Imports Outstrip Exports in First Half of 2007

Vietnam’s foreign trade is encountering big challenges.

Slow-growing export
May and June 2007 have seen favourable conditions to accelerate export in both intensive and extensive aspects. However, each month, Vietnam was able to earn just over US$4 billion, around the previously planned target. Thus, export revenue was only US$22.455 billion in the first six months this year, up 19.4 per cent on year, much lower than the 25.7 per cent growth in the first half of 2006.

Excluding crude oil, the six-month period export revenue of both Vietnamese-invested and foreign-invested sectors was higher than last year. The 10 per cent reduction in crude oil export value (resulted from both shrinking production and falling price) is the factor holding back the country’s export growth.

 

Not only crude oil, but also 10 other commodities had significantly slower growth rates. For example, apparel and textile rose 25.9 per cent, down from 32.6 per cent in the same period last year, footwear 10.8 per cent versus 20.3 per cent, and aquatic products 15.5 per cent versus 25.7 per cent.

 

Technical barriers raised by importers may have adversely impacted Vietnam’s export performance this year.

 

While exports slowed, imports made a record rise. Import spending exceeded US$27.2 billion in the first half of this year, up 30.4 per cent on year. The soaring export growth was seen in both the domestic sector (up 30.6 per cent) and the foreign-invested sector (up 30 per cent). However, the domestic sector posed serious concerns, as it earned only US$9.824 billion from exports while spending US$17.342 billion on imports. Thus, 76.5 per cent of the six-month trade deficit was contributed by the domestic sector, much higher than the percentage of 67.7 per cent in the first half of 2006.

The domestic sector’s high trade deficit percentage reflects its heavy reliance on outsourcing, and the underdeveloped supporting industries. This shows the competitive weakness of domestic sector. However, according to experts this trade deficit is now acceptable, because most import expenditures are on machinery, equipment and spare parts. During the six months, US$4.4 billion was disbursed for these commodities, up 46.5 per cent year on year. Meanwhile, the trade deficit for consumer goods was only US$383 million, only equal to 1.6 per cent of export earnings. Therefore, the trade deficit is still at a “safe level.”

 

Based on import statistics from the first six months this year, experts said WTO entry led to soaring imports, with major import items seeing higher growth rates than the same period last year, especially steel, cloth, leather, materials, computers, electronic components and petroleum (down 3 per cent in the first half of 2006, but up 10.5 per cent in the first half of 2007). There is no other way than grasping all available opportunities and improving competitiveness to boost exports. In this way, export growth may outstrip imports as it did before. Then, the US$46.8 billion export revenue target in 2007 can be reached. (Investment)