Vietnam and Australia trade have been on an upward trajectory with the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) further adding and cementing bilateral trade between both countries. With Australia-China trade relations hit by political tensions, Vietnam has become increasingly favorable for Australian investors. Vietnam Briefing highlights the growing trade between both countries and opportunities for investment.
Since Vietnam and Australia first established their diplomatic relations in 2018, the relationship has grown from defense cooperation to a strategic one. As of May 2022, both countries are among the top 12 trading partners for each other, with Australia being among the top official development assistance (ODA) donor countries, and accounting for a large number of overseas Vietnamese students.
Vietnam and Australia are both members of at least three free trade agreements (FTAs), namely the ASEAN-Australia-New Zealand Free Trade Area (AANZFTA), the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), and the Regional Economic Comprehensive Economic Partnership (RCEP).
Additionally, the two economies are highly complementary. Australia is a reliable supplier of services and raw materials that Vietnam’s exporters require, and Australian consumers enjoy Vietnam’s high-quality products in their homes and workplaces.
The CPTPP has first worked to boost a two-way trade as it brings tax breaks and regulatory incentives. According to data from the General Statistics Office (GSO) of Vietnam, last year, two-way trade between Vietnam and Australia hit US$12.4 billion for the first time, up more than 49 percent compared with that of 2020, making Vietnam the 12th largest partner of Australia and Australia the 10th biggest of Vietnam. The value of shipments to Australia also reached more than US$4.45 billion, a year-on-year increase of 23 percent.
Vietnam’s exports to Australia have been growing, reaching US$1.38 billion in the first quarter of 2022, an increase of 32.36 percent against the same period last year.
Sharp increases were seen in Vietnam’s export of various agricultural and industrial products to Australia, with 84 percent up for coffee, 51 percent up for aquatic products, 41 percent up in rubber, and 26 percent up in the electric cable. Notably, the shipments of iron and steel skyrocketed by more than 500 percent year on year.
In 2021, Vietnam spent nearly US$8 billion in importing goods from Australia, up nearly 70 percent from that of 2020. Specifically, the country is buying more essential materials from Australia, such as coal, iron ore, metals, cotton, wheat, and animal feed. In particular, Vietnam’s import value of coal from Australia in Q1 surged 176 percent year on year and that of cotton shot up 333 percent.
By the end of 2021, there were about 550 Australian investment projects in Vietnam with a total value of nearly US$2 billion, ranking 19th among foreign investors in the country.
However, such a performance is yet to match the full potential of the bilateral trade between the two countries considering that Australia is the 15th biggest FDI investor in the world and Vietnam among the top 20 FDI destinations globally in 2020.
In addition, given the three common FTAs with Vietnam, Australia only ranks 19th among foreign investors in Vietnam, still behind other partners who are yet to have an FTA with Vietnam such as Taiwan or Switzerland.