Australia and Vietnam have forged a robust and multifaceted relationship over the years, marked by mutual respect, shared interests, and strategic cooperation. On 07 March 2024, this partnership reached a significant milestone with the elevation to a Comprehensive Strategic Partnership, underscoring the depth and breadth of ties between the two nations.

Mutual Partnership

Vietnam and Australia have shared strong bilateral relations in terms of history. Ever since the establishment of diplomatic relations in 1973, both countries have built a robust and broad relationship with the foundation of trust and deep understanding.

During the initial phases of the COVID-19 pandemic, Canberra emerged as Hanoi’s second-largest foreign donor, generously contributing 26.4 million vaccine doses. Additionally, Australia has extended substantial Official Development Assistance (ODA) to Vietnam, supporting critical areas such as human resource development, infrastructure, public health enhancement, and Vietnam’s participation in UN peacekeeping missions. These tangible examples underscore the robust bilateral ties between the two countries and highlight Australia’s genuine commitment to its relationship with Vietnam. Socially, Vietnamese Australians constitute the sixth-largest migrant community in Australia. Additionally, nearly 17,000 Vietnamese international students are enrolled in Australian educational and training institutions. The Vietnamese alumni, having graduated from Australian universities and subsequently returned to Vietnam for work, have forged a robust and meaningful connection between the two nations and their peoples.

Trade and Investment

Australia and Vietnam enjoy a dynamic economic partnership characterized by rapid growth in trade and investment. In the financial year 2022/23, bilateral trade surged to $25.7 billion, reflecting a substantial increase of 75% from 2020. Vietnam's vibrant economy, with a GDP growth rate exceeding 8% in 2022 and surpasses 5% in the first half of 2024, presents significant opportunities for Australian exporters. Key export sectors include energy, dairy, meat, grains, and professional services, driven by Vietnam's expanding middle class and demand for quality imports.

Enhanced Economic Engagement Strategy, launched in November 2021, outlines a strategic roadmap to elevate bilateral economic ties, aiming to establish both countries among each other's top ten trading partners and double two-way investment. This streamlined approach underscores the commitment to leveraging economic synergies and fostering sustainable growth.

In the ASEAN region, Vietnam ranked as the second economy for goods export to Australia, accounting for more than two percent of the total value in 2023. In which, there are two outstanding categories, being coal and cotton. For cotton, Vietnam is now Australia’s largest export market, accounting for 40% of Australia’s total exports. In addition, Australia also accounts for nearly 40% of Vietnam’s cotton imports. The growth of trade from Australia to Vietnam is also demonstrated in food sector, with $170 worth of million dollars of Australian beef and $206 worth of million Australian live cattle to Vietnam. Besides beef, Vietnam also imports from Australia products such as coal, iron ore, cotton, wheat, metals, vegetables, and others.

From Vietnam’s side, in the first quarter of 2024, many of the nation’s key products made their ways to Australia, with one outstanding element being coffee. As provided by the General Department of Customs, in the first two months of this year, turnover from Vietnamese coffee exports increased approximately 1.5 times over the same period as recorded in 2023, reaching $7.57 million and ranked as highest level in the past four years. Considerably, during the first 5 months of 2024, the key export products of Vietnam (machineries and equipment, phones and components, crude oil, computer, electronic products and components, textile) also witnessed a strong growth as well.

Education and Innovation

Australia is a preferred destination for Vietnamese students seeking quality education, with over 38,000 students enrolled in 2023. Collaborative initiatives in education and innovation, including the New Colombo Plan scholarships and the establishment of the Vietnam-Australia Centre, facilitate knowledge exchange and capacity building. These initiatives strengthen institutional links and support Vietnam's development goals by harnessing Australian expertise in areas such as digital transformation and vocational training.

Investment trends

Over the last few years, Vietnam’s Foreign Direct Investment (FDI) landscape is positioned for robust expansion, offering numerous opportunities across various sectors. Notably, the technology, renewable energy, healthcare, banking, and real estate sectors stand out. Investor-friendly policies, combined with tax incentives, create an appealing environment for foreign investors. Moreover, emerging industrial hubs beyond Hanoi and Ho Chi Minh City enhance Vietnam’s allure as a destination for those seeking sustainable long-term growth prospects.

Based on data from the Foreign Investment Agency (under the Ministry of Planning and Investment), Australian businesses currently have 631 valid projects in Vietnam, with a total registered capital of $2.037 billion (accumulated as of February 22, 2024). To be specific, 18 industries and fields that Australian investors place their focus on are processing and manufacturing industry; Accommodation and food services; Agriculture, forestry and fisheries; health and social assistance activities; extractive; arts, recreation and entertainment; education and training; professional and scientific and technological activities; real estate business; wholesale and retail, car and motorbike repair. These sectors represent the diverse interests and contributions of Australian businesses in Vietnam.

Investment are scattered throughout Vietnam, about forty-five provinces and cities have successfully attracted Australian FDI projects, including Ba Ria - Vung Tau being the top province with 16 projects with total capital of nearly $400 million. Ho Chi Minh city also is one of the ideal place for investment from Australia with more than 300 projects and a total registered capital of $231.12 million.

Looking Ahead

Comprehensive Strategic Partnership will also involve an annual dialogue on minerals.

As Australia and Vietnam navigate the complexities of a changing global landscape, their cooperation stands as a testament to shared values and aspirations. With a focus on sustainable development, innovation, and regional cooperation, both nations are poised to chart a course towards a future marked by prosperity and mutual benefit.

Australia and Vietnam are well-positioned to harness their respective strengths and navigate future challenges together, ensuring a stable and prosperous Indo-Pacific region.

Authors: Vaibhav Saxena, Foreign Counsel and Quang Anh Nguyen, Associate