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Seeking to Narrow Trade Deficit with Thailand

Posted: Thursday, September 28, 2017

Vietnam runs a trade deficit with Thailand of US$3.5 billion in the first eight months of 2017, 15 per cent higher than Vietnam's export value to the Southeast Asian country. Reducing trade deficit with Thailand is always a hard nut to crack for Vietnamese companies against the backdrop of deeper and broader international integration.

Rising trade deficit
According to the Ministry of Industry and Trade of Vietnam, the two-way trade value between Vietnam and Thailand was estimated at US$9.64 billion in the first eight months of 2017, of which Vietnam took US$3.07 billion and Thailand earned US$6.57 billion. Vietnam’s trade deficit with Thailand rose 15.6 per cent from a year earlier in the first eight months.

Vietnam’s five top imports from Thailand in the reviewed period included electrical household appliances (US$646 million), vegetables and fruits (US$618 million), motor vehicles (US$432 million), petroleum products (US$406 million), plastic materials (US$403 million) and auto parts (US$340 million).

In 2016, the total value of the four biggest imports - household appliances, automotive parts, automobiles, and vegetables and fruits - accounted for 30 per cent of Vietnam’s total import value from Thailand.

Vietnam’s spending on Thai fruits and vegetables reached US$618 million in the first eight months of 2017, while the value in 2016 was just US$410 million, accounting for 44.3 per cent of Vietnam's spending on imported fruits and vegetables and 10 times higher than its earnings from fruit and vegetable exports to Thailand in the year. Vietnam mainly imported beans, mushrooms, durians, strawberries, rambutans, jellyfish, longan, mangosteens, jackfruits, plum, apricot, mango, guava, orange, coconut and cashew nuts from Thailand. Meanwhile, Thailand has licensed import of dragon fruits, litchi and longan from Vietnam.

Seeking the cause
The widening trade deficit with Thailand is resulted from rising imports of electrical goods, electronic consumer goods, fruits and vegetables, computers, plastic products, iron and steel, household appliances such as detergents, cosmetics, kitchen utensils and interior products although Vietnam can make these. In addition, Vietnamese consumers are still keen on Thai goods because of their prices, designs and quality.

With many tariffs slashed according to the ASEAN Trade in Goods Agreement (ATIGA), many imports from Thailand are subject to preferential tariff rates under ATIGA commitments. So far, Vietnam has abolished import tariffs on approximately 90 per cent of its total tariff lines and will remove tariffs on 98 per cent of tariff lines by 2018.

Thailand established a solid distribution channel in Vietnam and it is expanding it. Thai leading retailers such as Central Group and TCC Group have acquired retail chains in Vietnam for the past few years and continue to expand them in the country.

The Government of Thailand has allocated a big budget for large-scale effective trade promotion activities in the Vietnamese market over time. Every year, 12 - 20 Thai trade fairs are organised by the Thai Ministry of Commerce (Department of Export Promotion - DEP), the Thai Business Association as well as Vietnamese private companies in Hanoi, Ho Chi Minh City and other localities in Vietnam with a scale of 100 - 300 booths each fair.

One of important reasons leading to the sharp rise in Vietnam’s imports from Thailand is the latter’s investment expansion in Vietnam. Thai investors import more goods for their production and business operations in Vietnam. On the other hand, many consumer goods were previously imported from China but they are now imported from Thailand because Vietnamese consumers favour Thai goods over Chinese ones, and they are entitled preferential taxes according the ATIGA Agreement.

Adopting solutions
To win the trust of domestic consumers and assert product quality, Vietnamese companies need to invest in improving their production capacity, turn out products and services that meet quality and design demands of customers, while prices must be competitive enough against Thai rivals.

Relevant agencies such as the Ministry of Agriculture and Rural Development, the Ministry of Science and Technology and the Ministry of Finance must carry out solutions within their jurisdiction and work closely with the Ministry of Industry and Trade to have effective measures to promote exports to Thailand and fill the trade gap with the neighbouring nation.

The Ministry of Industry and Trade will continue to implement import control measures in accordance with the law to make sure that products imported from Thailand meet food hygiene and safety standards, technical standards and environmental standards among others. It will ask supermarket systems owned by Thai companies to introduce more Vietnamese goods to Thai retailers like Thai Central Group and Thai TCC Group to launch more Vietnam Goods Weeks and Vietnam Goods Marketing Connectivity Fairs.

It is suggested that technical barriers should be erected to restrict imports. However, according to Minister of Industry and Trade Tran Tuan Anh, technical barriers are not employed to restrict imports, but to improve the quality of domestic products. Otherwise, we can never compete against competitors in the current context of integration.

Huong Ly

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