VINACHEM

(VEN) - The Middle East includes 16 countries -Turkey, Lebanon, Israel, Syria, Jordan, Iraq, Kuwait, Iran, Saudi Arabia,Bahrain, Qatar, United Arab Emirates, Oman, Yemen, Palestine and NorthernCyprus. With the exception of Israel, most of the remaining countries areIslamic. The Middle East is home to two-thirds of the world's oil reserves.With a population of about 280 million and a high per capita income, the MiddleEast is a high-consumption and highly-solvent market.

Due to therecent chain reaction, which came from Egypt, strikes and uprisings havehappened throughout the Middle East, creating disorder in several countries inthe region like Yemen, Bahrain and Syria and causing economic pressure as theprice of oil increased. However, the governments of the Middle East have put inplace measures to control the situation. Most of the important export marketsfor Vietnam such as the United Arab Emirates, Saudi Arabia, Turkey, Kuwait andIsrael have remained unaffected, and the economic, trade ties between Vietnamand Middle East countries have not been hurt.

Vietnam andthe Middle East countries have established fairly complete legal frameworks,which act as the basis for the development and enhancement of the cooperationrelations in all fields, particularly trade, investment, industry and oil.Official cooperation mechanisms such as activities of joint committees,bilateral cooperation ties between ministries, sectors, and trade promotionagencies are improving, underscoring their active role in boosting cooperation.Several joint committees for Vietnam and Middle East countries have provedsuccessful. These include the joint-government committees for Vietnam and UAE,and for Vietnam and Iraq, and the joint committees for Vietnam and UAE, Turkey,Oman, Saudi Arabia, and Iran. At this time, Vietnam is looking to set up jointcommittees for Vietnam and Israel and Vietnam and Palestine.

Tradeexchange

Although theeconomies in Middle East countries were affected by the global financial crisisin 2009, which led to a decline in Vietnamese import purchases, its exports tothe region remained high, hitting US$1.14 billion in 2009 and soaring toUS$1.65 billion in 2010, a 44.7 percent increase from 2009-2010. At this time,Vietnam has trade ties with all 16 Middle East countries.

In 2010,Vietnam's largest export markets in the Middle East were Turkey (amounting toUS$528 million), UAE (US$508 million), Iraq (US$188 million), Saudi Arabia(US$144 million) and Israel (US$97 million). Vietnamese major exports to theMiddle East were seafood (amounting to US$163 million), rice (US$149 million),fiber (US$137.5 million), mobile phones (US$134.5 million), fabric (US$110.4million), computers and electronic accessories (US$99 million), pepper (US$61million), textiles and garments (US$59 million) footwear (US$57.4 million),cashew nuts (US$44.5 million), coffee, tea, milk, milk products, machinery,equipment, spare parts, handicrafts and more. This shows that Vietnam hasmostly sold farm products, food, electronic ware, computers and textiles andgarments to the Middle East, rather than construction materials, footwear,electric wire, electric cable, interior products, processed food, officeequipment and wood furniture, which Middle East countries have a high demandfor, and are Vietnam's advantageous products. Vietnamese mobile phones havebeen present in the Middle East for the last two years and they have surged tosit among the top five Vietnamese exports to the region.

Importpurchases from the Middle East were US$1.03 billion in 2009 and US$1.66 billionin 2010. Major imports were gasoline, oil, liquefied petroleum gas, chemicals,chemical products, plastic materials, fertilizers, normal metals, steel billetand animal feed. These imports have facilitated domestic production. Severalimportant import markets in 2010 were Saudi Arabia, Kuwait, Israel, Turkey andIran.

Cooperationin industry and investment

Thecooperation ties between Vietnam and the Middle East in the field of industryand oil are mostly focused on partners like Saudi Arabia, Kuwait, UAE andIsrael. Most cooperation projects have progressed well.

