In 2012, export growth and successful trade deficit control were two bright spots for the economy and played important roles in boosting Vietnam's GDP growth, creating jobs, selling goods for farmers, and reducing inventories. However, behind these figures, many problems and shortcomings still exist in import and export activities, as well as in the economy itself.
Trade surplus - Incomplete joy
Exports expanded at a higher rate than imports, helping improve Vietnam’s trade balance with other countries. In 2012, Vietnam recorded a trade surplus for the first time in 20 years, reaching US$284 million.
However, Dr Nguyen Duc Thanh from Vietnam National University said that the trade surplus depends on two factors: export and import. In 2012, exports did not increase much but imports plunged dramatically. This fanned concerns because slowing growth and shrinking manufacturing resulted to import decline.
Typically, the garment and textile industry still relied on 90 per cent of imported inputs in 2012 though it had started increasing localization ratio. In an import-relying outsourcing economy, shrinking input import fuelled concerns. Production contraction in 2012 may give rise to growth stagnation in the following years.
The Ministry of Industry and Trade said foreign-invested companies enjoyed a trade surplus of US$13 billion, including crude oil, while domestic firms incurred a trade deficit of US$11.7 billion in 2012. This indicated broad market differences. Indeed, imports primarily feed FDI enterprises.
Problematic export structure
Vietnam earned US$114.63 billion from exports in 2012, up 18.3 per cent over 2011, as much as 5.3 per cent higher than the initial target. Key exports rose in the year. Agricultural and aquatic product export expanded 6.4 per cent, fuel and minerals rose 4.2 per cent, and processed industrial products leaped 24.7 per cent.
Mr Phan The Rue, Chairman of Vietnam Retailers Association and former Deputy Minister of Industry and Trade, said that although exports grew impressively, at approximately 18.3 per cent to over US$114 billion, a majority was generated by FDI companies and crude oil - the export-restricted item on the list of energy security. While foreign-led companies easily have export markets and orders, domestic ones face numerous difficulties to this effect.
Exports of FDI companies, mainly employing low-paid workers, have low content of advanced science and technology. Vietnam only takes advantage of existing comparative pluses to boost exports while it failed to tap competitive advantages to develop products carrying high technological content and added value. Exports, typical of low added value, have not been added to the production and circulation chains of multinational corporations in the region and in the world.
Some export-driven industries also met with significant pressures. The exportation of raw minerals declined year after year because the Government advocated shifting to processed products to expand the market share and gain higher value.
Dr Luong Van Khoi from the National Centre for Socio-economic Information and Forecast (NCEIF) said the world economy was forecast to grow 3.4 per cent in 2013, from 3.9 per cent earlier. This indicated that the world economy still contains potential risks. Vietnam’s key importers, the US and Japan, showed dim signs of recovery. The US’s export was projected to be just slightly higher than in 2012 while the Japanese economy was estimated to sink further. This combination will significantly impact Vietnam’s exports in 2013.
Vietnam is removing and reducing export subsidies in accordance with WTO commitments. Meanwhile, technical barriers imposed by importing countries, especially quality barriers, may take away the relative competitive advantage of Vietnamese exports. Recently, Vietnamese shrimps and steel came up against difficulties because of remedies to trade.
Modest targets for 2013
According to a report on trade and industry development plans for 2013, the Ministry of Industry and Trade aims at export turnover of US$126.1 billion, up 10 per cent over 2012, and import spending at US$136 billion, up 19 per cent year on year. The trade deficit ratio is expected to be equal to 8 per cent of total exports.
Given these objectives, Vietnam has to step up exports, especially highly-value items; strictly control the importation of discouraged items or products that local companies have made; expand trade and export; and enhance market forecast accuracy.
In the domestic market, the Government will consistently apply market-driven, State-regulated pricing policy for electricity, coal, petroleum and public services in order to control inflation.
Huong Ly
Vietnamese
