Saudi-Vietnam Relations

Saudi-Vietnam Relations

Mohammed Al-Sudairi

Saudi Arabia and Vietnam first established official diplomatic relations in October 1999.1 This formalization of diplomatic ties - Saudi Arabia was the last among the Gulf States to do so - was largely enabled by the changing domestic circumstances within Vietnam that came about following its two-decade long process of reform, the 'Doi Moi', first launched in 1986. These reforms have enabled Vietnam to become one of Asia's fastest growing economies, while facilitating the normalization of Hanoi's status within the international community by the mid-1990s. While trade has been nearly non existent between the two sides, particularly given Vietnam's relative self-sufficiency in energy, Saudi and Vietnamese officials were from the very outset extremely optimistic about the future of bilateral ties.2 In 2000, an agreement for the avoidance of double taxation and the prevention of tax evasion was explored by both parties3 beside s the possibility of importing Vietnamese labor to the Kingdom.4

Reflecting the 'Looking East' policy of King Abdullah's reign, and coinciding with his visits to China and India, the year 2006 constituted an important milestone for the development of Saudi-Vietnam bilateral ties. A major delegation of Saudi businessmen, led by the Minister of State for Foreign Affairs Nizar bin Obaid Madani, visited Vietnam in May of that year and signed a framework agreement on economic, industrial, investment, and technical cooperation.5 A Vietnamese embassy was inaugurated in the Kingdom, following the signing of a preliminary agreement regarding the entry of Vietnamese labor into the Saudi market. The Kingdom was the first GCC country to sign such an agreement.6 It should be noted that, in 2006, bilateral trade stood at $139 million with an estimated 500 Vietnamese working in Saudi Arabia.7 Subsequently, Saudi interest in Vietnam as a po tential area of investment grew, albeit gradually. According! to one news report, Saudi FDI into Vietnam reached $200 million by 2007, including two factories built by Al-Zamil Steel Co. (exceeding $100 million by 2010)8 and a $65 million project by the Kingdom Holding Company to build several luxury hotels and resorts in the city of Da Nang.9

In April 2010, marking another major milestone in the relationship, Vietnamese President Nguyen Minh Triest went on a three-day visit to Saudi Arabia promoting an expanded and deepened "strategic" relationship with the Kingdom, particularly in the areas of infrastructure development, financing, and industry, and alleviating any existing challenges or hurdles.10 During talks with King Abdullah, both sides pledged to raise bilateral trade to $1 billion over the next few years - up from $744 million in 2010 and $455 million in 2009 - but reached their goal just a year later with bilateral trade touching $1.05 billion.11 Moreover, the two sides agre ed to speed up negotiations on a potential ASEAN-GCC FTA to bolster trade.12 Several agreements of significance were also concluded during the trip, including an agreement on the avoidance of double taxation, an agreement on agriculture, livestock and fishery cooperation, and a cooperation agreement between the Vietnam Chamber of Commerce and Industry and the Council of Saudi Chambers of Commerce and Industry (initiating several 'trade missions' and delegations over the years).13 In addition, a protocol on oil, gas, and mineral cooperation was signed, extending Saudi assistance (via Aramco) to the Vietnam National Oil and Gas Group (PVN), Petrolimex, and the Vietnam National Coal and Mineral Industry Group in their efforts to implement petrochemical and power generation projects across the country.14 It should be noted that although Vietnam is a net exporter of oil, it imports the majority of its petrochemical products (plastic materials, liq uefied gas, animal feed, fertilizers, etc.,) which make up the bulk o! f its imports from Saudi Arabia (roughly $600 million out of 2010's $744 million).15 Satisfying local demand has been a priority for the government, which has sought to address this via a number of projects including the enhancement of the Dung Quat refinery's (140,000 bbl/d) ability to handle crude oil from other regions such as the Middle East and building an additional two refineries in Nghi Son and Long Son, with a targeted total capacity of 200,000 bbl/d by 2017.16

Saudi Arabia also pledged to increase its development assistance to Vietnam, both through a $50 million soft loan granted on an annual basis17 and through a variety of projects overseen by the Saudi Fund for Development including preferential credits to help develop infrastructure and transportation networks in the interior, equipping medical facilities in the rural countryside, and providing vocational training (potentially connected to cultivating a suitable workforce capable of working in the Kingdom,) totaling, by 2013, an estimated $85 million.18

As of 2013, bilateral trade stood at $1.71 billion, with Vietnamese exports making up $471 million.19 The main articles of trade from Vietnam are agricultural (coffee, tea, pepper, cashewnuts, etc.) and marine produce, mobile phone handsets, garments, and machines among others, while Saudi exports mainly constitute plastic materials, liquefied gas, and other petrochemical/chemical products.20

While estimates vary, there are currently 15,000 to 20,000 Vietnamese workers in the Kingdom, an increase that can be attributed to Saudi Arabia's efforts to find alternative sources of labor given its ongoing disputes with a number of Southeast Asian countries.21 This is clear from recent Saudi efforts to bring in Vietnamese for housekeeping and domestic service purposes.22 The Vietnamese government also appears to be interested in sen ding its recent graduates and nurses abroad, imitating the models alr! eady followed by Thailand and the Philippines.23 An Investment Protection Agreement was signed in 2012. Besides, negotiations on possible visa exemptions for diplomats and businessmen, as well as agreements on encouraging investment and air transportation, are ongoing (there are already two Saudi Airlines freighter flights per week to Ho Chi Min City).24

There is very little information on Saudi Arabia's contacts with Vietnamese Muslims, who are estimated to be around 70,000 to 80,000-strong.25 In the 1990s and 2000s, Saudi funding was received by sections of the community, although it appears to be dwarfed by Malaysia's and Indonesia's contributions. Reportedly, Vietnam's largest mosque Xuan Loc in Dong Nai province was built partially through Saudi donations.26  More recently, in 2012, Saudi Arabia - through the Ministry of Islamic Affairs - has reached out to Muslim representatives in the country.27 There is no data on the number of Vietnamese pilgrims going to Makkah annually. According to one report, however, nearly 100 Muslims made the trip annually prior to re-unification in 1975.28 Since then, anti-religious policies instituted by Hanoi and the general impoverishment of the Muslim community have worked to effectively halt Muslim pilgrimage. Vietnamese pilgrims have been invited by Saudi Arabia to do the Haj at the King's expense.29

Saudi-Vietnam bilateral relations have much potential for growth, particularly given Vietnam's economic trajectory as a rapidly industrializing country. Bilateral trade will thus likely continue to grow, although it must be noted that a number of challenges and hurdles exist, including the absence of direct air routes, unfamiliarity about the other country among the two business communities, fluctuating exchange rates, and the cultural limitations caused by the lack of a common language.30 This may chang e as the significance of the market grows as a source of labor and ch! eap imports (hand in hand with the general industrial shift from China's industrial centers to Southeast Asian countries). A closer relationship would be facilitated by laying down the necessary infrastructure for more sustained trade (i.e., creating more air routes of entry for Saudi citizens, addressing visa issues, etc.) as well as expanding Saudi interaction with the local Cham Muslim communities who can play - given sustained support - an important role as potential middlemen in ways akin to those played by other Muslim minorities in neighboring states.

(Mohammed Al-Sudairi is a Researcher with the Gulf Research Center)


Copyright 2007