Risks are high

In the context of a tense global trade war, while a new wave of investment inflow into Vietnam has yet to unleash, risks facing Vietnamese enterprises as well as the entire economy have surfaced.

risks are high hinh 0
Shrimp processing for export in the Mekong Delta. Vietnamese enterprises should be the first to come up with schemes for self-protection – PHOTO: LE HOANG VU

The decisive moment of the global trade war initially waged by the United States may come soon at the G-20 Summit in Japan scheduled at the end of this month.

The whole world is now seemingly pinning all hopes on the summit meeting between U.S. President Donald Trump and Chinese President Xi Jinping. The U.S.-Mexico-Canada trade pact may be moved to Congress this summer after the Mexican Government has agreed to make certain compromises on the control of the illegal migrant flow into the U.S.

Meanwhile, negotiations on trade between the U.S. and Japan, the European Union and India, respectively, are under way as trading partners hope to avoid tax slaps.

When the Sino-American trade war erupted a while ago, some economists were quick to point out that Vietnam could be the first to benefit from it, placing emphasis on a shift of production lines from China to Vietnam.

This argument seems well-founded as foreign-invested investment from China to Vietnam surged rapidly in the first months of 2019. During the Jan.-May period, investment in Vietnam registered by Chinese enterprises amounted to US$1.56 billion, making an unprecedented upsurge of 450% year-on-year.

Notably, this was the first time ever China had surpassed other investors, such as the Republic of Korea and Japan, to become the number-one foreign investor in Vietnam.

However, please bear in mind that the total figure is merely registered capital. Another point relates to the fact that the sum is the total capital pledged by 233 Chinese projects. On average, the capital of each project is as small as US$6.7 million.

Furthermore, many other issues should be taken into account, like what the industries invested in by Chinese enterprises are and whether they are environment-friendly, and short-term or long-term. Next, whether enterprises moving out of China come to Vietnam or not depends largely on where they have positioned their value chains.

Surely enough, if Apple withdraws from China, the next destination is without doubt India. And if foreign manufacturers of consumer electronics (such as TVs, refrigerators and air conditioners) in China mull over a relocation, the landing place will possibly be Thailand whose supporting industries are far ahead of Vietnam. How big are the opportunities for Vietnam? Only time can tell. For now, they are simply guesswork.

Risks looming large

A short while ago, the U.S. Department of Commerce has received complaints lodged by American companies that accuse Vietnam’s Minh Phu of dodging anti-dumping tax with the use of India shrimp. Minh Phu is alleged to import shrimps from India to process at the minimum level before exporting them stateside.

In reality, Indian seafood exporters have been slapped with anti-dumping taxes since 2005 now. This means it’s highly likely that U.S. anti-dumping taxes will be inflicted on Minh Phu’s shrimps sooner or later. 

 

Behind the scene, however, is the fact that the U.S. Government wants to re-negotiate her trade pact with India. The American side contends that although it has given Indian partners an array of incentives as per the Generalized System of Preferences (GSP) over the years, U.S. enterprises have not received corresponding preferences from India. Consequently, India has become one among the countries enjoying a huge trade surplus with the U.S. in many consecutive years.

Likewise, in 2018, the U.S. and the European Union simultaneously imposed high tariffs on Chinese steel exports. Afterwards, suspecting that Vietnamese enterprises imported Chinese steel to re-export it stateside, the U.S. Department of Commerce slapped a 199.76% anti-dumping tariff and a 256.44% anti-circumvention tax rate on Vietnamese cold-rolled steel exports. 

It can be said that Indo-American and Sino-American trade tension has exerted indirect impacts on Vietnamese enterprises. This move plus Vietnam’s continuous high trade surplus with the U.S. has earned Vietnam a slot in the U.S. list of countries which need being monitored for monetary manipulation released last month. All considered, while the new wave of foreign direct investment has yet to unleash, risks faced by Vietnamese companies as well as the entire economy are quite visible.

Who can protect Vietnamese enterprises?

