Where does the trade deficit come from?

Vietnam doesn’t just import cars from the US and beef from Argentina.  Now it also imports apples and pears from South Korea and vegetables from Italy. That’s a part of the explanation why the trade deficit has grown sharply in the last months of the year.

Our appetite for imports has become our headache.  Experts warn that as a consequence of the decision by the State Bank to resume gold imports in November, Vietnam’s trade deficit for all of 2009 will be much higher than the $10.2 billion recorded for the year’s first eleven months.

Vietnam imports more cheese than China

The French Lactalis International Group late last week officially appointed Hoang Lan, a HCM City company as the distributor of its dairy, cheese and butter products in Vietnam.  Hoang Lan’s ‘impressive achievement’ is that in ten years of market development, Lactalis sells 500 to 600 tonnes of President brand cheese in Vietnam every year. The sales volume is the highest in Asia.

Minh Sao, a company specializing in importing South Korean products, said that  imports have grown by 30 percent this year.  It has doubled its imports of dried food, fruits and vegetables to two containers a month.  “If sales go well, we will import even more grapefruits, apples, pears and vegetables from South Korea to sell at the Tet season,” said Le Hoang Thuy Linh, Director of Minh Sao.

Vietnam has emerged as an attractive market for foreign-made goods. Just this  last month, HCM City received big trade delegations from Italy, Denmark, Brazil, Canada, South Korea and Indonesia.  Satoshi Kitashima, Director of the Japan External Trade Organisation (JETRO) said that Japanese businesses are  eyeing Vietnam because their domestic market is in the doldrums and Vietnam has attractive purchasing power.

Low competitiveness is a reason behind our high trade deficit

At a workshop discussing economic scenarios for 2010, participants warned that 2009’s high trade deficit will repeat next year.

Dr Vu Thanh Tu Anh, Director of Fulbright Economic Teaching Programme predicted that the full year trade deficit for 2009 may reach $13 billion.

Former Minister of Trade Truong Dinh Tuyen pointed out that Vietnam has a trade deficit not only with the ASEAN group, but also with China and South Korea.  The nation buys three times as much from India as it sells.

“Vietnam imports more from these countries than it exports because of its low competitiveness. Vientamese businesses cannot take full advantage of mutual tariff cuts to boost exports,” he added.

Since Vietnamese businesses cannot obtain enough materials from domestic sources, they tend to import more and more materials from China.

The marketing director of an event organization company told this story: “Recently, when preparing for a construction fair, we contacted directors of seven enterprises. However, five of the seven we contacted said they were in China to source products they will import to sell in Vietnam.

Pham Chi Lan, a leading economist, said that Vietnam’s production structure has not much changed over the last few years.  Vietnamese exporters still rely far too heavily on imported intermediate goods.  “We have talked and talked about developing supporting industries, but we have not done anything,” Lan said.

It’s essential, Lan said, that we raise our competitiveness.  In 2010, ASEAN group tariffs on Chinese goods will fall to the zero to five percent level, putting even more pressure on our producers.

VietNamNet/TT

Tags: Vietnam imports