Vietnam trade deficit to be controlled below 20pct of export turnover

One of the key tasks of the Ministry of Industry and Trade (MoIT) in 2011 is to promote the export momentum, and restrain the trade deficit at the allowable level (below 20 percent of export turnover), especially limit the imports of luxury consumer goods.

Although during past years, the export growth target and trade gap curb have met the expectation, MoIT still said that with the open economy like Vietnam, just loosing the balance of import and export, the situation may be difficult to control.

In 2010, the trade gap was considered the lowest level during recent years, estimated at about $12.37 billion, equalling to 17.27 percent of the export turnover while in 2008, it was 28.8 percent and 22.5 percent in 2009. The trade deficit mainly fell into the areas of domestic enterprises with about $9.78 billion, accounting for 79 percent of the country’s total trade gap.

Meanwhile, the trade gap of FDI enterprises (excluding crude oil) was only $2.6 billion, accounting for 21 percent of the total.

Though during past years, the ministry attributed the success in curbing trade deficit to the export growth of home firms, FDI enterprises also accounted for almost key items and high percentage in many processing industrial products. It’s easy to see that in the restructuring of export, items of FDI enterprises accounted for 53.8 percent of the country’s total export turnover. Meanwhile, in the correlation with import, FDI firms also have more advantages than the domestic ones when the trade gap of FDI firms was lower.

This showed that the competitiveness on productivity and quality of the products of FDI enterprises is always higher, indicating the potential of FDI firms decides largely the country’s export import turnover.

The processing industry during recent years has always made up over half of the export turnover. Thus, the country has reduced a largely part of the exports of natural resources (currently, it accounts for only 11 percent of the total export turnover) and lessened the rate of raw processing items like agro-forestry and fisheries products, which is now accounting for 21 percent of the total export turnover.

However, regarding commodities that need to be controlled, the results have not met the expectation. The import spending for these items still remained high at $5.7 billion in 2010, accounting for 6 percent of the total import spending. These luxury import items are still less than nine seat completely built unit (CBU) car, CBU motors, mobile phones and electronic products.

Meanwhile, the country still imported up to $4.93 billion or 5 percent of the country’s import value for items that belong to the import restriction. According to economists, if these factors are not controlled in 2011, the increasing momentum of trade gap may occur.

In 2011, the ministry forecasted the country’s export turnover would reach about $78 billion, up over 10 percent against 2010′s. Of which, export of FDI firms (excluding crude oil) would be about $38 billion. The forecast also showed that the export of items such as materials and fuel (crude oil and coal) would decrease (crude oil at eight million tonnes and coal export at 15 million tonnes). Seafood export turnover is expected to reach $6 billion, rice export at 6.5 million tonnes, coffee at 1.1 million tonnes, and rubber at 800,000 tonnes.

Meanwhile, the group of processing and manufacturing products like garment and textile and footwear would continue to be two key export items with an export turnover of $13 billion and $6 billion in 2011 respectively.

The ministry would also focus on the group of high tech products such as electronic and computers and software products with an export turnover of about $4 billion in 2011.

As for import, the country’s import spending in 2011 is expected at $92 billion, rising over 11 percent year-on-year. Of which, imports for essential commodities and materials for production will be still maintained. While, the group of items that need to be controlled includes iron and steel products, coal, petrochemical, gas, stone and precious metals.

And the country should restrict the imports for luxury commodities such as material for tobacco, consumer goods, less than 12 seat cars and components and components for motors.

The ministry also predicts the country’s trade gap in 2011 would be about $14 billion, equalling to 18 percent of the total export turnover.

Tags: Vietnam trade Deficit