Difficult to firmly balance the trade balance

Assoc. Dr. Pham Tat Thang, Senior Researcher, Trade Research Institute (Ministry of Industry and Trade).

It is said that we should not be too happy when Vietnam surpasses this year because of the surplus that contains many unstable factors. What is your point?

In fact, the state of Vietnam economy is always trade deficit. This is because Vietnam's export goods are mainly agricultural, forestry and aquatic products or low-value processed goods. Meanwhile, Vietnam imported inputs such as machines and high-value technology. Trade deficit is one of the macroeconomic indicators of Vietnam. The government is aware of this and sets the goal of trying to balance the trade balance by 2020. Setting such a goal is a high goal.

However, in recent years, there have been some cases of export surplus such as 2013, 2014. That period, the global economic crisis. There are items of world demand decline so the countries do not import goods from Vietnam. Vietnam does not have orders again resulting in no need to import many other inputs. Meanwhile, in the agricultural sector, Vietnam still exports relatively well. Some of the FDI products still export well. This makes Vietnam export surplus. Excess at that time is worrying, not praiseworthy.

In the period 2015-2016, Vietnam's trade deficit as usual. However, in the first 10 months, the export surplus has returned. The good effect of trade surplus is to make the source of foreign currency rich, the ability of foreign currency reserves increased. However, it should not be too happy because the trade surplus here is still unsustainable. Vietnam's export surplus this year mainly thanks to the export of many agricultural, forestry and aquatic products as well as electronic goods of FDI.

Despite the overall view of Vietnam's economic surplus, in fact, Vietnam is still trade deficit from markets such as Korea, China. Is this disturbing, sir?

It can be imagined that the entire state of the economy in 2017 is a trade surplus, in which it is mainly exported to the US, Japan, and the EU. This proves that the value of agriculture, processed goods such as textiles and garments, footwear, etc., are still well-consumed in these markets, but Vietnam has not imported high technology from these markets.

Export turnover of fruit and vegetables of Vietnam has increased sharply in 10 months 2017. Source: Internet.

Meanwhile, from the beginning of the year, looking specifically, it is true that Vietnam still trade deficit from markets such as Korea, China. The import of raw materials for textile, footwear, plastic etc., as well as a direct investment through investment projects in Vietnam. For example, Samsung Group (Korea) invested heavily in Thai Nguyen and Bac Ninh. Samsung's mother company to bring goods into Vietnam is included in the import. Meanwhile, export turnover of mobile phones, computers etc., Samsung is very large, but the benefits to Vietnam is quite small, not significant. Vietnam is still mainly employed.

It is also an increase in imports, but it will be better if Vietnam focuses on free trade agreements to promote technology trade, equipment etc., from countries such as the United States, Japan, EU, etc., in the future, the balance will be more sustainable.

The "picture" seen in Vietnam's export surplus is mainly expected in the FDI and export of agricultural, forestry and fishery products. To increase the value of goods export in the coming time, increasing the benefits for Vietnamese enterprises instead of current FDI enterprises, in your opinion, what is the effective solution?

At present, Vietnam's industry is underdeveloped. Exports mainly depend on FDI and agriculture. The export of agricultural, forestry and fishery products is positive, but export is still in terms of quantity rather than quality. In the long run, in order to increase the value, it is necessary to accelerate the export of agricultural and aquatic products in the form of processing. Regarding the reduction of dependence on FDI, the most important solution is how the domestic enterprises are linked to the production chain of FDI enterprises. In particular, domestic enterprises provide inputs to FDI enterprises or supply terminals for FDI enterprises. For example, in the case of Samsung, businesses need to improve capacity, enter advanced technology to be able to produce screws, electronic circuits etc., ensure the quality, provided by Samsung. To do so, the overall solution is that the State has a policy of actively supporting private enterprises to develop more strongly.

The government has set a target for 2020 to truly balance the trade balance. Could you say that in terms of Vietnam now, this goal is feasible?

The balance of trade must be accompanied by the achievement of the objective of a developed economy in the direction of industrialization and modernization. The Government also aims to 2020, the economy developed in the direction of industrialization and modernization. However, in my opinion, this is certainly not achieved. When there is no developed economy in the direction of industrialization and modernization, Vietnam does not have goods with high-value content for export. Therefore, the goal of balancing trade is unlikely to be achieved.

In the long term, there should be changes in economic restructuring, both in terms of investment and investment direction. For example, in the industrial sector, the manufacturing and processing industry must develop, but only concentrating on investing in the construction sector such as apartment buildings and resorts etc., is not valuable, only enriching a group of giants.

Thank you Sir!