13 Nov 2015

PM heads to Vietnam to talk trade

4:56 pm on 13 November 2015

Trade and security are top of the agenda for the Prime Minister as he heads to South East Asia.

Two way trade with Vietnam was at $1.1b in the June year and the government wants to double that by 2020.

Two way trade with Vietnam was at $1.1b in the June year and the government wants to double that by 2020. Photo: 123RF

John Key leads a business delegation to Vietnam this weekend, before heading to the annual APEC meeting in the Philippines and East Asia Summit in Malaysia.

Trade with Vietnam has grown rapidly in the last six years, making it the country's 19th largest partner, and New Zealand's fastest growing market in South East Asia.

Two way trade stood at $1.1 billion in the June year, with dairy, wood and education services dominating exports, and the government wants to double that by 2020.

With about 2000 Vietnamese studying here and a number of institutions establishing joint programmes in Vietnam, Economic Development Minister Steven Joyce, who will accompany Mr Key in Vietnam, said education was a key priority.

"We've got some good opportunities with the Vietnamese which I identified on my last trip. There's now a strategic partnership plan which will help some of our universities get very good access into the Vietnamese market, which is great."

300714. Photo Diego Opatowski / RNZ. Steven Joyce  during a press conference regarding Novopay next steps.

Steven Joyce Photo: RNZ / Diego Opatowski

Aviation is also a focus, ranging from air traffic control to training.

While China dominates business thinking, Vietnam born and New Zealand based, Khoa Nguyen, who runs Viet River Holdings and is on the Asean New Zealand Business Council, said firms should not dismiss Vietnam.

He said two thirds of its 91 million population were under 30.

"Vietnam is a perfect fit for New Zealand business. If you've been to Vietnam now, they are well-educated, a younger generation which exports to the rest of the world."

It's also cheaper and easier to do business there.

Wages in China's coastal cities are four times more expensive than Vietnam, prompting many firms to shift their operations to Hanoi, Da Nang or Ho Chi Minh City.

Certainly, Vietnam's position in in the global supply chain is growing.

Air New Zealand announced it will begin flying direct to Ho Chi Minh City next year, due to strong demand.

But Khoa Nguyen warns that building relationships can take time, and New Zealand firms should proceed carefully.

"It's got 90 million people. [Firms] need to pick and choose. They need to be in there for the long haul, not for quick runs. I think that's a common mistake I see when New Zealand businesses go to Vietnam. They say big market, so I can make big bucks. And they fail miserably."

The relationship between the two countries has flourished in recent years.

Air New Zealand plans flying direct to Ho Chi Minh City next year.

Air New Zealand plans flying direct to Ho Chi Minh City next year. Photo: 123RF

Since 2012, there's been 11 high level visits between the two countries covering trade, defence, tertiary education and food safety.

A senior adviser international at AUT University Chris Hawley said the Vietnamese were a fiercely independent people, a trait they saw in New Zealand.

"I can remember the first time I visited Hanoi in about 1989, talking to people in government there. That's before we had an embassy.

"One of the first things I was told was 'New Zealand, you're the country that stood up to the United States over the nuclear issue. We admire you for that.' That's the sort of thing that appeals to Vietnamese people."

Security is also likely to be discussed.

Vietnam disputes the claims of its neighbour and sometimes rival China over the South China sea, which has turned violent in the past.

China is New Zealand's largest trading partner, but Chris Hawley said this country's burgeoning relationship with Vietnam should not jeopardise that.

He said New Zealand had consistently sought a peaceful resolution over the territorial disputes in the region, and for the rule of law to be upheld.

"We have to be careful because things could change in the future with disputes in the South China Sea. But I think New Zealand has the skill and ability to manage these relationships quite well, and play that neutral role by being friendly and working with both countries."

Mr Key will head to Manila for the APEC summit on Tuesday, and then on to the East Asia Summit, where territorial disputes are likely to feature heavily.