Since the beginning of the year, a lot of bilateral and multilateral free trade agreements (FTA) between Vietnam and other countries have taken effect. However, many Vietnamese enterprises still cannot take full advantages of the low tariffs in FTA to boost exports to other markets. Meanwhile, foreign goods have been flooding Vietnam’s market.

Foreign goods flooding domestic market

“The import revenue of the company has increased by five folds over the same period of the last year,” said Ngo Huu Binh, Director of Bao Binh Company.

Being a trade compan specializing in importing consumer goods to sell domestically, Bao Binh has successfully taken full advantages of the lower tariffs to import more goods.

Currently, the products that the company imports from ASEAN countries like confectionaries, cosmetics, children toys, etc. now can enjoy import tax exemption already. Many producers in Thailand and Malaysia have asked Bao Binh to act as the distributor for their products in Vietnam. Currently, the prices of consumer goods from Thailand, Malaysia and Singapore are cheaper by 15-20 percent than that of two years ago.

Binh said that the prices of many kinds of the products are even lower by 20 percent than domestic products, while imports have high quality.

“No import tariff, plus lower prices are our advantages,” he said.

Binh went on to say that imports can be divided into two kinds. High grade products from ASEAN are carried to big supermarkets, wholesale markets and big shops in big cities. Meanwhile, lower quality goods are brought to markets in other cities and provinces. As such, ASEAN goods have been making their way to Vietnam’s market

China – the big exporter to Vietnam

In doing business with China, Binh said that every day, he receives no less than 10 calls and emails asking for cooperation from Chinese companies that make consumer goods. The companies ask Bao Binh to act as the agent that distribute Chinese goods.

According to the importer, Vietnam has only cut 30 percent of tax lines on imports from China. However, Vietnam will have to cut the tariff further in 2011-2012 to fulfill the commitments on opening the market.

“They (Chinese importers) are seeking Vietnamese distributors because they are preparing for the time when the import tariff is cut further to zero percent,” Binh said.

Vietnam still cannot take full advantages of FTAs

In principle, Vietnam can also take full advantages of FTAs, when other countries have to lower their import tariff, to boost exports to the country.

The statistics showed that the trade deficit (the excess of imports over exports) of Vietnam with countries that have signed FTAs with Vietnam was not eased in the first six months of the year. According to the Ministry of Industry and Trade, in the first half of the year, the trade deficit with China had reached the record level of $6 billion. The import revenues from other markets have also increased in comparison with the same period of 2009. The import revenue from ASEAN countries reached $7.8 billion, an increase of 20.4 percent, while the import revenue from Japan had reached $4 billion, an increase of 31 percent.

A lot of reasons have been cited to explain why Vietnam still cannot take full advantage of the FTAs.

Experts say that Vietnam mainly exports raw materials with low processing content and, therefore, low value. These products have very low import tariffs or zero percent tariffs, so Vietnam cannot enjoy much benefit from FTAs.

Of Vietnam’s export items, 40 export items have the modest export revenue of over $10 million for each, while this group accounts for 80 percent of the total export revenue

Meanwhile, many enterprises said they cannot take full advantages of FTAs because they do not have enough information about FTAs. Tran Quoc Manh, Deputy Chairman of the HCM City Fine Arts Association admitted that some members of the association even do not know how to get certificates of origin (C/O) to be able to enjoy preferential tariffs.