VietNamNetBridge –Vietnam is striving to reduce the trade deficit to 14 percent by 2015 and to obtain the payment balance in a few years. However, this proves to be a very difficult task, for many reasons.
It is understandable that trade deficit is unavoidable for developing economies like Vietnam. However, if Vietnam has to import products, it should be selective and import technology. It should choose to import products at best prices with most favourable commercial conditions.
Vietnam is now striving to reduce the trade deficit to 14 percent by 2015 and to reach the payment balance in a few years. Initially, Vietnam was aiming to balance the imports and exports by the early 2010s.
However, Vietnam still imports in large quantities. The import turnover and the trade gap in 2006-2010 are both much higher than that in 2001-2005. In 2009 and 2010, if not counting gold exports, the trade deficit would be much higher than the released figures.
The causes of the high trade deficit in the 2001-2005 still have not been eliminated,. Meanwhile, reducing trade deficit has become harder as Vietnam, under the WTO commitments, has to open its doors to foreign products. Therefore, experts have every reason to believe that balancing the imports and exports in the next few years is a difficult task.
10 big challenges
1. In previous years, when explaining the high trade deficit, Vietnam always said that it needed to make heavy investment in manufacturing to improve the production capacity, therefore, it had to import raw materials and equipment.
This is still true for the current period and the near future, as in the next five-year period, Vietnam needs to continue to make large investments for the development of modern technology, and so it will need to import more and more expensive high-tech production lines and equipment.
2. Experts pointed out that Vietnam’s production will still be relying on imported raw materials until its supporting industries develop. Meanwhile, Vietnam has not made any considerable progress in this area. Currently, garment, footwear, automobile, electronic and mechanical engineering industries still rely on imported raw materials. This means that the bigger the production scale is, the more Vietnamese enterprises have to import to feed local production.
3. Vietnam-made products now have to compete with import products. And in the competition, Vietnamese enterprises do not have many advantages. They cannot rely on the cheap labour force any more. Meanwhile, the interest rates have been escalating, the local currency depreciates, while the administrative procedures remain too complicated. This means that import products are more competitive? in Vietnam’s market
4. While Vietnamese enterprises try hard to persuade Vietnamese people to buy Vietnamese products, import products have been welcomed warmly. Foreign enterprises come to Vietnam regularly to advertise their products, and attend trade fairs. Thai enterprises, for example, come once a year at least, even though Thai products have been flooding the domestic market already.
5. Sometimes the Government has to order the import of various products in order to stabilize the domestic market. For example, the Government once had to allow importing sugar in order to force the domestic prices down.
6. Foreign invested enterprises have been making “great contributions” to the high import turnover. Instead of importing parts? to assemble domestically, the enterprises now tend to import finished products to sell domestically.
7. Vietnam has been importing not only high-tech products which it is stil unable tomake domestically, but also many other kinds of products, including simple goods. The volume of carrots imported through Cat Lai port in HCMCity in the first 10 months of 2010 increased by three folds in comparison with t the first 5 months. The toothpicks imports increased 12.5 times.
8. Vietnam has been importing from Asian countries more than it exports (the trade deficit with East Asian countries was $23 billion in the first 11 months of 2010). Meanwhile, in the trade relations with Europe and the US, Vietnam enjoys trade surplus. This means that Vietnam does not import high technologies from advanced economies, and it mostly imports backward technologies.
9. Vietnam has been trying to install technical barriers in order to control imports, but they still do nothelp. Experts have warned that Vietnam is becoming the dumping ground of the world’s technologies.
10. Meanwhile, Vietnamese consumers still favour foreign made products, thus paving the way for foreign made products to flow into Vietnam.
