VietNamNet Bridge – Auto manufacturers of Russia and Belarus are expected to join hands with Vietnamese partners to form joint ventures to manufacture and assemble trucks and other vehicles in this market.

Recent deals between competent agencies of Vietnam, Russia and Belarus will pave the way for establishment of such joint ventures in Vietnam.

According to the European Market Department under the Ministry of Industry and Trade, the three nations have concluded negotiations over bilateral cooperation agreements on auto manufacture and assembly.

After around half a year of talks as instructed by the Government and the Ministry of Industry and Trade, the working group of Vietnam set up last August reached deals with the Russian and Belarusian sides. Chief negotiators initialed the Vietnam-Russia protocol in Moscow on January 15 and the Vietnam-Belarus protocol in Minsk on January 20.

Each party then starts to carry out internal procedures so that the protocols can be officially signed, hopefully in late February or early March, the ministry said on its website.

Such protocols contain terms about support for prioritized investment projects specified in the free trade agreement (FTA) between Vietnam and the Eurasia Economic Union (EAEU) whose member states include Russia and Belarus.

Both the Russian and Belarusian teams announced to accelerate procedures to have the Vietnam-EAEU FTA ratified so that the trade pact and the protocols can come into force at the same time.

Under such protocols, Russian and Belarusian auto manufacturers of KAMAZ, GAZ, UAZ and MAZ trucks and Vietnamese partners will set up joint ventures to manufacture and assemble vehicles of ten seats or more, and terrain and some specialized vehicles.

The parties concerned pledge vehicle assembly in Vietnam will observe the Prime Minister’s Decision 1211/QD-TTg dated July 24, 2014 on the development strategy for Vietnam’s auto industry until 2020 with a vision towards 2030.

Under the decision, the local content ratios of special-purpose vehicles, trucks and terrain vehicles, and over-ten-seat autos will be 25%, 30% and 35% in 2020 respectively. Such proportions are expected to rise to 40%, 45% and 45% in 2025.

However, Belarus commits higher localization percentages of 40% in 2020 and 60% in 2026.

In addition to the domestic market, joint ventures will export vehicles to third countries, particularly in Southeast Asia, as vehicles made in Vietnam with a localization ratio of 40% or higher can enjoy tax exemptions when they are exported to ASEAN markets.

To realize the targets, joint ventures will be allowed to import completely built-up (CBU) vehicles into Vietnam at zero tariffs for sale to sound out the market and have import tariffs on auto parts exempted in five years, before such tariffs in the FTA between Vietnam and the EAEU are cut to 0%.

However, to benefit from such tax incentives, joint ventures will need to meet specific requirements in the protocols and comply with technical standards of Vietnam.

Russian and Belarusian partners should prepare specific plans to transfer technology, contribute to the development of Vietnam’s component production and supporting industries, training Vietnamese technicians, support auto and component exports and help joint ventures trade vehicles and components they manufacture in the ASEAN markets.

Quoc Hung

SGT