Risks may further heighten as in the first five months of this year, the sales of some Vietnamese exports to the U.S. rose sharply. For example, wood and woodwork exports stateside earned US$1.84 billion in sales, a jump of 35% from the year-earlier period; computers and electronics, US$1.78 billion, 72%; and machinery and tools, US$1.69 billion, 54%.

Nobody can tell where the U.S. will probe into these exports and treat them the same way as she did with Vietnamese steel and shrimp. Nevertheless, one thing is fore sure: risks will run high for these three commodities of Vietnam.

To cope with this situation, Vietnamese enterprises should be the first to come up with schemes for self-protection. They should proactively collect data and send relevant reports on the origin of their materials or production processes to the U.S. Department of Commerce.

This is what Minh Phu has done during the 10 years from 2005 to 2015, when it supplied periodically data of origin and production processes. In 2016, Minh Phu’s products were removed from the U.S. anti-dumping tariff list.

However, in the long run, related Vietnamese agencies should devise radical measures to systematically minimize these risks. First, it is necessary to disseminate information about the U.S. import-export tariff systems among Vietnamese enterprises. To enjoy U.S. import tariff incentives, a beneficiary should achieve a rate of at least 35% for local materials used in its production.

Secondly, the General Department of Vietnam Customs and the Ministry of Industry and Trade must take effective measures when dealing with enterprises intentionally taking advantage of Vietnamese trade system for profiteering, as they adversely affect other enterprises and the whole industry. SGT

US-China trade war increases risk of trade deficit for Vietnam

US-China trade war increases risk of trade deficit for Vietnam

The US-China trade war and Chinese yuan devaluation have increased the risk of a widening trade gap, with more imports from China flowing to Vietnam.

Trade war likely to dampen VN markets this week

Trade war likely to dampen VN markets this week

Rising fears about the US-China trade war are forecast to continue to drag down market sentiment and dampen investor confidence.  

The trade war rages on

The trade war rages on

The Sino-American trade war is escalating in unpredictable ways. Contrary to some analyses, its impacts on Vietnam are arguably beneficial. A vulnerable economy such as Vietnam’s is unlikely to benefit from this global war.  

 
 

Other News

.
Party Secretary General, State President Nguyen Phu Trong and determination to clean and purify the apparatus
Party Secretary General, State President Nguyen Phu Trong and determination to clean and purify the apparatus
FEATUREicon  03/02/2021 

The disciplining of a series of high-ranking officials, including incumbent and retired ones, shows that the fight against corruption and wrongdoings in the last five years has been accelerated 

Flower markets see peak activity on pre-Tet days
Flower markets see peak activity on pre-Tet days
FEATUREicon  02/02/2021 

Flowers and ornamental trees sourced from China are overwhelming Vietnamese flowers at traditional and online markets. Japanese orchids are selling like hotcakes despite high prices.

General Secretary Nguyen Phu Trong: "What I do not polish myself"
General Secretary Nguyen Phu Trong: "What I do not polish myself"
FEATUREicon  01/02/2021 

Mr. Nguyen Phu Trong has been re-elected as the General Secretary of the Party Central Committee for the 2021-2026 term. 

MIC outlines plan on preparing human resources for national digital transformation
MIC outlines plan on preparing human resources for national digital transformation
FEATUREicon  30/01/2021 

The Ministry of Information and Communications (MIC) is building a plan to develop digital human resources for national digital transformation.

Govt seeks 7.5-8% annual growth in next 25 years via digital transformation push
Govt seeks 7.5-8% annual growth in next 25 years via digital transformation push
FEATUREicon  02/02/2021 

To become a powerful and prosperous country by 2045, Vietnam needs to obtain a GDP growth rate of 7.5-8 percent per annum for the next 25 years. Only digital transformation can helps make this a reality.

Digital transformation opens up new development space
Digital transformation opens up new development space
FEATUREicon  29/01/2021 

"Like exploring new lands, the expanded cyberspace will open up a new development space for the country,” Minister of Information and Communications Nguyen Manh Hung said at the 13th National Party Congress on Thursday morning (January 28).

