Export in Second Half of 2007: Quality and Formalities

Never before has the quality of export commodities been under such scrutiny. Vietnam can increase exports in the remaining months, provided that administrative reform removes hurdles for businesses. This was the main thrust of the conference on exports in the first half of 2007 chaired by Vice Minister of Trade Nguyen Thanh Bien.

 

Ms Nguyen Thi Anh, Director of Song Tien Co Ltd, shocked the conference with the remark, “Though we often claim the volume of export, strict evaluation shows that the export value is not high or competitive. There are problems in all our main exports: pepper, coffee, cashew nut, aquatic products, rice, etc. Furthermore, shipments are dependent on partners, causing low export efficiency.” She pointed out that foreign ship owners recently increased freight charges without negotiating with concerned businesses. For example, the charge for a 40 foot container increased from US$800 in June to US$1,100 in July and now US$1,300. In August, the charge for a 20 foot container will increase US$400. Although charges have increased, shipment is still slow, causing other expenses. These problems are beyond the reach of the businesses. To increase export competitiveness, the best way is to reduce FOB and increase CIF. For this purpose, the logistics system must be upgraded.

 

For his part, Mr Van Thanh Huy, President of Vietnam Coffee-Cacao Association pointed out a serious problem. Of the over one million tonnes of coffee exported this year, impurities made up one per cent, against 0.5 per cent in coffee from other countries. “Though we have announced Vietnam quality TCVN 4193, unfortunately it has not been applied,” Mr Huy added.

Meanwhile Mr Do Ha Nam, President of Vietnam Pepper Association said that Vietnam quality TCVN should not be applied at the moment, as most Vietnamese products are processed manually and fail to meet the condition of less than 1 per cent of impurity. If the criteria are applied, only a few enterprises can satisfy it, causing difficulty for the majority.

 

According to Ms Anh, export encouragement has increased the number of aquatic enterprises from 200 to 450 and the export value from US$1 billion in 1999 to over US$3 billion in 2006. But Ho Chi Minh City remains the only place issuing Certificates of Origin (C/O). Backlogs in Ho Chi Minh City cost enterprises time and money. ”Wherever customs offices are located, C/O should be granted. It is a scientific approach,” Ms Anh suggested.

 

The repayment of VAT is often repeated at the conference. According to the report, the export is not paid upon L/C, but 45 days after paying tax rate of 5 per cent. And VAT repayment takes 60 more days. According to an estimate, for exports worth over US$1 million, enterprises must pay tax some VND1 billion, having to borrow money to “pay in advance for the State.” In the first half of 2007, the trade deficit is already US$4.78 billion, 21.3 per cent of the total export value, and US$2 billion higher than the first half of 2006. Consequently, Vietnam cannot control trade deficit in the remaining months. It also means that even with WTO membership, Vietnam is failing to fully benefit from the large market by increasing exports. In fact, Ho Chi Minh City has started importing dozens of famous world brands. The question of how to maintain import-export balance concerns both officials and businesses after joining the WTO.