30 Years of Vietnam s Foreign Trade ( ) and Beyond

Transcription

1 30 Years of Vietnam s Foreign Trade ( ) and Beyond Dr Le Quoc Phuong Deputy General Director Vietnam Industry and Trade Information Center (Ministry of Industry and Trade)

2 Contents VIETNAM S TRADE REFORMS SINCE 1986 ACHIEVEMENTS SHORTCOMINGS FUTURE TRADE DEVELOPMENT

3 I. VIETNAM S TRADE REFORMS SINCE 1986 Before 1986: central planning, inward-looking economy State monopoly of foreign trade Trade carried out by small number of state-owned import-export enterprises Tight regulations over foreign trade Rigid quantity targets for trade Fixed exchange rate Largely inward-looking economy No international economic integration. Joined only CMEA (Council for Mutual Economic Assistance), economic cooperation organization of Soviet bloc Traded mainly with Soviet Union and few other socialist states No FDI sector.

4 I. VIETNAM S TRADE REFORMS SINCE 1986 Since1986: market-economy reform, foreign trade liberalization Decentralization of foreign trade State monopoly of foreign trade abandoned Private firms allowed to take part in exports/imports. Removal of export licensing control Export licensing system abolished Tariff reduction, lowering of NTBs Number of import tariffs and export duties dropped dramatically Quotas removed from almost all export and import goods (except few) Exchange rate reform Different exchange rates, previously applied to trade transactions within and outside central plan, were unified. Domestic currency devalued to establish more realistic exchange rate.

5 International Integration efforts Milestones 1995: Joined ASEAN 1996: Joined AFTA (ASEAN Free Trade Area) 1998: Joined APEC (Asia-Pacific Economic Cooperation) 2000: Signed Vietnam-US Bilateral Trade Agreement (VUBTA) 2007: Joined WTO 2008: Signed Vietnam-Japan Economic Partnership Agreement (VJEPA) 2009: Joined FTA between ASEAN and its major trade partners: ASEAN - China (ACFTA), ASEAN - Japan (AJFTA), ASEAN - Korea (AKFTA), ASEAN - India (AIFTA), ASEAN - Australia, New Zealand (AANZFTA) 2015: Signed FTA Vietnam -Korea (VKFTA), FTA Vietnam-Customs Union (Russia, Kazakhstan, Belorus) Talks for FTA Vietnam -EU (EVFTA) and TPP completed ASEAN Economic Community (AEC) effective 31/12/2015.

6 II. ACHIEVEMENTS During , Vietnam suffered from major external shocks collapse of socialist states of Soviet bloc (Vienam s major trade partners) Asian financial crisis badly impacted Thailand, Indonesia, Malaysia, Korea (Vienam s important trade partners in Asia) global economic crisis severely impacted US, EU, Japan (Vienam s major export markets) But Vietnam s trade keeps expanding, thanks to reforms, international integration efforts Trade value.1986 exports US$ 800 mil. 2015: expected US$S160 bil Number of trade partners. Before 1991 Vietnam traded mainly with Soviet bloc. Now number of trade partners increases to more than 200. Growth rate of trade For almost entire period (except few years Vietnam affected by external crises), trade growth generally exceeds 20%. Average growth rate of exports for this period 25.5%/year, high by world standard

7 II. ACHIEVEMENTS Figure 1: Vietnam s foreign trade ( ) Exports ($US bil) Imports ($US bil) Trade balance ($US bil)

8 II. ACHIEVEMENTS Exports/GDP ratio Exports of goods/gdp rose from 30.8% in 1990 to 80% in 2014 (Exports+Imports)/GDP now is some 160%, showing high degree of openness Exports per capita US$36 in 1990 => US$2080 in 2014 Commodity composition of trade In 1991: Vietnam exported 180 items (counted at 3-digit level of SITC). In 2015: exported items cover almost full range of world trade (269 commodities). Shift of export commodity structure from resource towards manufacturing In 1991: 17/20 top exports of Vietnam were resource-based (agriculture, fishery, forestry, mining), 3/20 are manufactured (clothes, travel goods). In 2014: 9/20 top exports were resource-based, 11/20 are manufactured. Manufactured goods accounts for more than 70% of exports Vietnam is world top exporter of many commodities (Table)

