Last update 6/23/2011 1:00:00 PM (GMT+7)

To put a brake on exports to reduce trade deficit with China
VietNamNet Bridge – If Vietnam successfully controls the export of the products which have the input materials reliant on foreign sources, restructures the industries and markets, it will be able to reduce the trade deficit with China, according to Dr Dinh Van Thanh, Director of the Trade Research Institute under the Ministry of Industry and Trade.

Many experts say that Vietnam’s export growth is unsustainable. What do you think about it?

Our high priority goal in recent years is to increase exports as much as possible, using export as the driving force for the growth and the job generation. Vietnam strives to have the growth rate in 2001-2010 double the GDP growth rate. In reality, the GDP growth rate was 8 percent, and the export growth rate was nearly 19 percent. As such, the export growth rate target was attainable.

However, another target - which is also a very important goal – balancing the trade by 2010, was not reachable. Meanwhile, the trade deficit has been increasing significantly.

What should we do to reduce the trade deficit, while we still can increase exports in a more sustainable way?

In the socio-economic development strategy for 2011-2020, the government has set up the target of reducing the export growth rate. Vietnam plans to obtain the economic growth rate of 7.5-8 percent during that period, but the export growth rate would be just 1.5 times of the GDP growth rate, at about 12 percent, which means a slower growth rate than previously. If so, we will have sufficient conditions to restructure the export items.

A big proportion of the export turnover has been brought by the export or mineral resources and raw farm produce. However, in the time to come, we will have to focus on exporting processed industrial products and processed farm produce. If so, the decreases in the export turnover and the possible impacts on the employment can be foreseeable.

Nevertheless, the export slowdown will have positive significance because this creates favourable conditions for Vietnam to carry out the restructuring. At present, 80-85 percent of input materials for garment and footwear production must be fed with imports. If Vietnam still wants to boost the exports of the products, it will still have to increase imports.

When Vietnam reduces the targeted exports of the products which have low added values or low processed content, it will be able to reduce the imports, thus helping balance the trade.

However, we cannot put a break on the exports immediately, because this will lead to the cut of millions of jobs, and badly affect the social security.

Therefore, when designing the trade policy for the next development period, we will pursue the principle of slowing down the export growth rate and restructure the export items as the same time, to ensure that Vietnam can export the products with higher added values

The imbalance in the trade between Vietnam and China has been existing for many years. What should we do to improve the current situation?

This is really a thorny problem, and we are still considering the problem. China provides up to 60 percent of materials to Vietnamese enterprises which make products for export. China also provides the cheap equipment and technologies which helped Vietnam boost exports in the last period. If we do not intend to boost the export of the products which have the input materials reliant on Chinese sources, we will be able to reduce the imports from the countries.

However, there is a noteworthy information that China is shifting to rely on domestic investment and domestic market as the driving force for the growth, instead of relying on investment and export. This spells a new opportunity for Vietnam to boost exports to China.

If we still have to import materials from China, but we then make products to export back to China, this will help us balance the trade with the country.

In the policies on attracting foreign direct investment (FDI) to Vietnam, we hope that foreign invested enterprises can make big contribution to the export growth. However, in fact, many enterprises also import materials to make products domestically for export. The profits, in this case, belong to foreigners. What should we do to change the current situation?

A common thing in the policies on attracting FDI and encouraging export is that we offer investment incentives at maximum level to lure foreign investors to Vietnam.

I think that the policies need amendment. We should set the requirements, for example, the technology levels, on foreign investment projects.

Pham Huyen