VietNamNet Bridge - The Ministry of Industry and Trade (MOIT) has estimated that the trade deficit may be as high as $4 billion in 2015. Meanwhile, the Hong Kong and Shanghai Banking Corporation (HSBC) has predicted the figure would be higher than $6 billion, far outstripping last year’s $0.6 billion.

 

Trade deficit widens

A MOIT report showed that Vietnam’s total export turnover in the first 11 months of the year was $148.7 billion, an increase of 8.3 percent compared with the same period last year, while the import turnover reached $152.5 billion, up by 13.7 percent. The huge increase in imports led to a trade deficit of $3.78 billion this year.

HSBC, in its latest report, pointed out that the 13.7 percent increase in import turnover has relations to higher demand for fixed assets and equipment. The significant increase of 25 percent in fixed assets and equipment reflected the domestic businesses’ activities of expanding their production scale.

The higher imports from businesses which shows the warming up of the national economy should be seen as good news. However, import demand was mostly from foreign invested enterprises (FIEs). This shows the big difference between FIEs’ trade balance and domestic enterprises’.

In Vietnam, FIEs remain the driving force in exports, accounting for 68.2 percent of total export turnover.

Vietnamese enterprises have witnessed a trade deficit of $18.78 billion so far this year, while FIEs have exported more than imported by $15 billion. The figure includes crude oil exports.

The foreign invested economic sector continues a high growth rate with high export turnover mostly coming from valuable export items such as smartphones, components and cameras.

The General Department of Customs (GDC) noted that Vietnamese enterprises mostly export farm produce, raw materials and minerals, while the prices of the products have been fluctuating heavily in recent months. Meanwhile, FIEs have been boosting the export of processed and assembled products.

Bui Trinh, a renowned economist, said the trade deficit is foreseeable. Vietnamese enterprises mostly do outsourcing for foreign enterprises, therefore, they need to import equipment and input materials. 

Trinh thinks the trade deficit would be a growing tendency in the time to come, when Vietnam joins a series of free trade agreements (FTAs).

He went on to say that there are two choices for Vietnam. If it maintains the outsourcing-based economy, it will see the trade deficit increasing sharply in the future. But if it strives to export valuable products under its own name, it will have to develop supporting industries.

A World Bank report released in December pointed out that exports show Vietnam’s integration with the global value chain. In Vietnam, FIEs remain the driving force in exports, accounting for 68.2 percent of total export turnover.

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