Vietnam: FTAs a silver lining for economic growth
New-generation free trade agreements (FTAs) continue to be a silver lining in Vietnam’s trade growth targeting US$1 trillion in import-export revenue by 2025.
The country’s trade surpassed the milestone of $700 billion in value to hit $73.5 billion in 2022, a rise of 9.5 per cent 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 per cent, while imports by 8.4 per cent.
With a trade surplus of nearly $11 billion 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, 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 $10 billion.
Although Vietnam is an economy with high openness (the ratio of goods imported and exported to GDP was 200 per cent) and easily affected by external factors, trade with impressive results became a highlight of the economy in the context of growing global uncertainties, including 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 per cent, 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 we 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 the Association of Southeast Asian Nations (ASEAN), the ASEAN Free Trade Area, the application to join the World Trade Organisation 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 $100 billion in trade for the first time in 2007 and $200 billion after just four years. The milestone of $300 billion was hit in 2015, $400 billion in 2017, $500 billion in 2019, and $600 billion 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 per cent 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 per cent 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 FDI companies were dominant in the export revenue of Vietnam. In 2022, the exports of FDI companies accounted for 74 per cent 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 per cent 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
Nguyen Thi Huong, GSO’s general director, said that Vietnam needed to promote exports while strengthening the management of imports appropriately, ensure a sustainable trade balance and increase official exports in association with restructuring industries and building brands.
Dien said the ministry would review and advise authorities to negotiate and sign new bilateral and multilateral trade agreements.
In addition, measures would be raised to efficiently take advantage of existing FTAs to promote trade while priority would be given to developing e-commerce and building domestic and foreign supply chains.
Support would be provided to localities and enterprises to shift to official exports, build product brands and remove technical barriers so that enterprises could penetrate new markets.
Stressing the important role of FTAs in diversifying markets and promoting trade growth, Dien said the ministry would advise the Government to build a new strategy on international economic integration in the context that the global economy was forecast to struggle in 2023.
It was essential to take advantage of FTAs to develop fundamental and breakthrough industries, Dien said. Analysis and forecasts must also be enhanced to keep up with global and regional market developments.
He said that trade remedies would also be enhanced to protect the legitimate interests of domestic enterprises and maintain a fair, competitive environment in international trade.
He also urged enterprises to pay attention to renovating technologies to enhance competitiveness, improve product quality and build brands while speeding up digitalisation, greening production and transforming business models based on the application of digital technology and promoting cross-border trade via e-commerce.
Trang said that with timely and substantive support and every enterprise’s effort, the country could be confident and have motivation for further development in 2023 and beyond.
Source: Vietnam News