Numerous challenges facing Vietnam’s exports in 2018

Last year saw Vietnam’s exports rise by 21% to 213.7 billion, crossing the US$200 billion mark for the first time. Building on 2016’s figure of US$1.78 billion, the country continued to run a trade surplus of around US$2.67 billion.

Export’s overreliance on strong FDI

Observing favourable indicators in exports over 2017, Duong Duy Hung, head of the Planning Department under the Ministry of Industry and Trade (MoI), said export markets continued their expansion to reach more than 200 trade partners covering 29 markets with an export value of over US$1 billion each, and four with a value of US$10 billion each.

Robust patterns of growth were reported in exports to many markets. As a result of businesses capitalizing on the benefits presented by free trade agreements (FTAs), the most notable developments were made in markets. Vietnam has signed such agreements with, like ASEAN (up 24.3% to US$21.7 billion) and Japan (up 14.2% to US$16.8 billion).

Last year, 764,052 certificates of origin were granted and the value of shipments enjoying C/O incentives rose to US$37.8 billion, up 22% in quantity and 24% in value when compared to 2016.

The composition of export goods saw constructive changes, with sizable growth in both agri-forestry and aquatic products and processed industrial products.

A significant point in the development of Vietnam’s exports is that the trade surplus was mainly with developed countries, which impose strict requirements on imported goods like the US, EU, Australia, and New Zealand. While Vietnam improved its trade balance with other markets, another positive signal is that it reduced the trade deficit with China thanks to expanding exports to the market.

However, MoIT Minister Tran Tuan Anh indicated a weakness in Vietnam’s exports due to an over dependence on the foreign direct investment (FDI) sector.

Most processing and manufacturing products bearing a high added value are dominated by FDI businesses. In fact, the sector accounted for more than 70% of total export revenue, so any fluctuations in the sector will partly affect the value of exports.

In the face of the pitfalls of FDI, agricultural and aquatic products have found it difficult to make inroads to demanding markets which place strict requirements on quality and food hygiene. Businesses have not yet built their own stable and trusted brands for most export products.

On the other hand, Vietnam still has to import a huge volume of materials to process and manufacture goods for export. This dependence will result in any increase to world market prices, pushing the cost of domestic production up and reducing the competitiveness of domestic goods, putting at a distinct disadvantage.

Complication break down

This year, the export sector is forecast to continue facing challenges and hurdles due to instability in the global economy and the fast changing financial and trade policies of strong economies such as the EU and US. In addition, the consensus among economists is that global growth in 2018 will be slow.

Meanwhile, global supply keeps rising as many countries establish themselves in the supply chain of agricultural products, and accelerate production programs in order to reduce their dependence on imports. Protectionism is escalating with an array of trade and technical barriers being imposed by countries. Exports of some agricultural and mineral products have hit their maximum level and it is difficult to see any further improvement.

Mr Tuan Anh suggests identifying products with the potential to boost exports in the specific period, and boost market expansion, especially traditional markets with which Vietnam has signed FTAs.

The MoIT will continue to publish information about FTA incentives, streamline issuance of C/O certificates via the Internet, and self-certification systems to raise the efficiency of FTA exploitation. It will also join the national one-door mechanisms and deploy the pilot project of a Regional Self-Certification system.

The ministry will seek improvements to the quality of its market research, analysis, and forecasting while providing market information at home and abroad. It will also take measures to renovate trade promotion management, propose workable policies, mechanisms, and measures to orient markets, and restructure the production of goods in which Vietnam holds an advantage.

Deputy Minister Tran Thanh Nam stresses the necessity of dealing with complications faced in key markets such as the EU and US, boosting brand building for agricultural products and market analysis, and outlining orientations for the development of material zones to better serve export activities.