Taking full advantage of FTAs to maintain export growth

In the context of COVID-19 pandemic’s complicated developments disrupting international trade, Vietnam’s exports have still maintained positive growth.

The mango production line of Southern Nafoods Joint Stock Company (Photo: DANH LAM)
The mango production line of Southern Nafoods Joint Stock Company (Photo: DANH LAM)

Another highlight of exports here is the continuous new recording of export surpluses. However, according to experts, the high increase in the trade surplus also has many potential concerns about the decline in domestic production.

Maintaining growth momentum

According to the Ministry of Industry and Trade (MoIT), in the first nine months of this year, the country's export turnover was estimated at US$202.4 billion, a year-on-year increase of 4%. Notably, the domestic economic sector continued to be the driving force for export growth as its nine-month export turnover reached US$71.4 billion, a sharp increase of 19.5% over the same period last year, accounting for nearly 35.5% of total export turnover. Meanwhile, the foreign-invested sector’s exports declined by 2.9% against the same period last year to US$131.03 billion. The domestic business bloc is still a bright spot in the exports of Vietnam with nine-month export growth four times higher than the national growth rate, especially in the context of FDI businesses’ exports recording negative growth.

Given the fact that global trade has been strongly influenced by the Covid-19 epidemic, Vietnam's exports still managed to maintain positive growth partly because the country made good use of tariff preferences from free trade agreements (FTAs) , thereby expanding its export markets.

Deputy Director of the Import and Export Department under the MoIT Tran Thanh Hai said that the participation in FTAs, especially the EU - Vietnam Free Trade Agreement (EVFTA), has improved competitiveness and helped Vietnamese goods expand their market share. By the end of September, the authorised organisations have granted 20,680 sets of certificates of origin (C/O) of the EUR.1 form with total turnover of nearly US$830 million in exports to European countries. The commodities granted C/O of EUR.1 were mainly in footwear, aquatic products, plastics, coffee, textile and garment, agricultural products and electronics. These are positive results, demonstrating that the EVFTA has helped enterprises expand their market in the context of the heavy impacts of the COVID-19 pandemic.

Another noteworthy aspect of the country’s exports is the continuous increase in the trade surplus. In September, the trade surplus has been estimated at US$3.09 billion. In the first nine months of this year, the country’s trade balance saw a surplus of US$16.58 billion, higher than the same period last year when the figure was US$7.27 billion. In the face of decreases or slowdowns in the growth in the exports of many countries in the region, the export growth of 4% and the maintenance of Vietnam’s surplus of trade balance in the first nine months is a huge effort. However, many experts have warned that although the trade surplus will help increase foreign exchange reserves, if the trade surplus increased due to a sharp decline in imports this would be a sign of concern. Domestic production still depends heavily on imported raw materials, so the decrease in imports partly reflects a decrease in domestic production. In addition, Vietnam's trade surplus was mainly based on the FDI sector (the trade surplus of US$27.51 billion), while domestic enterprises recorded nearly US$11 billion of a trade deficit.

Supporting enterprises

Deputy Minister of Industry and Trade Do Thang Hai has said that in the first nine months of this year, the turnover of “commodities to be imported” (including those serving production) was estimated at US$164.43 billion, a year-on-year decline of 0.3% and 88.5% of total import turnover. In particular, many raw materials for domestic production such as computers, electronic products and components recorded high turnover and growth rates with US$45.05 billion, an increase of 17.8% over the same period last year. Meanwhile, the turnover of imported goods that need to be controlled was estimated to have reached US$11.4 billion, down 15.3% compared with the same period last year. Accordingly, import turnover saw a decrease of 44.2% for cars with under nine seats, 32.3% for vegetables and fruits, 10% for cameras, camcorders and components; and 8% for confectionery and cereal products.

According to Deputy Director of the Exports and Imports Department Tran Thanh Hai, although the total export turnover has seen a positive growth in nine months, several sectors such as textiles and garments witnessed a significant decrease. Therefore, support for enterprises to take full advantage of the relevant FTAs is crucial to boost export growth in the near future. The relevant agencies under the MoIT should continue to closely coordinate with trade system and promotion organisations to enhance the provision of information to businesses to understand global developments and regional market trends towards a better business orientation. The MoIT will also focus on trade promotion and the building of brands.

Recently, the application of digital transformations in promotion activities and online communication have been strongly implemented to help enterprises overcome the adverse impacts of the COVID-19 pandemic and expand their trading activities. Other measures have been to enhance trade facilitation through the connection of administrative procedures between the MoIT ,the National Public Service Portal and the National Single Window as well as reviewing and simplifying business conditions and specialised inspection regulations. It is essential to enhance cooperation with the relevant agencies to reduce logistical costs and many others affecting import and export activities. In the long term, the MoIT will work with other ministries to speed up production restructuring, creating a source of high-quality export products to meet the needs of import markets, especially increasing the domestic share of exported commodities. For agricultural products, the MoIT and the Ministry of Agriculture and Rural Development will strengthen the restructuring of agricultural production on a large scale in association with the preservation, processing and promotion of production linkage and value chains.