HANOI: According to data from the General Department of Việt Nam Customs, Việt Nam’s trade deficit with other members of the Association of South East Asian Nations has been widening relentlessly in recent years, going up from US$3.2 billion in 2013 to $4 billion in 2014 and $5.5 billion last year. It climbed to $4.5 billion in the first nine months of this year. The deficit with Thailand alone during this period was $3.3 billion. It was $1.4 billion with Malaysia and $1.8 billion with Singapore.
Analysts attributed Việt Nam’s increasing trade deficit to the free trade agreements it has signed. For instance, the import of automobiles from Thailand increased consistently in the last seven months, as 18,837 units worth more than $343 million were shipped to the country. This made Thailand Việt Nam’s leading automobile exporter.
Preferential import tariffs under Việt Nam’s ASEAN Trade in Goods Agreement commitments caused the sharp increase in car imports from Thailand. Under the agreement, the import tax on automobiles from ASEAN members – Myanmar, the Philippines, Malaysia, Thailand, Singapore, Laos, Indonesia, Cambodia and Brunei besides Việt Nam – will fall from 50 per cent to 40 per cent by 2016, to 30 per cent by 2017 and zero per cent by 2018. The customs department figures show that Thailand was followed by South Korea, which shipped 3,560 cars to Việt Nam, and China with 2,260 units.
As for South Korea, besides a trade deal between it and ASEAN, the Việt Nam-South Korea Free Trade Agreement (VKFTA), which took effect last December, has also helped boost its exports to Việt Nam, especially of machinery and equipment and raw materials by causing import tariffs to be cut sharply, even to zero in some cases, with immediate effect. The analysts also pointed out some other reasons for Việt Nam’s big trade deficit, one of which is the proliferation of major foreign-invested projects, especially by Chinese companies in the country.
Việt Nam’s imports comprise of three main categories: capital goods, mainly machinery and equipment (accounting for 30 per cent of imports), intermediate goods (60 per cent) and consumer goods (10 per cent). A majority of capital and intermediate goods imported is for projects won by Chinese investors in this country. China is also the biggest provider of capital and immediate goods to Việt Nam.
Besides, the domestic industrial sector’s low competitiveness, particularly in support industries, forces many Vietnamese private and even State-owned enterprises to import machinery and equipment from South Kroea, ASEAN members and, especially, China. Việt Nam’s deeper and deeper integration into the global supply chain has also encouraged its businesses to import intermediate goods and assemble them into final products for exporting to other markets like the US and Europe.
