How the Russia-Ukraine conflict is affecting Vietnamese business

When the Russia-Ukraine conflict unfolds and a month passes, the Vietnam briefing looks at the impact of the conflict on Vietnam as well as the country’s business. While it is still too early to determine the long-term effects, we examine the short-term effects that will play a key role in how the economy moves forward.

The Russia-Ukraine conflict, which began on February 24, sent shockwaves through global markets and led to an unprecedented response from countries around the world in the form of economic sanctions and other sanctions. In doing so, the West and its allies are sending a clear signal that they want to isolate Russia politically by isolating Russia from the global financial system.

Russia-Ukraine could have limited direct consequences on Vietnam

Although analysts say the impact of the Russia-Ukraine conflict on Vietnam may be limited to direct consequences, the conflict could have significant consequences for Vietnam’s trade and commerce. From disrupting trade and global supply chains to creating geopolitical tensions, we discuss the effects that can be felt by businesses operating in Vietnam.

Neutral position of Vietnam

Vietnam has maintained a neutral position, refusing to directly condemn or pardon Russia’s actions, and has called for a peaceful and diplomatic solution to the conflict.

Nevertheless, due to the sanctions imposed on Russia and the subsequent indirect consequences, Vietnamese businesses are bound to be stuck in cross-hair.

Businesses engaged in direct trade with Russia, Ukraine and Belarus will experience the most immediate effects of the conflict. Ukraine is now largely closed for trade and commerce, and only essential goods and supplies are entering the country through the Polish border.

Transportation costs are rising

Vietnam-based businesses are already facing trade challenges with Russia and Ukraine. Several businesses have complained that transportation costs have risen due to the exclusion of Russian banks from the leading international payment system SWIFT.

Also, businesses are facing supply chain problems caused by the epidemic. Vietnam is a major manufacturer of smartphones. Although the US has not yet imposed restrictions on imports and exports between Vietnam and Russia (excluding high-tech products using US machinery and technology), disruption of the raw materials used to make smartphones could affect Vietnam’s smartphone manufacturing industry unless alternative plans are made. Implemented

In particular, it is becoming increasingly difficult to obtain inputs from wood processing industries that rely on timber imported from Russia and Ukraine.

Vietnam has also faced inflation which could only be exacerbated by rising oil and gas prices. According to Dragon Capital, Vietnam has imported about 1.5 1.5 billion worth of fertilizer, iron, steel, coal and agricultural products from Russia and Ukraine in recent years. Although Vietnam has exported about US $ 2.4 billion for mobile phones, garments and textiles and electronics.

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This article was first produced by VietnamBriefing which is produced by Dejan Veins & Associates. The company supports foreign investors across Asia from the office Around the worldIncluding China, Hong Kong, Vietnam, Singapore, IndiaAnd Russia. Readers can write [email protected]

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