ASEM Business Forum Strengthening Asia-Europe Economic Ties

to Overcome the Global Financial Crisis and BeyondHo Chi Minh City, 6 May 2009

Asia-Europe Economic Ties from the Perspective of a New EU Member State seen in Context of Hungarian – VN Cooperation

Remarks of Hungarian Ambassador László Vizi

ASEM IN ITS SECOND DECADE

Different nature of regional cooperation – norms, practices and institutions Creation of the “missing link” Three pillar set-up of ASEM Europe’s weight in global economy as largest

single market source of FDI ODA donor

and

Asia’s dynamism economies in Europe and Asia complement each other

► Successful match

GOALS, EXPECTATIONS AND ACHIEVEMENTS OF THE SECOND PILLAR

Strengthening economic ties through: promotion of trade – TFAP ( Trade Facilitation Action Plan ) improved regulatory climate for FDI – IPAP ( Investment

Promotion Action Plan ) Active involvement of private sector – AEBF ( Asia-Europe

Business Forum ) Track two – Economic cooperation and think tank initiatives

ASEM in

bilateral and multilateral framework multilateral trade order

ACHIEVEMENTS FROM DIFFERENT PERSPECTIVES

reinforcing WTO based open trading system ? handling crisis situations ? promoting greater trade and investment ?

Lack of substantial contribution in strengthening the multilateral trading system at a time when individual national economies increasingly tend to rely on bilateral free trade agreements.

Lessons from ASEM wide handling of the Asian economic and financial crisis of 1997-1999

Networking and better knowledge of mutual regimes as basic nature of ASEM and opportunity to achieve progress on country–to–country level, promote greater bilateral trade and FDI flows

IMPACT OF EU ENLARGEMENT ON INTRA-ASEM DYNAMICS – TRADE AND INVESTMENTS

EU – Enlargement of May 1, 2004and ASEM Membership expansion of October 7-9, 2004 - ASEM 5 Summit Hanoi

EU10 joins

Instead of Trade disruption and trade diversion FDI flow redirection (predicted in some forecasts)

Real trends ( 1.)

Trade creation: Overall tariff level in NMS decreased as a result of Common External Tariffs Larger markets Single set of rules and procedures in trade GSP

TRADE STATISTICS EU27 MERCHANDISE TRADE WITH ASIAN ASEM COUNTRIESVIETNAM-HUNGARY BILATERAL TRADE

2004 2005 2006 2007 2008Turnover 100 104 128 202 216Export 100 107 135 157 200Import 100 101 119 248 235

Bilateral trade turnover(Change in percentage, base 2004)

Export

0

50

100

150

200

250

2004 2005 2006 2007 2008

year

%

Turnover

0

50

100

150

200

250

year

%

Turnover 100 104 128 202 216

2004 2005 2006 2007 2008

Import

0

50

100

150

200

250

300

2004 2005 2006 2007 2008

year

%

Real Trends (2)

FDI: EU15 inflows to EU NMS (New Member States) – not at the expense of inflows to Asian ASEM

economies Expanding FDI from most developed Asian ASEM to EU NMS (membership as positive perception,

lower investment risk particularly for SMEs)

Future: Opposite direction: EU NMS FDI to some major capital importing Asian ASEM economies ? Another wave of Asian FDI to EU ?

Real Trends (3)

ASEM dynamics: benefiting from well established relations of some EU NMS in some parts of Asian ASEM ( Vietnam,

China, Laos, Cambodia, Mongolia) traditions of cooperation human capital market niche in ODA provision: experiences in transition management

IMPACT OF EU ENLARGEMENT ON INTRA-ASEM DYNAMICS –

TRADE AND INVESTMENTS – CONT.

CONTEXT OF HUNGARIAN – VIETNAMESE COOPERATION

Dynamic economic growth Business opportunities Attractive investment climate Pro business leadership Stable domestic environment New development paradigm Historical context China + 1 factor

MAIN REASONS FOR THE INTERNATIONAL INETEREST IN VIETNAM – SHARED BY HUNGARY:

Background:Traditional system of relationship, deep rootsRole of human ties

However:Reasons for lower intensity on both sides in 1990s

Basics of moving on:Change of system in HungaryDoi Moi in VietnamNew framework: Hungary’s EU and Vietnam’s ASEAN membership, their joint participation in

the ASEM processMultilateral framework enhances bilateral cooperation opportunities

Conclusion: We have found the right answers for the key question: how to transfer elements of stable value from our traditional cooperation of decades to a new period, when both domestic structures and international relations of the two countries changed basically, and the process of globalization requires new types of cooperation.

