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Vietnam: FTAs a silver lining for economic growth
HANOI: New-generation free trade agreements (FTAs) continue to be a silver lining in Vietnam’s trade growth targeting US$1 trillion (RM4.33 trillion) in import-export revenue by 2025.
The country’s trade surpassed the milestone of US$700bil (RM3 trillion) in value to hit US$735bil (RM3.19 trillion) in 2022, a rise of 9.5% against the same period of the previous year, according to the updates of the General Statistics Office.
Of the figure, exports rose by 10.6%, while imports by 8.4%.
With a trade surplus of nearly US$11bil (RM47.7bil) this year, Vietnam registered a trade surplus for seven years in a row, which contributed significantly to the balance of payments, improving foreign-exchange reserves, stabilising exchange rates and other macroeconomic indicators, the Deputy Minister of Industry and Trade Tran Quoc Khanh said.
Thirty-nine products joined the club of over a billion US dollars in export revenue, nine of which had export value from US$10bil (RM43.3bil).
Although Vietnam is an economy with high openness (the ratio of goods imported and exported to gross domestic product or GDP was 200%) and easily affected by external factors, trade with impressive results became a highlight of the economy in the context of growing global uncertainties
This included the impact of the Covid-19 pandemic, the Russia-Ukraine conflict and rising inflation worldwide.
According to Tran Thanh Hai, deputy director of the ministry’s Import-Export Department, to achieve high export turnover and added value, it was necessary to mention the efforts of enterprises in exploiting traditional markets and searching and expanding into new markets.
The implementation of new-generation FTAs such as the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP), EU-Vietnam FTA (EVFTA) and UK-Vietnam FTA (UKVFTA), and the Regional Comprehensive Economic Partnership also helped promote exports to these markets with an average growth rate of around 20%, Hai said.
By the end of 2022, 15 FTAs with Vietnam were in effect, and two others under negotiation. Hai said that implementing FTAs, especially new-generation FTAs, contributed significantly to promoting exports, especially to markets where it had never had an FTA like Canada, Peru and Mexico.
The growth in trade in 2022 also came from the effort to stabilise and resume production and business from the fourth quarter of 2021 after the pandemic, which created a great motivation for the production of goods and trade activities.
He said that the effort to facilitate trade and accelerate administrative reforms also played an important role in trade growth.
According to the General Department of Customs, during the past three decades, the Vietnamese economy witnessed a strong transformation process.
It gradually implemented multilateral and diversified foreign policies, taking advantage of trade and investment cooperation, integration and technology transfer to promote economic development.
The year 1995 was marked by a series of memorable events, which set the stage for Vietnam’s process of opening up and integrating into the global economy, including the accession to Asean, the Asean Free Trade Area, the application to join the World Trade Organisation (WTO) and the normalisation of Vietnam-US relations.
The customs authority said that Vietnam’s imports and exports saw strong growth and constantly set new records.
Vietnam reached the milestone of US$100bil (RM433bil) in trade for the first time in 2007 and US$200bil (RM866.8bil) after just four years.
The milestone of US$300bil (RM1.3 trillion) was hit in 2015, US$400bil (RM1.73 trillion) in 2017, US$500bil (RM2.17 trillion) in 2019, and US$600bil (RM2.6 trillion) in 2021.
The customs authority said that Vietnam was continuously in the top 30 countries and territories with the largest import-export value globally in the ranking of the WTO.
Notably, while the rankings of Asean countries did not see significant improvements in recent years, Vietnam saw remarkable growth.
In 2021, Vietnam ranked 23rd in export value and 20th in import value worldwide.
Despite two-digit growth in 2022, exports were anticipated to face several difficulties and challenges, both from within the economy and external influences.
To achieve the goal of export growth at 6% this year, coupled with maintaining a trade surplus, more support must be given to enterprises, especially in capital access and market expansion.
The first challenge was the decline in orders when many cut, postponed or cancelled. Many enterprises could not sign new ones due to the rising inflationary pressure from many countries, including Vietnam’s major trade partners.
Hoang Hong Thuy from the Chien Thang Garment Joint Stock Company said that orders were around 30% lower due to the impact of global issues, including the Russia-Ukraine conflict.
The second challenge was the financial pressure on export enterprises, with most facing capital shortages, difficulty accessing capital due to high-interest rates, fluctuating foreign exchange rates, and rising input material prices after more than two years of struggling with the pandemic.
In addition, the requirements for the quality of goods were increasingly demanding. It was a must to improve the product quality to take advantage of tariff preferences provided by new-generation FTAs, such as EVFTA and CPTPP.
According to Nguyen Cam Trang, deputy director of the Import–Export Department, the story was not only about origins but also about how to meet requirements on food hygiene and safety as well as labour standards.
Another problem was that foreign direct investment (FDI) companies were dominant in the export revenue of Vietnam. In 2022, the exports of FDI companies accounted for 74% of the country’s total export revenue.
Dau Anh Tuan, deputy general-secretary of the Vietnam Chamber of Commerce and Industry, said that the growth of domestic private enterprises was lower than that of FDI enterprises. This highlighted several points.
The first was that the domestic private sector was not as good as FDI enterprises in taking the advantages of FTAs Vietnam signed.
The second was domestic enterprises were slower than FDI in moving up the supply chain ladder.
Minister of Industry and Trade Nguyen Hong Dien said that while the manufacturing and processing industry accounted for 89% of exports in 2022, the participation of domestic enterprises remained modest.
Participation of domestic enterprises in the global supply chains was also limited, and the country’s export was still heavily dependent on the FDI sector, Dien added.
Nguyen Thi Thu Trang, director of VCCI’s WTO and Integration Centre, said FTAs would continue to be a silver lining for enterprises to create competitive advantage and maintain and expand market shares.
To maintain growth engines for export, Trang said that Vietnam should strengthen the negotiation of new FTAs (bilateral, multilateral and regional) and, at the same time, have an annual programme to evaluate the efficiency of the implementation of FTAs, thereby identifying and promptly handling issues that affected the use of such trade agreements
Dien said the ministry would review and advise authorities to sign agreements. — Viet Nam News/ANN