Deputy Minister of Industry and Trade, Nguyen Thanh Bien, has an exchange talk with the press on declining exports and large trade deficit. The situation is not yet an alarm, he said.
What is your opinion about the recent trade deficit?
The trade deficit in the first two months of 2010 was estimated at US$1.74 billion, equal to 19.6 % of total import spending. The level of trade deficit lies in the territory approved by the National Assembly, at not more than 20 %. However, the situation is not very worrying because there are some causes for the high trade deficit. To be exact, Vietnam did not export gemstones and precious metals in the first months as many as in 2009 but spending billions of dollars on these items to stabilise the domestic market. In my opinion, this matter will not be a major concern in the following months.
On the other hand, import expenditures of foreign-invested enterprises increased 50 % while high value of imported commodities also caused an inflation of value.
Trade deficit widened because exports declined. While production input materials such as petrol increased, agricultural products retreated in price. For instance, rice and coffee dropped 25 % over the same period of last year. Without favourable conditions as last year, the volume of exported rice slid while the price also tumbled. The exportation of processed industrials like textile and leather shoes signalled good growth but trade barriers in importing markets may be a major obstacle.
What is the solution to the trade deficit?
The Ministry of Industry and Trade has submitted several trade deficit reduction measures to the Prime Minister and the Government has agreed to assign us to coordinate with other ministries to implement. Our top concerns include forex adjustment policy, business troubleshooting measures, or price keeping measures.
On March 2, 2010, the Ministry of Industry and Trade met with the Vietnam Food Association. The two bodies agreed to purchase 1 million tonnes of rice for temporary stockpiling for later export. This measure will be applied to some other commodities like coffee. The Ministry is also actively implementing trade promotion activities in foreign markets.
In addition, boosting export is also a way to reduce trade deficit. The Ministry also encourages companies to negotiate with partners to sign contracts to speed up the delivery. Contracts signed in March and the first quarter will be delivered earlier as the volume is greater.
In the coming time, the Ministry will step up exportation of goods with high value, in large volume and with high growth potential. Particularly, it will facilitate the shipment of key exports and trivial items with high content of technology like software, electronics and computers.
Many countries have applied tariff barriers to restrict imports. Can Vietnam adopt any of these to improve trade balance?
Vietnam must take this issue into consideration carefully before applying any technical barriers or technical measures. We do not discriminate but have to apply these measures in accordance with the laws and the capacity of Vietnam.
At present, Vietnam only regulates tariff barriers at the limited level. For example, when it imports foods, processed foodstuffs and vegetables, it may regulate by veterinary or quarantine rules. The application of tariff measures is only successful when it comes from the coordination of concerned authorities. The Ministry of Health strengthens safety measures to food items that may affect consumers or the Ministry of Transport coordinates with other organs to control the import of transport means or the Ministry of Industry and Trade will actively join hands with the Ministry of Agriculture and Rural Development and the Ministry of Science and Technology to implement these solutions thoroughly.
High exchange rate and interest rate are also worsening trade deficit. How have the measures launched by the Ministry of Industry and Trade like export credit guarantee been working?
At present, the State Bank of Vietnam is lending 18-20 % per annum and this will be a capital attracting channel for banks, thus raising barriers to access credits with low interest rates against enterprises. The interest rate of over 20 % is a woe to exporters as it blunts the competitiveness.
Therefore, banks should widen lending accesses for businesses, especially exporters. In the current situation, the return of many businesses is only 25 % and if the interest rate will be 20 % plus, the return ratio will be affected and the competitiveness of Vietnamese goods will be weakened.
Regarding export credit insurance, several EU countries like France and the Netherlands, and Asian nations like Japan, South Korea and India have applied this type of insurance for a long time. The Ministry of Industry and Trade is working with the Ministry of Finance to survey and send the scheme to the Government in the first quarter of 2010.
Reported by Huong Ly
Vietnamese
