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Transition from development cooperation to trade with Vietnam

In recent decades, Vietnam has developed and become significantly more prosperous. It became a lower middle-income country in 2010. The bilateral development cooperation programmes between Finland and Vietnam will end in 2018 and the transition to trade and economic cooperation and bilateral trade is ongoing.

Transition strategy in Vietnam:

pdfCooperation between Finland and Vietnam 2016-2020

Vietnam has succeeded in significantly reducing poverty. The number of Vietnamese living in extreme poverty has decreased to approximately three per cent. In the early 1990s it was over 50 per cent.  Nowadays poverty is concentrated in remote rural areas, while people living in urban areas have considerably higher income levels.

Hai Phong, photo: Juho Paavola/MFA
Finland’s long-term development cooperation in Vietnam helped in that a Finnish company got the bridge construction contract in Haiphong. Photo: Juho Paavola/MFA

Rapid economic development and urbanisation have also created problems. The Vietnamese are concerned about air and water pollution, inadequate waste treatment and food safety. Adaptation to climate change is a crucial issue in Vietnam, which is one of the countries most affected by climate change in the world.

Commercial cooperation

The Vietnamese economy has grown rapidly in recent years.  In 2016, gross domestic product grew six per cent and over 100,000 new companies were registered in the country. Vietnam has opened up rapidly to international trade: in recent years, the value of foreign investments has tripled in comparison to official development aid.

Finnish companies have become more interested in Vietnam. The new businesses mainly operate in the information technology sector. Around 120 Finnish companies operate in Vietnam, of which around one third have set up a business in the country or have permanent operations there.

The relations developed through development cooperation have been useful in projects such as bridge construction, and commercial projects are also underway in the water sector.  Cooperation based on freshwater fishing has created opportunities for businesses in the sector in Finland, such as those producing fish feed.

During the transition period, Finland will promote business cooperation in the following areas in particular:

- water
- forestry
- science, technology and innovation
- energy and clean solutions
- education

Cooperation will focus on solutions that are economically and environmentally sustainable.

UPM Raflatac, photo: Juho Paavola/MFA
About forty Finnish companies have established business operations in Vietnam. Photo is from UPM Raflatac industrial plant. Photo: Juho Paavola/MFA

Results

Cooperation between Finland and Vietnam in the water sector began in the mid-1980s in Hanoi, and in the 1990s in Haiphong. Thanks to the development cooperation, millions of people now have clean drinking water, known in Hanoi as ‘Finnish water’.

Since 2004, the water supply, sewerage and wastewater treatment have been developed in 25 small towns in northern Vietnam.  As a result of these projects, 150,000 people in these towns now have tap water and almost 10,000 homes are connected to the public sewerage system.

The management of Vietnam’s forest resources and the availability of data on forests have improved. As a result of the forest data system project FORMIS II (2013-2018), a nationwide forest data system has been developed, based on open code, which the Vietnamese forest administration uses for its monitoring, decision-making and reporting.

The expertise and skills for developing Vietnam’s innovation system have improved. The Innovation Partnership Programme IPP II (2014–2018) supporting the development of Vietnam’s innovation system has improved training in entrepreneurship and innovation and support for growth companies. It has strengthened the main national, local and international networks, strengthening innovation. The programme has also increased cooperation between the state administration, research institutes, business accelerators and others developing the ecosystem, as well as between businesses.

 Risk management

Vietnam is a relatively stable operating environment. However, cooperation still runs the risks of corruption and poor governance. Civic and political rights are restricted in Vietnam.

Risk management requires that processes are continuously monitored and enforced, including field and extra audits. The risk assessment and preparedness measures are updated regularly.

Finland has promoted administrative transparency and the availability of information in its projects. Any problems are raised in discussions with the country’s administration.

Finland's support

Finland plans to support Vietnam with a total of some EUR 5.4 million from development cooperation funds in 2017–2018. In 2017–2018, Finland also supported the development of Vietnam’s water, energy and meteorology sectors, through projects funded through mixed credits.

The FORMIS II forest data system development project supports Vietnam’s forest administration, particularly with regard to processes for managing forest resources. The project focuses on the quality, availability and transparency of data. Finland’s support in 2013–2018 amounts to EUR 9.7 million.

The Innovation Partnership Programme IPP II (2014–2018) supports the implementation of Vietnam’s science and technology policy and innovation activity in the private sector. Finland’s support for the programme in 2014–2018 is EUR 9.9 million.

In addition to the bilateral cooperation, Finland has channelled concessional credits for use in the development of public infrastructure in Vietnam. In 2016, the total value to Finnish companies of projects based on concessional credits was 56.5 million euros.

Finland is also supporting a regional energy and environment partnership programme (EEP Mekong), covering five countries in the Mekong region with just under three million euros. The programme aims to increase the proportion of energy in the Mekong River countries produced using clean energy solutions.

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