Agricultural and fishery products join fuel and minerals in stunting export growth.
According to the latest report from the General Statistics Office (GSO) Vietnam’s exports failed to meet the set target for 2015 of $165 billion, reaching just $162.4 billion, for an increase of 8.1 per cent, the lowest in five years.
Fortunately the trade deficit has been brought under control, at $3.2 billion, or 1.97 per cent of export turnover; lower than the expected $4 billion and the target of 5 per cent set by the National Assembly.
Obstacles face main items
Demand in global markets is falling, which contributed to the disappointing export performance. Out of the total of $162.4 billion, foreign enterprises exported $115.1 billion, up 13.8 per cent compared with 2014 and accounting for 70.9 per cent, while domestic enterprises exported just $47.3 billion, down 3.5 per cent against last year.
Export growth was not as high as expected due to turnover from agricultural and fishery products and fuel and minerals, which are Vietnam’s strength, continuing to decline both in value and volume.
Regarding export markets, the US remained the largest in 2015, with turnover of $33.5 billion, up 17 per cent and accounting for 20.6 per cent of the total. Following was the EU with $30.9 billion, up 10.7 per cent and accounting for 19 per cent of the total, China with $17 billion, up 13.7 per cent, and South Korea $9 billion, an increase of 25.2 per cent.
Revenue from exports to ASEAN, however, reached just $18.3 billion, down 4.2 per cent, while exports to Japan were only $14.1 billion, down 4 per cent. The falling crude oil price is primarily responsible.
Import turnover, meanwhile, was $165.6 billion, up 12 per cent compared to 2014. The foreign-invested sector imported $98 billion, up 16.4 per cent, while the domestic sector imported $67.6 billion, up 6.3 per cent.
China held its place as Vietnam’s largest import source, with turnover of $49.3 billion, up 12.9 per cent and accounting for 28.8 per cent of the total. South Korea followed, with $27.7 billion, up 27.4 per cent, ASEAN with $23.8 billion, up 3.8 per cent, Japan $14.4 billion, up 11.6 per cent, the EU $10.3 billion, up 16.3 per cent, and the US $8 billion, up 27 per cent.
The trade deficit in 2015 was therefore $3.2 billion, after three consecutive years of being in surplus. While a trade surplus was maintained with Vietnam’s two major trading partners, the US and the EU, of $25.5 billion and $20.6 billion, respectively, the deficit with other major markets increased. The deficit for the domestic sector was $20.3 billion, while the foreign-invested sector was in surplus by $17.1 billion.
Export items in decline
Pressure from AEC and FTAs
Many countries use trade defense measures to create barriers to protect their domestic production and others, including competitors of Vietnam such as Brazil, India, China, and Indonesia, devalued their currencies during the year to promote exports, which directly impacted on Vietnam’s exports. Given these factors the export result was actually quite encouraging. The contribution of exports to the economy, however, very much depends on added value, but Vietnam’s exports were mainly items without high added value.
In 2015 negotiations ended over the TPP and Vietnam wrapped up the EU-Vietnam Free Trade Agreement (EVFTA), while the Vietnam - South Korea FTA (VKFTA) took effect on December 20. These are expected to be drivers of export growth as well as economic growth in the future.
Many difficulties will remain in 2016. The global economy will still be unpredictable and trade barriers are expected to increase and become even more complex. Participating in FTAs will also pose challenges for the country’s economy and trade.
On December 31 the ASEAN Economic Community (AEC) will be officially established, creating many opportunities but also bringing many challenges, putting pressure on Vietnam’s integration and competition in the domestic market. ASEAN also has other trade channels, such as ASEAN+ China, which will facilitate the export of Chinese products to the bloc. If Vietnamese enterprises do not enhance their competitiveness it will be difficult to sustain exports.