Vietnam's Haiphong Paper Co. (Hapaco) is to open a trading centre in Vladivostok because of difficulties financing potentially lucrative cross-border trades with Russia. The Vietnamese listed company has cited difficulties in opening letters of credit (L/Cs) for Russian business as one reason why it has chosen to establish a local presence in eastern Russia.

The paper producer will sell Vietnamese tissue paper into the region where it could be sold cheaper than the western Russian paper currently dominating the market. Russians will sell to Hapaco goods including high quality pulp, timber and machinery that are cheaper in Russia than in Vietnam.

As well as paper products, Hapaco is planning to sell several other types of Vietnamese goods including clothing, footwear and domestic appliances through the trading centre into the regional market.

This would give the Vietnamese company with a local credit management function a competitive advantage over other exporters to Russia who must risk open account trading terms or insist on cash up front.

According to a recent survey in International Trade Finance, around half of Russian imports are paid for on open account while the other half must pay cash in advance.

A spokesman said that while "paper production remains our core business, we believe that establishing a trading center in Russia will also contribute to our long term plans".

He said Vietnam already imports between 150,000 and 160,000 tons of pulp each year. He didn't comment on how much of that could in the future come from Russian exports.

The centre, in which Hapaco has already invested between $50,000 and $70,000, will include a 500 sq m restaurant and a 100 sq m showroom, he noted.

The spokesman said Hapaco has invested in the office because, without a local presence, it is still very difficult to do business with many parts of Russia.

He noted that it's often hard to open letters of credit - used to finance international trade - for Russian business.

"In a market where business conditions are very basic, you can't sell goods or collect money without a local office," he explained.