Domestic Firms Reclaim Top Export Growth

9:09:31 AM | 30/7/2019

Vietnam’s domestic export showed signs of slight decline in the first months of the year. However, given the tough global trade, the country’s export performance can be considered positive, illustrating great efforts of businesses, especially domestic ones.

Domestic exporters prevail

The export of domestic businesses outperformed the country in the year to date. The export value of foreign-invested firms rose only nearly 6% year on year in the first seven months of the year, accounting for 70% of the total export value, while the domestic business sector recorded a higher growth of 10.4%. The export share of domestic companies increased slightly to 30% in the first six months of 2019 from 29.1% a year ago.

Unlike the previous years, the growth momentum of the domestic sector was not driven by agricultural and aquatic shipments but by industrial products. Specifically, while agricultural and aquatic exports slipped 6.9% year on year, industrial manufactures climbed 9.1%, thus helping drive the sector’s overall growth.

The domestic business sector started to involve more in processing industries. Vietnam's exports were mainly driven by a 9.1% growth of industrial manufactures, which accounted for 83.5% of total export value. The share of processed industrials expanded from 82% in the January-June period of 2018 to 83.5% in the corresponding period in 2019.

Effective drives from FTAs

Vietnam made good use of tariff preferences offered by its FTAs ​​to expand new markets. Joining FTAs has helped reduce tariffs on Vietnamese-originated goods and sharpen their competitiveness in partner markets. In the first seven months of 2019, shipments to FTA markets grew well, rising over 9% with Japan; over 6% with South Korea and 6.5% with ASEAN.

In particular, exports to CPTPP member markets fared well in the reviewed period, proving Vietnam’s capabilities of utilizing integration commitments to promote exports and diversify markets. In the first six months of 2019, shipments to Canada and Mexico expanded 31.5% and 22.4% respectively.

Hardship remains

According to the Ministry of Industry and Trade, exports grew but remained unsustainable. The trade balance was not really stable. Export growth was easily affected by external factors such as volatile world prices, increased trade barriers and technical barriers erected by importing countries.

The quality of agricultural and aquatic products was improved but remained low to strict standards on food safety in importing markets. Overproduction and price-based competition led to disadvantages for Vietnamese companies in determining export prices and in accessing markets imposing high quality and food safety requirements.

Agricultural exports faced hardships on oversupply, falling prices, rising competition and slowing consumption. According to statistics, rice, coffee and rubber export prices declined by 15.1%, 11.7% and 6% from the same period in 2018, respectively.

To achieve the export target of 8-10% as assigned by the Government to the Ministry of Industry and Trade (equivalent to US$263 billion), Vietnam must earn an average of US$23-23.4 billion a month in the last five months of the year. This is a very hard task as the last time Vietnam recorded US$23 billion a month was August 2018. The world economy is showing signs of declining, which is not a good condition for Vietnam to accelerate exports in the remaining months of 2019.

Vietnam's agricultural exports to China encountered a lot of obstacles as this nation intensified management and traceability of imported fruits in general and watermelon in particular since May 2019. Under new rules, Chinese importers must register traceability stamps at Chinese customs authorities and affix thee stamps on import labels which include information on orchards and packing facilities. The list of gardens and packagers must be officially notified by authorities of exporting countries to Chinese counterparts.

FTAs have brought many opportunities thanks to tariff reduction and market opening. However, national competitiveness, domestic and foreign investment, supporting industrial development, infrastructure and human resources have not improved markedly to make the most of FTA benefits. Many businesses do not have the right knowledge of risk management, marketing methods in international trade and actively connect to domestic and foreign-invested enterprises.

Vietnam still ineffectively uses technical measures to manage imports, protect domestic production and defend consumer interests under WTO regulations and manage quality management of imported goods

Huong Ly