9 II. ACHIEVEMENTS Table: Vietnam as world s top exporter of many commodities Commodity Export value 2014 (US$ bil) Rank in world Vietnam share in world exports (%) Cashew Coffee Rice Footwear Garment Seafood Wood, wooden products 6,3 4 7,7 Natural rubber

10 III. SHORTCOMINGS Export value high, but value-added very low 90% of export agricultural and seafood products are unprocessed. Manufactures account for more than 70% of exports, but most are assembled. Vietnam export commodity competitiveness is low Most of export products (including agricultural and manufactures) are low quality and have no brand name, thus have low price. Slow shift from low value-added exports to high value-added. Export structure shifted from resource-based towards manufactures in early 1990 Further shift from low value-added exports to high value-added has been slow. Vietnam s top export items still dominated by raw materials (rice, coffee, rubber, seafood, vegetables, crude oil, coal), labor-intensive manufactures (garment, shoes, travel bags, furniture) and assembled hi-tech products (smart phones, computers, photo- and videocameras).

11 III. SHORTCOMINGS Persistent high trade deficit Vietnam has chronic trade deficit in (except 1992, ). Extremely large trade deficit with China (US$ 30 bil in 2014). Most manufactures based on assembly. Supporting industries under-developped => Vietnam imports most of materials, parts to make final export products => trade deficit. Trade deficit common for developing countries, which intensively import capital goods for industrialization. But Vietnam s high long-lasted trade deficit => economic instability (current account deficit, devaluation of domestic currency, inflation) High dependency on limited number of export commodities and markets Although Vietnam s export commodities cover almost full range of world exports, limited number of goods dominates exports (Table) 24 major export items (above US$ 1bil) account for 86.5% exports in largest items (above US$3bil) covers 70%, 2 largest items (smart phones, garment) make up 30% Although Vietnam trades with 200 economies, most trade is with limited number of economies (Table) 6 top export markets (US, EU, China, ASEAN, Japan, Korea) account for 75% of Vietnam s exports. 7 top import sources (China ASEAN, Korea, Japan, EU, US) make up 80% of imports Dependency on few trading partners risky if unfavorable conditions occur on these markets. Collapse of Soviet bloc => Vietnam lost major export markets. Asian economic crisis => Vietnam s major Asian trade partners severely impacted. Global crisis => Vietnam s major trade partners (US, EU, Asian economies) were hurt).

12 III. SHORTCOMINGS Vietnam s top export items (value above US$ 1 billion in 2014) TT Item Export value (USD mill) Share (%) Total export value , FDI companies 93, Domestic companies 56, Phones and parts 23, Garment 20, Computers, electronic products, devices 11, Footwear 10, Seafood 7, Machinery, equipment and parts 7, Crude oil 7, Wood, wood products 6, Transport eqipment and parts 5, Coffee 3, Rice 2, Yarn, weave fabrics 2, Travel bags, wallets, hats 2, Photocameras, videocameras and parts 2, Plastic products 2, Iron, steel 1, Cashew 1, Natural rubber 1, Steel products 1, Vegetables 1, Pepper 1, Cassava and products 1, Material for textile and footwear 1, Gasoline and refinery products 1,

13 III. SHORTCOMINGS Vietnam s top export markets and import sources (2014) Market Value (USD million) Share (%) Exports Imports Exports Imports Total 150, , US , EU-28 27,906 8, China 14,931 43, ASEAN 19,118 22, Japan 14,693 12, South Korea 7,144 21, Taiwan 2,308 11, Hong Kong 5,202 1, UAE 4, Australia 3,990 2, India 2,511 3,

14 III. SHORTCOMINGS Domination of FDI sector in exports FDI companies make up more than 2/3 of exports, domestic companies less than 1/3 Some export items dominated by FDI companies: smart phones (99.6%), computers and electronics (98.9%), cameras (98.1%) and so on Vietnam s high growth of exports stems mainly from high growth of FDI exports, while domestic sector grows very slowly