BUILDING THE RELATIONSHIP

Growing political contacts Strengthening confidence Widening contractual relations Hungary reappeared in Ho Chi Minh City through Honorary Consulate New cooperation structures (such as renewed Joint Commission on Economic

Cooperation, the Joint Business Council in both countries, the new framework of science and technology cooperation)

Through all the above:

Catching up economic relations with the level of political ties, narrowing gap The cooperation is more and more widened, many fields have direct or

indirect positive impacts on the economic interests of both sides

GENERAL TREND OF CURRENT BILATERAL RELATIONS

BILATERAL ECONOMIC RELATIONS

New swing and turning-point

Economic promotional events Appearance in media Economic focus and activities in the course of the high-level

visits Trade turnover increased dynamically in 2007 (+58%), a further

improving trend in 2008 (+26% in Hungarian export, appr. same level of import)

→ more balanced trade

NEXT STEPS

A/ Fields

Keep strengthening the market presence of various pharmaceutical products with high turnover

Products and technologies in agricultural field and food industry Cooperation in information technology, electronics, machinery,

pharmaceutical industry, etc… by applying advanced technologies and technology transfers

Take part in the infrastructure development projects from the stages of preparation, design, making pre-feasibility studies of projects, consultancy, etc… in the fields of public transportation, waste treatment, sewage treatment, environment protection, water supply, etc…

NEXT STEPS

B/ Tools

By closer company ties, strengthening Hungarian presence, including the form of joint ventures

In the context of ongoing equitization of state-owned enterprises in Vietnam, considering areas of possible and suitable Hungarian investment opportunities

Maximizing the export generating effect of the already concluded ODA (tied aid) loan agreement and of those under consideration

Promotional opportunities by the Joint Business Council Hungarian enterprises need to strengthen their appearance at

exhibitions, conferences, trade fairs in Vietnam Encouraging investments by Vietnamese companies in Hungary Mutual strengthening of tourism promotion, multi-dimensional approach

COOPERATION STRUCTURES

Joint Commission on Economic Cooperation Joint Business Council with chapters in both countries Two offices opened to represent Hungarian SMEs Economic Sub-Committee of Friendship Association Embassy:

Providing information Lobbying Consultations Proposing exchange of delegations (government and business) Supporting promotional activities with the presence of the Embassy Press conferences, PR activities

IMPACT OF THE INTERNATIONAL FINANCIAL CRISIS ON HU-VN TRADE TIES

(Change, percentage)

Economic data forecast for Hungary

IMF 2009.04.22. Hungarian Government 2009 2010 2009 2010

GDP -3,5 -0,8 GDP -5,5/-6 -0,5 Inflation 3,8 2,8 Inflation 4,5 - Current account deficit 3,9 3,4 Current account deficit 4 – 4,5 -

THE NEW GOVERNMENT MUST TACKLE ALL ELEMENTS OF THE VICIOUS CIRCLE

THE GOVERNMENT WILL USE A NUMBER OF MEASURES BEYOND THE BUDGET TO STIMULATE THE ECONOMY

CHANGES OF MACRO-ECONOMIC INDICES AS A CONSEQUENCE OF MEASURES

IMPACT ON BILATERAL RELATIONS

Chances of lower demand for Hungarian export items possible but cushioning factors

Pharmaceutical products are the main export commodity of Hungary to Vietnam (55 - 60 % of total ) with presence on the market through several decades no forecast of falling back

Consumption-led crisis management gaining ground in Asia and may create more opportunities in Vietnam as well

VN export items to Hungary – lower price category – chances of demand increase

The interest of Hungarian companies increased remarkably in the last two years, new relations between the two countries’ enterprises creating new opportunities for exchanging commodities from both sides, especially for Hungarian export at medium term

Outsourcing further increase according to international forecasts Increase of Hungarian investments expected to happen, including

equitization (although not short but rather mid or long term ODA (tied aid) loans one of the most important tools to widen our economic

cooperation, may be the most effective potential factor to help Hungarian exports in the next 3-4 years

CONCLUSION

Instead of stopping or “wait and see”

Keep in motion things we started

Fine-tuning the tools of cooperation

Minimize negative impacts caused by the financial crisis

Use opportunities newly emerging in present circumstances

Prepare capacities for the post – crisis period

Maintain contacts, communication