ITC impact: Mekong (en)

A South-South trade promotion project by ITC and the Organisation internationale de la Francophonie (OIF) contributed to a sharp rise in trade between 14 African nations and three Mekong countries, recent trade data show.

Data provided by Viet Nam’s Ministry of Industry and Trade indicate that trade between the eight countries of the West African Economic and Monetary Union (UEMOA) and Viet Nam rose fivefold to US$935.2 million in 2013, compared with US$180 million in 2007. Trade between the six countries of the Economic and Monetary Community of Central Africa (CEMAC) and Viet Nam increased more than fourfold to US$309.5 million in 2012, compared with US$65 million in 2007.

Contracts that ITC has facilitated over the last six years have amounted to at least US$160 million in the cashew nut, rice and cotton sectors. ITC has also facilitated the transfer of cashew processing machinery from Viet Nam to Côte d’Ivoire.

Headline numbers may be just the start of a thriving South-South partnership. ITC’s trade flow analysis indicates the potential business partnership between the regions may be closer to US$5 billion.

‘Businesses of Viet Nam and of the CEMAC and UEMOA countries participated actively in numerous activities organized by ITC and OIF,’ said Le Duong Quang, Viet Nam’s Vice Minister of Industry and Trade. ‘The cooperation between Viet Nam and CEMAC and UEMOA is developing not just in trade, but also in investment.’

‘Achievements in 2013 include the conclusion of technology transfer agreements in the cashew nut sector from Viet Nam to Burkina Faso, and the establishment of direct cooperation between banks in the two regions, which will significantly reduce transaction times and costs,’ said Ben Mohamed Imamo, Senior Programme Officer at ITC.

OIF approached ITC in 2007 to set up a project to expand intra- and inter-regional trade between CEMAC, UEMOA and the three francophone countries of the Mekong region – Cambodia, the Lao People’s Democratic Republic and Viet Nam. The project began in 2008 and concluded with an agribusiness forum in Ho Chi Minh City, Viet Nam, in January 2014 and an interbank partnership meeting in June 2014.

Based on surveys by ITC, stakeholders prioritized agribusiness, textiles and clothing, and wood as sectors with the highest potential. Cotton is an export product for eight of the 14 African countries that comprise the two regional economic communities, while Viet Nam is one of South-East Asia’s major exporters of wood furniture.

Results of the project were almost immediate:

• In 2008, the trade mission to Guinea-Bissau of Vietnamese importers of cashew nut resulted in a letter of intent for Viet Nam to import 35,000 tons of raw cashew nuts over three to four years.
• In 2008, a rice buyer-seller meeting in Ho Chi Minh City resulted in US$29 million of Vietnamese rice being imported by companies in CEMAC and UEMOA.
• In 2009, US$110 million in business deals and medium-term contracts were generated for exporting cotton from Benin, Burkina Faso, Senegal and Togo to Viet Nam.
• In 2012, US$4.95 million in trade in cashew nuts was generated between Guinea-Bissau and Viet Nam.
• In 2012, US$5.5 million in business deals and US$16.1 million in short- and mediumterm export orders were generated for Cameroon, the Republic of the Congo and Gabon. In Benin, 80% of the cashew-processing machinery now comes from Viet Nam.
• In 2014, an agribusiness forum organized in Ho Chi Minh City resulted in business deals worth US$9 million to export raw cashew nuts from Benin to Viet Nam.

Furthermore, two companies in the two countries have signed a joint-venture agreement to facilitate the transfer of cashew-processing technology from Viet Nam to Benin with an investment of €12.9 million.

Business links, investment and banking

‘Five years ago, Viet Nam was not a known country for Africans. Since 2008, OIF and ITC have facilitated business links between Viet Nam and Africa. This will pick up and this will be for the long term,’ said Guillaume Razack Ishola Kinninnon, General Manager of SWCM, a food processing and manufacturing company in Benin.

Kinninnon said that one problem often encountered by exporters from both regions is that letters of credit have to be confirmed by a European bank, which causes delays and additional costs. As part of ITC’s methodology to promote South-South trade, it facilitated direct interbank cooperation between the Vietnam Joint Stock Commercial Bank for Industry and Trade and banks in the Republic of the Congo, Guinea-Bissau and Togo in 2013.

‘[We hope] that our Viet Nam-ITC cooperation develops even more in the future,’ said Tran Quang Huy, Director of the African, West and South Asian Market Department of the Ministry of Industry and Trade, Viet Nam.