At this time,Saudi Arabia is concerned about investing in oil (building oil refineries andproviding materials for them), infrastructure, civil construction,post-telecommunications, tourism and real estate in Vietnam. The Zamil SteelGroup's prefabricated steel building frame production factories in the Noi BaiIndustrial Zone in Hanoi and the Amata Industrial Park in Dong Nai Province areSaudi Arabian investment successes in Vietnam. In February 2009 the VietnamNational Oil and Gas Group (PVN) concluded an agreement with the Saudi ArabianOil Company (ARAMCO), regarding cooperation in crude oil supply to the DungQuat Oil Refinery, liquefied petroleum gas supply, as well as other oilrefinery projects in Vietnam. The Vietnam National Petroleum Corporation(Petrolimex) has also tied up with ARAMCO to import oil and build an oilrefinery with a capacity of 10 million tonnes annually in the Van PhongEconomic Zone, Khanh Hoa Province.

Industrialcooperation between Vietnam and Kuwait is mostly visible in the field of oiland gas. On the occasion of the visit to Vietnam in April 2008 by KuwaitMinister of Oil and Information, PVN concluded an agreement with the KuwaitPetroleum Corporation (KPC) and Japanese partners, for the development of theNghi Son Oil Refinery Complex in Vietnam. In addition, Kuwait has providedimportant Official Development Assistance (ODA) for Vietnam. So far, throughthe Kuwait Fund for Arab Economic Development, Kuwait has provided loans fornine projects in Vietnam totaling 38 million Kuwaiti dinar, or about US$140million. The loans mostly went to rural infrastructure projects such as roadsand small irrigation projects in poor provinces. So far, many of them have beencompleted and become operational. These include the Dau Tieng and Van Dinhirrigation projects and the Dac Ta-Ngoc Linh Road.

Economicrelations with UAE are mostly in the areas of oil and investment. In 2007, PVN,the UAE partner - the International Petroleum Investment Company (IPIC) and athird partner - Trafigura/GS of Singapore - concluded a Memorandum ofUnderstanding (MOU) on cooperation in investment in Oil Refinery No.3 in LongSon, Ba Ria-Vung Tau Province. As for now, the parties are considering relatedquestions in order to spur the rapid implementation of the project. PVN'smembers, PV Gas and PV Oil, have trade ties with the Abu Dhabi National OilCompany (ADNOC) in the areas of liquefied petroleum gas, oil and oil products.

Regardingindustry, Vietnam-Israel cooperation is mostly in high technology. RAD, ECITelecom Ltd., Comverse and Alvarion, and Ultra Pure Core (UPC) and Vietnamesepartners are successfully developing projects in Vietnam. Most Vietnamese largetelecommunications service providers like VNPT, Viettel and EVN have usedIsraeli technology. Israeli companies have also taken part in several projectsin Vietnam, examples being the Landmark building in Hanoi and Capital Fundbuilding in Ho Chi Minh City. UPC is working with Vietnam's Quang Viet FiberCompany to build Southeast Asia's most modern optic fiber production plant inBinh Duong Province.

Economic,trade prospects

The MiddleEast is an important market for Vietnam, particularly regarding trade,investment, labor export and cooperation in oil and gas. Recognizing this,Prime Minister Nguyen Tan Dung made public Decision 125/2008/QD-TTg onSeptember 9, 2008, adopting the project to boost the Vietnamese-Middle Easternrelations in 2008-2015. The project proposed master solutions to enhancerelations in the areas of politics and diplomacy, investment, petroleum, labor,trade, finance-banking, transport, tourism, information-culture-sport,agriculture, science-technology, education-training, and security-nationaldefense. Following the project, Minister of Industry and Trade Vu Huy Hoangsigned Decision 6583/QD-BCT on December 15, 2008, making public a Ministry ofIndustry and Trade action program to implement the government's project topromote relations between Vietnam and the Middle East in 2008-2015. The actionprogram is aimed to boost exports, to increase trade with the Middle East toUS$3.1 billion in 2010 (this goal was reached) and US$7.5 billion in 2015. Regardingcooperation in petroleum, the action program also aims to boost the developmentof signed agreements on petroleum projects and expand petroleum operations inthe Middle East by making the most of good opportunities to conclude agreementson oil exploration/extraction, and diversify sources of crude oil and liquefiednatural gas imports to facilitate the energy security strategy for Vietnam.

Inconsideration of the achievements, potential and prospects for trade betweenVietnam and the Middle East in the coming years, it is expected that Vietnameseexports to 16 countries in the Middle East will hit about US$1.98 billion in2011 (up 20 percent from 2010) and US$4.1 billion in 2015./.