15 IV. Future trade development To date, apart from WTO and BTA with US, Vietnam signed 10 FTAs : AFTA (ASEAN Free Trade Area), also known as ATIGA (ASEAN Trade in Goods Agreement) Five (ASEAN+1) FTAs between ASEAN and its major trade partners in the region (China, Japan, Korea, India Australia and New Zealand) Latest development in 2015: Signed FTA Vietnam -Korea (VKFTA) in May To be effective 2016 FTA Vietnam Customs Union (Russia, Kazakhstan, Belorus) in May To be effective 2016 Talks for FTA Vietnam-EU (EVFTA) completed in Dec Expected effective in 2016 Talks for TPP completed in October Expected effective 2018 ASEAN Economic Community (AEC) effective on 31/12/2015. Currently talks going on for: RCEP: FTA of 10 ASEAN members and 6 major trade partners which have FTA ASEAN +1 FTA with European Free Trade Area (Switzerland, Norway, Liechtenstein, Iceland) Future development: Vietnam s foreign trade sector and its companies will Greatly benefited by FTAs and other international treaties Face with higher and tougher requirements (technical, SPS, environment and labor standards, rule of origin, equal treatment, etc)

16 IV. Future trade development Future trade development greatly influenced by FTAs and other international treaties FTAs Vietnam has signed, or is going to sign, have many differences (participating partners, scope of sectors involved, roadmap for liberalization, depth of liberalization measures). But all have one common point: each member economy committed to opening up its own market for goods/services from other members, in exchange of having greater access to other members markets. This creates opportunities and imposes challenges. Opportunities For entire economy: pressure to speed up reforms to raise competitiveness for whole economy, for each company, for goods/services on both domestic and world markets. For trade: Vietnam s export goods will have better access to vast markets => Vietnam s exports further expands => Creates Economies of scale effect for Vietnam s economy => more efficient For FDI: creates more favorable conditions to attract more investment (Investment stimulus) Challenges Fast opening up economy under trade pacts => Vietnam s companies/goods/services have to face fierce competition from foreign companies/goods/services on both domestic and world markets. This takes place in context of low competitiveness of Vietnam s economy its companies/goods/services => Vietnam s uncompetitive sectors and companies may get in serious trouble.

17 IV. Future trade development 1. WTO: Vietnam joined 2007 Positive impacts Opportunities and challenges of selected trade pacts Dispute settlement: Vietnam s companies have equal rights, as companies from other members, to file complaints and settle trade disputes. Tariff reduction: tariff commitment under WTO has quite limited impact as most tariff cuts are not significant (except for IT and textile products) and have quite long reduction roadmap. WTO has larger positive impacts on institutions and services sector Impact on Institutional sytem: WTO has larger impacts on institutional system (trading rights, distribution rights, rights of investors) => making Vietnam s business environment more transparent and competitive => pressure on Vietnam s companies to restructure towards world standard and higher efficiency. Foreign companies given rights to do business in Vietnam => encourage competition Impact on service sector: Commitments under WTO to open service sector => speed up the development of Vietnam s service sector => making service sector more developed, more efficient => reducing service cost => reducing companies production cost => enhancing economic growth.

18 Future trade development 1. WTO Negative impacts Vietnam s companies have to accept rule winner is stronger and more efficient company. Most of Vietnam s companies have limited capacity in terms of capital, technology, human resources, business and management skills in global environment => at risk to be taken over by more experienced, more efficient foreign companies. Joining WTO means opening up domestic market on MFN basis to all WTO members => Vietnam s companies/goods/services are under competition pressure from foreign companies/goods/services => Some Vietnam s companies, even sectors, will collapse In projects not using state budget, Vietnam does not have rights: to select sub-contractors. to require sub-contractors use domestic goods. Some FDI companies in production sector will shift to import activities or take part in distribution activities to take advantage of gradual lower tariffs => Imports surge.