Vietnamese-made games now played around the world
Vietnamese-made games now played around the world
FEATUREicon  31/01/2021 

To create a level playing field and help Vietnamese develop games reach the world market, it is necessary to have more reasonable policies, experts say.

Education Minister outlines 9 achievements, 5 problems in educational sector
Education Minister outlines 9 achievements, 5 problems in educational sector
FEATUREicon  28/01/2021 

After seven years of implementing Resolution 29 on reforming the education and training sector, Vietnam has gained several outstanding achievements.

Vietnam stands at turning point to recover and make a breakthrough
Vietnam stands at turning point to recover and make a breakthrough
FEATUREicon  29/01/2021 

The 13th National Party Congress is taking place in the context of unpredictable changes in the world, as the Covid-19 pandemic is dividing many countries, the global economy is experiencing negative growth and ongoing trade and economic conflicts.

13th National Party Congress: Hanoi, HCM City aim for digital government
13th National Party Congress: Hanoi, HCM City aim for digital government
FEATUREicon  28/01/2021 

Hanoi and Ho Chi Minh City both plan to develop synchronous, inter-connected digital, IT, and data infrastructure, creating a foundation for digital economic and social development.

Digital transformation: smart homes invented by Vietnamese
Digital transformation: smart homes invented by Vietnamese
FEATUREicon  02/02/2021 

The digital transformation process is being carried out throughout Vietnam, from large enterprises to small shops.

UNESCO expert: Vietnam education reform on right path, recommends better allocation of funds
UNESCO expert: Vietnam education reform on right path, recommends better allocation of funds
FEATUREicon  28/01/2021 

Dominique Altner, Senior Program Specialist at IIEP (International Institute for Educational Planning), spoke to VietnamNet about the development of Vietnam’s education system in the last five years.

Local specialties reach global market on e-commerce sites
Local specialties reach global market on e-commerce sites
FEATUREicon  02/02/2021 

Displaying local specialties on e-commerce platforms has proven to be the quickest way to increase the value of Vietnam’s farm produce and introduce it to international customers.

Two resolutions for reform
Two resolutions for reform
FEATUREicon  28/01/2021 

The Government has issued Resolutions 01 and 02, showing the spirit of reform and steadfast effort over the years to remove barriers in the business environment, helping people and businesses to thrive.

Digital transformation to contribute 25% of HCM City's GRDP by 2025
Digital transformation to contribute 25% of HCM City's GRDP by 2025
FEATUREicon  27/01/2021 

By 2025, digital transformation will contribute 25% of HCM City's gross regional domestic product (GRDP), said Chairman of HCM City People's Committee Nguyen Thanh Phong.

Wind, solar power sees new boom
Wind, solar power sees new boom
FEATUREicon  27/01/2021 

Many wind and solar power projects are awaiting approval to be added to the list of projects to be developed under the national power development plan.

After 30-year boom, motorbike market sees decline in sales
After 30-year boom, motorbike market sees decline in sales
FEATUREicon  31/01/2021 

The sales of motorbikes decreased sharply in 2020. After 30 years of continued growth, the motorbike market has become saturated.

Vietnam shows its 'firm stuff' after five years of difficulties
Vietnam shows its 'firm stuff' after five years of difficulties
FEATUREicon  26/01/2021 

The US-China trade war, Brexit, the US withdrawal from TPP, Covid-19 and internal difficulties all have affected Vietnam’s economy in the last five years.

Long-term development commitments realised through strategic M&A moves
Long-term development commitments realised through strategic M&A moves
FEATUREicon  25/01/2021 

A potential rise in mergers and acquisitions is sparking concerns that local firms will lose competitiveness by selling themselves to foreign investors.

Reshuffle underway to further stimulate revival of economy
Reshuffle underway to further stimulate revival of economy
FEATUREicon  23/01/2021 

The 13th National Party Congress is expected to set the country’s average annual growth rate of 6.5-7 per cent from now until 2025, when Vietnam may become a higher middle-income nation. 

 
 
 
Leave your comment on an article

OR QUICK LOGIN