade agreements between the two countries, including AANZFTA, CPTPP, and RCEP, it will be equally important for Vietnam to heighten quality control on its agricultural exports, especially considering Australia’s quality standards and regulations that are stricter than those of the US and EU in some areas, HSBC’s economists said.
Currently, only four fresh fruits are given market access into Australia: mangoes, dragon fruit, lychee, and longan, but this also indicates significant opportunities for market expansion.
Australia pushes Vietnam’s energy transition process
The export of goods is not the only area with potential opportunities – services are another area for expansion, albeit only gradually.
In 2023, ASEAN welcomed 4 million Australian tourists, but less than 10% of them visited Vietnam. Part of the reason may relate to visas, as Australia is not visa-exempt and flight capacity constraints still exist.
An expansion in the visa exemption list is under consideration and new flight routes have been introduced. These are important initiatives, as Australian tourists tend to have a relatively high propensity to stay and spend during their holidays.
In addition, Vietnam has the second largest rare earth deposits in the world which remain largely untapped. Australian firms, with expertise in the mining and processing industry, are looking to capture this opportunity, with steady FDI inflows into the industry in ASEAN. For Vietnam specifically, one such example is Blackstone Minerals, which is currently running two facilities – a nickel mine and a refinery – in the northern province of Son La.
Nhập mô tả cho ảnh Beyond critical minerals, Australia’s role as a major supplier of energy for Vietnam puts it in a strategic position to help accelerate Vietnam’s energy transition. Subsequently, the Australian government has committed to providing related support worth 105 million AUD to Vietnam.
In addition to trade and FDI, other forms of cooperation also matter. While Indonesia has long been Australia’s dominant recipient of official development assistance (ODA), Vietnam has also seen a steady flows of development aid. Meanwhile, human capital is closely intertwined. Australia long held an educational milestone of establishing Vietnam’s first foreign-owned international university (RMIT University in 2000). Reflecting its ongoing commitment, the Vietnamese branch of the Royal Melbourne Institute of Technology (RMIT) was further supported by an additional 250 million AUD investment last year, contributing to the launch of the Innovation Hub to help support up-skilling of the workforce./.
