Exports make significant contributions to economic growth

Tuesday, 2014-12-23 17:54:52
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NDO - Despite many difficulties in the past year, Vietnam’s export sector has recorded impressive achievements with total revenue estimated at US$150 billion, up 13.6% from the previous year, and making a substantial contribution to the economy.

Impressive growth

In 2014 the structure of Vietnam’s exports has seen a positive shift in line with the Government’s export strategy during the 2011-2020 period with manufactured goods accounting for the largest share at 73%, followed by agricultural (15%) and mineral exports (6%). Export growth helped stimulate GDP growth, create jobs, boost sales of farming products and reduce inventories. These results reflect that the Government’s strategy is on the right track and the economy’s production capacity has been increasingly expanded. Another noteworthy point is that export growth helps curb trade deficit, as Vietnam continued to maintained a trade surplus in 2014, projected at US$1.5 billion.

In recent years, foreign-invested enterprises have made significant contributions to economic and export growth. In 2014, this sector remains a key player behind an increase in export value and growth. Revenue from foreign companies was estimated at US$101.8 billion in 2014, up 15.4% over the previous year and accounting for more than two thirds of the country’s total earnings. Main exports belong to the manufacturing sector, including phones, computers, electronic devices, and cameras, among other things.

This result come as the Vietnamese Government regards foreign direct investment (FDI) as an important source to drive economic development. The Government and relevant ministries have introduced many measures to attract, manage and streamline FDI. Vietnam prioritises FDI projects which are high-tech, environmentally friendly and utilises natural resources effectively. Investment is also encouraged in agriculture, services with a high degree of knowledge and products with a competitive edge, able to take part in global value chains.

Regarding domestic enterprises, they encountered certain difficulties in export markets and input costs throughout 2011-2013, amidst both national, and global slowdown. The FDI sector faced less trouble as they had more control over capital and the supply market. However in 2014, thanks to the economic recovery momentum and the Government’s timely introduction of support measures, exports from the domestic sector have shown improvement. Export growth by this sector has accelerated from 1.2% and 4% in 2012 and 2013 to 10% in 2014 reaching US$48.2 billion with both major agricultural and manufactured goods posting positive growth.

Taking advantage of free trade agreements

As an export-led economy, increasing the competitiveness of Vietnamese goods in major export markets through the signing of free trade agreements (FTAs) has an important significance, especially when factors such as cheap labour and natural resources are no longer useful. Recently enterprises have taken advantage of multilateral and bilateral economic integration opportunities to boost export growth. The total export value of goods with a certificate of origin is on the rise, reaching US$19.3 billion in the first nine months of 2014, a year-on-year rise of 94%.
Vietnam is actively negotiating the Trans-Pacific Partnership (TPP), an FTA with the EU and the European Free Trade Association (FTA), which comprises Norway, Iceland, Switzerland and Liechtenstein. The country has also recently concluded negotiations of trade deals with the Republic of Korea and the Customs Union of Russia, Belarus and Kazakhstan. These trade pacts are expected to bring about many opportunities for Vietnamese exports, creating a foundation for the domestic manufacturing sector to join global supply chains. Vietnam will both open the domestic market in line with commitments, and have opportunities to diversify import markets of commodities and materials needed for manufacturing and consumption, thereby phasing out reliance on markets with many potential risks. In the schedules to reduce and remove tariffs and non-tariff barriers under these agreements, Vietnamese goods can easily access markets of FTA partners.
A number of Vietnam’s major exports such as garments, footwear, seafood and agricultural produce are still being levied high tax in some major markets. For the US, Vietnamese garments are imposed tax of up to 32%, footwear between 3.8% and 58% and seafood up to 15%. In Japan, the tax rates on Vietnamese garments are between 3.3% and 10%, footwear 6.7% and 30% and seafood 1% and 8.5%. After the TPP is signed, the import duties will be cut to between 0% and 5% to facilitate the growth of Vietnam’s main exports. This will enhance the competitiveness of Vietnamese goods in term of prices, and create a momentum for domestic and foreign manufacturers to expand their production, attracting orders with higher added values.

However, the question is how export enterprises can most take advantage of these FTAs to boost exports and expand their market. Currently there are still a number of enterprises not interested in tariff preferences. Therefore in future, the Ministry of Industry and Trade (MOIT) should strengthen communication of FTAs’ content to the business community so that enterprises can fully take advantage of those FTAs. The MOIT should also co-ordinate with relevant ministries and agencies to work out measures to attract investment in export supply chains in order to increase the rate of domestic content and value for export products.

Challenges ahead

It is predicted that the world economy will continue to recover, and the Government’s efforts in macroeconomic management will help create a favourable environment and open new opportunities for exports. However, difficulties and challenges remain as the source of raw materials for manufacturing export goods, is still heavily reliant on imports, and uncertainties in the world will negatively affect the Vietnamese economy, especially the export sector. Vietnam is also expected to face more anti-dumping lawsuits and increased competition in the global market. These challenges require the co-ordinated efforts of ministries, agencies and business associations to address shortcomings and take advantage of opportunities and resources for the goal of sustainable development.

In order to achieve the 2015 export target of more than US$160 billion, up 10% from 2013, the Ministry of Industry and Trade and relevant ministries and agencies should focus on measures to support enterprises, remove difficulties for farmers and encourage foreign companies to invest in high-tech and environmentally friendly projects. They should also work together to increase trade promotion activities, help the business community to take advantage of free trade agreements, provide accurate market forecasts and up-to-date information on export markets and further simplify administrative measures to help enterprises reduce customs costs and clearance time.

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