In January the deficit ballooned to nearly 1 billion USD as imports rose by 1.7 percent to 20.8 billion USD, according to the General Department of Customs (Source: VNA) Hanoi (VNS/VNA) – Vietnam faces a possible return to a tradedeficit this year after three years of enjoying surpluses, experts saidpointing to the sharp rise in imports and increasing difficulties facingexports.
In January, the deficit ballooned to nearly 1 billion USD as imports rose by1.7 percent to 20.8 billion USD, according to the General Department ofCustoms. Exports were down by 1.3 percent to 20billion USD.
The biggest reason experts think the deficit could be around 3 billion USD thisyear is a sharp increase in import of feedstock and raw materials by manysectors.
According to the Ministry of Industry and Trade (MoIT), imports are likely toincrease in sectors whose production is still strongly dependent on importedraw materials and equipment and those performing outsourcing.
They include leather shoes, textile and garment and agriculture processing.
The ministry said the deficit so far this year was mostly due to import ofelectronic products, fabric, technologies, and components and accessories.
The question is why do Vietnamese enterprises still import such largequantities of materials and equipment?
Nguyen Duc Thuan, Chairman of the Vietnam Leather,Footwear and Handbags Association, said the domestic supporting industry inthose sectors remain very weak and unorganised and so cannot ensure sufficientsupply of high-quality materials and accessories required by manufacturers.
Consequently, leather, footwear and bag companies have no choice but to resortto imports.
This means the country has to cope with global price volatility and productioncosts increase, which affects the competitiveness of Vietnam’s exports.
Another and more important reason for the trade deficit this year is the numberof free trade agreements including the Comprehensive and Progressive Agreementfor Trans-Pacific Partnership (CPTPP) and EU-Vietnam Free Trade Agreement (EVFTA)that have come into force this year.
The agreements have begun to attract investments in many sectors by both localand foreign enterprises seeking to take advantage of the opportunity to sell tothe great partner markets.
This also means imports of technology, equipment, accessories, and rawmaterials are set to accelerate, worsening the trade gap.
On the export front many Vietnamese agricultural and fishery enterprises arefacing increasing competition globally.
Analysts said challenges would persist through 2019.
Global sources of supply are expected to increase since more and more countriesare entering the supply chain for agricultural products. The increasingproduction also means many countries are paring down imports of these productsand replacing them with local ones.
The increasing supply and dwindling demand will almost certainly keep prices incheck meaning export value is unlikely to rise by much.
Consequently, leather, footwear and bag companies have no choice but to resortto imports.
This means the country has to cope with global price volatility and productioncosts increase, which affects the competitiveness of Vietnam’s exports.
Another and more important reason for the trade deficit this year is the numberof free trade agreements including the Comprehensive and Progressive Agreementfor Trans-Pacific Partnership (CPTPP) and EU-Vietnam Free Trade Agreement (EVFTA)that have come into force this year.
The agreements have begun to attract investments in many sectors by both localand foreign enterprises seeking to take advantage of the opportunity to sell tothe great partner markets.
This also means imports of technology, equipment, accessories, and rawmaterials are set to accelerate, worsening the trade gap.
On the export front many Vietnamese agricultural and fishery enterprises arefacing increasing competition globally.
Analysts said challenges would persist through 2019.
Global sources of supply are expected to increase since more and more countriesare entering the supply chain for agricultural products. The increasingproduction also means many countries are paring down imports of these productsand replacing them with local ones.
The increasing supply and dwindling demand will almost certainly keep prices incheck meaning export value is unlikely to rise by much.
Experts said while the freetrade agreements that Vietnam has signed would bring opportunities for itscompanies to export more, it would not be easy to make use of them becauseexporters are required to meet certain requirements, one of which is the originof goods.
If Vietnamese firms want to export to partner markets they would have to uselocally sourced materials or from countries that are part of the same tradetreaty.
Many Vietnamese manufacturers are heavily reliant on imported raw materialsfrom non-partner countries.
The Vietnamese cashew industry, for instance, imports 63 percent of raw cashewfor processing mainly from some African countries like the Ivory Coast, Ghanaand Nigeria.
Similarly, furniture markers import more than 39 percent of their total woodrequirements from Laos and Cambodia, which are not part of any of the tradedeals.
Vietnamese enterprises would need to look for new sources and obtain propercertificates of origin, experts said.-VNS/VNA
If Vietnamese firms want to export to partner markets they would have to uselocally sourced materials or from countries that are part of the same tradetreaty.
Many Vietnamese manufacturers are heavily reliant on imported raw materialsfrom non-partner countries.
The Vietnamese cashew industry, for instance, imports 63 percent of raw cashewfor processing mainly from some African countries like the Ivory Coast, Ghanaand Nigeria.
Similarly, furniture markers import more than 39 percent of their total woodrequirements from Laos and Cambodia, which are not part of any of the tradedeals.
Vietnamese enterprises would need to look for new sources and obtain propercertificates of origin, experts said.-VNS/VNA
VNA
