Vietnam's trade deficit with ASEAN continues
HANOI - With Vietnam's economy continuing to run a trade deficit with Association of Southeast Asian Nations (ASEAN) countries in the first quarter of the year, Trade Ministry officials have warned that Vietnam's export sector has much to do to close the gap.
First quarter figures showed Vietnam had a deficit of more than US$1 billion with its ASEAN partners, while posting surpluses with the European Union and other major trading partners.
Singapore continued to take the lead among ASEAN countries with a $560 million trade surplus with Vietnam. While Singapore mainly exports machinery, equipment and petroleum to Vietnam, Vietnam exports lower-value crude oil, seafood, desktop computers and components to Singapore.
Thailand had a surplus of $306 million with Vietnam in the first quarter, followed by Indonesia, $103 million, and Malaysia, $91.5 million.
But Nguyen Ngoc Hai, Vietnam's trade counselor in Singapore, argued that the scenario was natural because countries with big investments in Vietnam would tend to export more machinery and equipment to feed their businesses operating in the country.
"Reducing the trade deficit is not something that can be done overnight as it will lead to the need to change the entire export structure," he said.
Bui Huy Son, director of the ASEAN division under the Trade Ministry's multilateral department, said Vietnam has been running a deficit with ASEAN for years. He shared Hai's opinion that adjusting the national export structure would be a very difficult task.
"ASEAN is an important trading partner, but not our only one. Besides, in their market, a trade deficit is a natural thing," he explained.
Meanwhile, Cao Nang Gian, a trade counselor in Thailand, said the trade deficit with Thailand has been increasing sharply in recent years. Due to Thailand's proximity to Vietnam and the country's competitive prices and high quality, Thai products such as petroleum, plastics, motorbike components and clinker sell well in Vietnam.
The Trade Ministry also argued that the trade deficit does not mean all Vietnamese goods were dominated by foreign goods. Phan Minh Nghia, deputy general director of the Tan Mai Paper Company (TPC), said his business has been able to survive the tough competition with imports from Thailand and Indonesia over the last two years.
TPC recently invested VND170 billion (US$10.7 million) to import a new production line and was able to bring down production costs by 5-10%. Yet Son, from the Trade Ministry, also warned of the difficult time ahead facing local businesses, especially when Vietnam accelerates its tariff-cutting process under the ASEAN Free-Trade Agreement (AFTA).
Vietnam conducted the tariff cuts for the first time in 1996 and has applied a tariff harmonization list since July last year, with many goods seeing tariffs cuts by 0-5%.
The Trade Ministry has received many warnings from the domestic business community on the possible failure of Vietnamese firms to withstand foreign competition, Son said. "But Vietnamese businesses will survive and the market will not be greatly affected," he added confidently.
"Electronics and refrigeration makers used to think it would be hard for them to survive, but they competed well," Son said.
However, the Trade Ministry is now preparing an overall report to analyze the impacts of the AFTA on Vietnamese businesses and the economy in the last 10 years, he said.
Asia Times - May 07, 2005.
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