Billion-dollar Export Structure Changing

1:33:59 PM | 10/5/2019

According to the General Statistics Office (GSO), although Vietnam’s export value still gaining momentum in the first quarter of 2019, it started to show signs of slowing down from a year ago (down 4.7%). Vietnam had nine exports each worth more than US$1 billion in the quarter, which accounted for 70.8% of the country’s total export value.

More processed exports

The GSO Report showed that Vietnam’s export slowed down in the first two months of 2019, grossing only US$13.9 billion. In March, the value soared to US$22.4 billion, 61.1% higher than that in February. Among nine billion-dollar exports in the quarter, seven increased in value from a year earlier, including garments and textiles (US$7.3 billion, up 13.3%), electronics, computers and components (US$6.9 billion, up 9.3%); footwear (US$4 billion, up 15.3%); machinery, equipment and parts (US$3.9 billion, up 5.2%); wooden products (US$2.3 billion, up 17%), vehicles and parts (US$2.2 billion, up 7.6%), and iron and steel (US$1.1 billion, up 3.6%.)

In general, billion-dollar exports still largely belonged to the foreign-invested sector, which held up to 97.1% of telephones and components, 90.8% of electronics, computers and components; 77.2% of footwear; and 59.3% of textiles and garments.

By market, the United States was still the largest importer of Vietnamese goods, worth US$13 billion in the first quarter. Telephones and components expanded by 76.9%; textiles and garments increased by 12.3%; and footwear grew by 8.9%. The European Union (EU) was the second biggest market of Vietnam with US$10.2 billion. Electronics, computers and components rose by 13.5%; textiles and garments looked up 9.8%; and footwear climbed 9.7%. Shipments to China reached US$$7.6 billion, down 7.4%. Electronics, computers and components fell 2.1%; vegetables and fruits sank by 10.8%; telephones and components tumbled 69.1%. Exports to ASEAN climbed to US$6.3 billion. Garments and textiles leaped 40.5%; and iron and steel expanded by 8.3%. Vietnam earned US$4.7 billion from its exports to Japan. Electronics, computers and components increased by 31.9%; and garment and textile grew by 7.4%. Shipments to South Korea amounted to US$4.7 billion. Telephones and components looked up 20.1%; electronics, computers and components rose by 14%; and textiles and garments increased by 6.4%.

Thus, the export structure tended to shift towards a positive pattern, matching the roadmap and objectives of the Government’s Export Development Strategy in 2011 - 2020 and to 2030. Accordingly, the share of exported raw products and minerals kept declining, while the shares of processed and manufactured products, as well as agricultural and aquatic products, was on the rise.

This showed that Vietnam has made good use of tariff preferences given by FTAs to which it was a signatory ​​to expand new export markets. In the first three months of 2018, Vietnam's export value to the US soared 26% year on year. Shipments to the EU, South Korea and ASEAN also saw 2.5%, 7.7%, and 6% rises, respectively.

Seeking new opportunities for agricultural products

Vietnam’s traditionally strong exports like agricultural products shrank in the past time. For example, fruits and vegetables brought home US$885 million (down 8.6%); coffee, US$830 million, (down 23.8%); cashew nuts US$625 million (down 17.2%); rice, US$567 million (down 23.6%); and pepper, US$189 million (down 14.7%).

In 2019, the agricultural sector set a target of earning US$43 billion from exports to boost its growth to 3%. However, after the first quarter of 2019, this goal seemed to be challenging. The Ministry of Agriculture and Rural Development is actively negotiating market expansion, maintaining traditional markets and reducing dependence on certain markets. Vietnam will effectively embrace the opportunity from free trade agreements, especially the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the Vietnam - EU Free Trade Agreement (EVFTA).

Dr. Nguyen Do Anh Tuan, Director of the Institute of Policy and Strategy for Agriculture and Rural Development (IPSARD), the Ministry of Agriculture and Rural Development, said that in 2019, Vietnam’s agricultural export will see both opportunity and challenge. The biggest challenge is the world economy is forecast to slow in 2019 as a result of trade tensions and protectionist barriers. Countries that are expected to experience growth decline are all major importers of Vietnam’s agricultural products, such as China, the EU and Japan. In that context, Vietnam’s exports will certainly be affected.

However, Dr. Tuan said that Vietnamese agricultural products and exporters also see many opportunities, including the effective CPTPP Agreement, which is expected to open up great opportunities for agricultural, forest and aquatic exports to make inroads into this enormous and potential market.

“Even during the U.S.-China trade war, we can find many opportunities when investors are taking “Go South” policy, which indicates leaving China for other markets. Both the U.S. and China are main importers of Vietnamese goods. Therefore, highly-taxed products in the trade war, such as furniture and seafood, can find opportunities,” he said.

But, he warned that the biggest opportunity for exporters is policies that strongly facilitate business operations.

“Credit policy is being reformed in a direction that collaterals can be goods and equipment instead of only land. This will widen access to credit sources for businesses. The Ministry of Natural Resources and Environment is drafting a revision to the Land Law in a way that facilitates land accumulation. The Ministry of Agriculture and Rural Development has many initiatives to promote processing and development of self-contained production chains and expand markets. Businesses need to make good use of this opportunity, and join hands with farmers to form concentrated production areas to easily increase added values for agricultural products,” said Tuan.

Luong Tuan