19 Future trade development under signed and to-besigned FTAs 2. Vietnam-Korea FTA (VKFTA) signed May 2015, effective 2016 Opportunities Vietnam opens market for extra 200 commodities from Korea (as compared to FTA ASEAN Korea), raising number of tariff lines liberalized from 87% of total in AKFTA to 894% in VKFTA Korea opens market for extra 495 commodities from Vietnam (as compared to AKFTA), raising number of tariff lines liberalized from 91.3% of total in AKFTA to 95.4% in VKFTA. In particular, Korea cuts tariffs on Vietnam s manufactures (garment, machinery) and agricultural products (shrimp, fish, fruits, vegetable). Vietnam s garment-textile industry: Tariffs on textile materials imported from Korea reduced (Korea is2 nd largest supplier of textile materials rts for Vietnam after China). Korea abolished tariffs on Vietnam s garment 500 Korea FDI textile-garment companies in Vietnam also benefiied Vietnam s electronic industry Tariffs on devices imported from Korea reduced. Vietnam currently imports large amount of mobilephone parts from Korea. Korea FDI companies in Vietnam benefitted (most smart phones produced by Korean companies Samsung, LG ) Vietnam s automobile industry: tariffs on vehicle parts imported from Korea reduced to 0-5%). Currently tariffs on vehicle parts imported from Korea range from 3 to25% Vietnam s seafood industry (shrimp, fish)benefitted: Tariffs on Vietnam s seafood exported to Korea reduced. For shrimp, Korea abolishes tariff for import quantity within the import quota of 15 thousand tons. Vietnam now 3 rd largest supplier of seafood for Korea after China and Russia. Korea is Vietnam s 5 th largest export market for shrimp after US, Japan, EU, China Vietnam s agricultural products Korea for the first time opens markets for Vietnam s sensitive produce such as garlic, ginger, bee honey. Tariffs on tropical fruits (mango, banana, pineapple) imported from Vietnam abolished within 10 years However rice, chilly and onion are excluded from list.

20 Future trade development under signed and to-besigned FTAs 2. Vietnam-Korea FTA (VKFTA) Challenges for Vietnam companies Vietnam companies producing vehicle parts: to face fierce competition with cheaper parts imported from Korea Vietnam companies producing trucks: to face fierce competition with cheaper trucks imported from Korea Vietnam retail companies : to face fierce competition with Korea retail companies coming to Vietnam (eg Lotte) Vietnam agricultural-seafood export companies: on one hand benefitted from Korea opening markets on the other hand will have to face with more strict SPS and food security regulations.

21 Future trade development under signed and to-be-signed FTAs 3. FTA Vietnam EU (EVFTA) Opportunities EU opens market for 99% of total tariff lines on Vietnam s goods => Vietnam s exports to EU expected to jump by 30-40% after EVFTA effective Vietnam s garment industry gets large benefits, as EU is 3 rd largest export market for Vietnam s garment Vietnam s footwear industry greatly benefitted, thanks to tariffs gradually reduced to 0% on roadmap EU is world 2 nd largest import market for footwear EU is one of 2 largest export markets for Vietnam s footwear (US and EU) Vietnam is 2 nd largest footwear supplier for EU after China Vietnam footwear export value to EU expected to double current value after EVFTA effective Vietnam seafood industry: currently 461 companies have meet requirements to get licensed to export seafood to EU (after only China) => opportunity to increase Vietnam s seafood market share in EU.

22 Future trade development under signed and to-be-signed FTAs 3. FTA Vietnam EU (EVFTA) Challenges Vietnam s garment industry To get benefits from 0% tariff: Vietnam s garment has to comply with fabric forward rule, meaning at least fabric and sewing should be done in Vietnam But Vietnam currently imports fabric largely from China => making it difficult for Vietnam garment companies to be benefitted from EVFTA Vietnam s seafood industry will face with more strict quality requirement (origin certificate, traceability, SPS and food security requirements) Vietnam s companies will face with more strict requirements on environment protection, social responsibility, labor standards

23 Future trade development 4. TPP Opportunities (eg for US market) Vietnam s garment industry: TPP reduces tariff to 0% from current average tariff of 17% Vietnam s footwear industry: TPP reduces tariff to 0% from current average tariff of 12% Vietnam s seafood industry: TPP reduces tariff to 0-6% on Vienam s seafood (shrimp, catfish) Vietnam s wooden furniture industry : TPP reduces tariff to 0% on Vienam s furniture

24 Future trade development 4. TPP Challenges Vietnam s garment industry faces "Yarn forward" clause IPR protection: much longer than in WTO Possibilty of increased anti-dumping, anti-subsidy measures, more strict technical and SPS barriers when Vietnam s imported goods increase rapidly. TPP limit power of home government over foreign companies Disputing foreign companies may sue home government by submitting claim to foreign courts instead of home courts. Disputing foreign companies may claim compensation for damage or loss by reason of alleged breach of any rights by domestic regulations (on land use, environtment, health, finane, etc)

25 End of presentation Thank you!