Vietnam-Japan Trade: Continuing High Growth Rate

Vietnam and Japan maintain a special relationship in the Asia-Pacific region. The two countries established official diplomatic relations in 1973 when Vietnam was not yet reunited. Ever since, the two countries have developed all-round cooperation, especially when Vietnam started its Doi Moi (Renovation) initiated at the 6th National Congress of the Communist Party of Vietnam in 1986. After Vietnam joining WTO, bilateral economic relations and trade soared up and Japan became one of the most important partners of Vietnam in the region and the world. During the visit to Japan in March 2014 by Vietnamese President Truong Tan Sang, the two countries upgraded Vietnam-Japan relations to deep and extensive strategic partnership for peace and prosperity in Asia.

 

 With fine political foundation, mutual understanding and harmony between the peoples of the two countries, Vietnam-Japan trade has developed tremendously and become a “model” for bilateral relations between Vietnam and other countries. Presently, Japan is the third biggest export market of Vietnam after the US and China, and the third biggest import market of Vietnam after China and South Korea. According to statistics, the bilateral trade growth rate has maintained at 17 percent in the past 10 years, bringing two-way trade value increasing from US$7 billion in 2004 to nearly US$26 billion in 2013, with Vietnam trade surplus in this period. Notably, Vietnam-Japan bilateral trade has promoted an import-export structure most helpful for the economic restructuring of the two countries, especially in period of economic recession, and developing an “organic relationship” of mutual linkage and reliance without direct competition in all markets. Japan is an important market for main Vietnamese exports such as garments, crude oil, sea products, timber and wood-based products, footwear, etc. In return, Vietnam imports mainly input materials for its export industries.

 

Alongside with Japanese investment increasing in quantity and quality, the bilateral trade continues to develop in both ways: (1) import of high technology to increase Vietnamese economic competitiveness and exports to other markets; (2) export to Japan products and services of Vietnamese production factories established by Japanese-Vietnamese companies to meet Japanese needs.

 

Consequently, with the importance of bilateral relations in their development strategies in the region, the two countries signed Vietnam-Japan Economic Partnership Agreement (VJEPA) in December 2008, officially effective from October 2009, creating all-round economic and trade cooperation for businesses and economies of the two countries in all fields: products, services, investments, business environment, people’s movement, etc. Also according to VJEPA, from 2019, with markets for products expanded, 92 percent of bilateral trade value will be tax-exempted (Japan will exempt taxes for 95 percent of Vietnamese exports).

 

It is safe to say that Japanese trade and investment have contributed to Vietnamese economic structure in the implementation of the past 5-year socio-economic development plan as well as industrialisation-modernisation strategy to 2020.

 

 Due to both objective and subjective conditions, so far Vietnamese export makes up only a very small percentage in Japanese import (1.67 percent in 2013 statistics). Vietnamese products and services export to Japan remains modest in comparison with Vietnamese economic potential and capacity. The constraints to Vietnamese exports to Japan can be named such as State protectionism, protection of consumers’ interests in Japan, complicated and diversified regulations on technical standards of imports (especially with agricultural products and foods), consumption culture and custom of Japanese people, multi-layer distribution system, high trade promotion fees, high competition by regional countries in the region such as China, Thailand, Indonesia, Cambodia, the Philippines, etc.

 

However, when Vietnamese businesses have suitable business strategies and close cooperation with Japanese partners under the assistance of the two governments can overcome those difficulties. Opportunities will be wide opened and bilateral trade value will attain high growth rate.

 

Vietnam-Japan bilateral economic cooperation, trade and investment are ripening and deepening. To be successful, the two countries should enhance the all-round cooperation for long-term strategic interests in context of profound changing political-economic situation in the region and the world. They must create large and comprehensive cooperation frameworks for business communities of the two countries to promote investments and trade in all sectors.

 

 In addition, there must be more initiatives to promote the stable consumption of Vietnamese agricultural products in Japanese market.

 

 Related ministries and agencies of the two countries should coordinate closely to implement bilateral economic linkages so as to enhance the cooperation of business communities for mutual interests and development.

 

In particular, two countries should develop and implement successfully bilateral and multilateral mechanism for economic and trade cooperation such as VJEPA, TPP, etc. in order to create more opportunities for business associations and communities of the two countries to approach markets and promote trade and investment.

In small scale, the two countries shouldencourage their businesses to increase information exchanges on import-export needs, market surveys, matchmaking in trade and investment, upgrading production lines, advanced and modern production of high quality and productivity to meet the high demand of Japanese market and consumers. They should also inform businesses in time tax reduction by VJEPA process so that businesses can readjust their business strategies in Japanese market.

 

For their parts, business associations and communities should make the best use of the promotion channels of Vietnam and Japan (Industry and Trade Ministry, Vietnamese Commercial Section in Japan, JETRO, ASEAN-Japan Centre (AJC), etc.) to develop import-export activities in the two countries.