Opportunities to promote import-export growth

Wednesday, 2017-12-06 17:55:48
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Vietnam will receive advantages for exporting agricultural products thanks to tariff preferences. (Credit: thoibaonganhang.vn)
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NDO – Implementing ten Free Trae Agreements (FTA) with many countries and territories, Vietnam has taken advantage of the agreements. In the 2018-2020 period, the tax reduction roadmap will be further promoted thus the tariff for many commodities is expected to drop to 0%, which will create new opportunities to increase import and export turnover, thereby boosting economic growth.

Expectation from FTAs and records

The Ministry of Finance is proposing ten draft Decrees on Vietnam’s special preferential import tariffs to implement ASEAN Free Trade Area, free trade agreements of ASEAN with Japan, India, Australia – New Zealand, the Republic of Korea (RoK) and China, as well as Vietnam – RoK, Vietnam – Japan, Vietnam – Chile and Vietnam – Eurasian Economic Union FTAs.

The new Decrees aim to make commitments in intra-ASEAN. By the end of 2016, Vietnamese Government issued the Resolution No.109/2016/NQ-CP the list of ASEAN Harmonized Tariff version 2017 (AHTN 2017); therefore, special preferential import tariffs needed to be updated as appropriate. The draft Decrees will not affect the implementation of commitments under signed FTAs, while also ensuring the stability of special preferential import tariffs.

Since 2015, a series of imported commodities to Vietnam have received tax reduction under FTAs’ commitments. As committed, the tariff will be cut further during 2018-2022 period. From 2018, the import duties of many commodities will be cut to 0%; meanwhile others will enjoy gradual tax reduction and tariff elimination by 2022. The Ministry of Finance has concretely calculated the average tariff reduction rates in each year for ten FTAs.

The tax reduction for products imported to foreign countries under FTAs’ commitments will help Vietnam expand its export markets, contributing to increasing the export turnover. According to General Department of Customs, Vietnam’s total export and import value reached US$384.74 billion in the first 11 months of this year, a year-on-year increase of 21.1%. Accordingly, the export value is estimated at US$193.75 billion, up 21.1%, while total import value at US$190.99 billion, up 21%. The country enjoyed a trade surplus at US$200 million in November. Notably, the export and import value in the past 11 months witnessed an excess of US$33.36 billion in comparison to the last year (US$351.38 billion). Therefore, export turnover during the last 11 months of this year exceeded the target of around US$5.8 billion.

Economic experts said that one of important aspects of FTAs was the commitment to open the market for goods, removing most of the import duties, which has created opportunities for Vietnam to diversify its import markets. Therefore, the country’s trade deficit from several markets has changed in recent time. For example, the trade deficit from China has gradually reduced, while from the RoK and ASEAN countries increased.

The above figures showed that Vietnam’s export picture has been brighter than ever, with the strong increase of export turnover. The Ministry of Industry and Trade forecasted that if the export growth continues to be maintained, the total export turnover in 2017 could reach around US$210 billion, higher than the target of US$188 billion that was set at the beginning of the year. With this number, the year 2017 will witness the highest growth ever, contributing to a GDP growth target of 6.7%.

Many challenges

According to Pham Tat Thang from the Ministry of Industry and Trade, one of the levers for the export growth in the coming time is FTAs. Vietnam has signed FTAs with many potential markets, including Japan and Eurasian Economic Union. However, enterprises have been equipped with less essential knowledge to take advantage of opportunities from the FTAs.

Economic expert Vo Tri Thanh, former deputy head of Central Institute for Economic Management (CIEM), emphasised that in the context of Vietnam’s deep international integration, with the signing of many new generation FTAs with important partners, including the US and EU, Vietnam should move the trade deficit to countries with developed economy and high technology to develop its economy. If not, Vietnam will always be the country lagging behind economically, particularly in the era of industrial revolution 4.0.

However, according to expert Ngo Tri Long, the trade deficit from some markets as implementing FTAs’ commitments is not necessarily ominous. For example, the implementation of commitments with the RoK has helped Vietnam increase import and export turnover. The RoK surpassed the US, EU and ASEAN to become the second largest trading partner with Vietnam for the first time, only following China. Imported commodities from this market are mainly machines serving for investment and production for export, which will have a positive impact on economic growth.

Trade deficit from the RoK market is an ‘irresistible trend’ because after Vietnam – RoK FTA signed, goods from this market have spilled into Vietnam. Notably, Vietnamese enterprises should take advantage of the FTA as well as improve their capacity and promote joint ventures to participate in the global production chain.

Actively taking advantage of opportunities

Vu Nhu Thang, Director of the International Cooperation Department under the Ministry of Finance, noted that the application of new import tariffs during the 2018-2022 period will not have negative impacts on the implementation of commitments under the signed FTAs as well as ensure the stability of the special preferential import tariffs. The tariff line was built on the basis of commitments under FTAs, so the tariff rate is essentially unchanged from the commitment schedule. Implementing FTAs’ commitments, domestic enterprises will benefit from tariff preferences. As a result, the input will decline while the efficiency of production and business will be improved, which will raise the domestic tax collection to offset the reduction of import tax revenue.

Leaders of several agro-forestry-fishery import and export enterprises said that integration is a long-term and equal playground for businesses. The competition is self-evident; the elimination of import taxes will bring many benefits to the enterprises. Responding to the deep tariff cuts in the coming time, many enterprises have set measures to improve the quality of their products to expand their export markets as well as development strategies in the domestic retail market with the population of over 95 million.

Deputy General Secretary of the Vietnam Association of Seafood Exporters and Producers (VASEP), Nguyen Hoai Nam shared that during the negotiation processes for FTAs, the Ministry of Finance has closely coordinated with the Ministry of Agriculture and Rural Development and VASEP, particularly discussing the tax rate for commodities that Vietnam has not yet had any sources or low output. VASEP strongly agreed with the tax adjustments in order to bring benefits to domestic producers the tax reduction process. With the import structure of the fishery sector, over 80% of the imported output will be produced for exports; meanwhile the rest will be for processing and domestic consumption. Imports for production for exports are the strength of Vietnam; therefore, VASEP has proposed the Ministry of Finance and the Government to accelerate the roadmap to reduce import tax to 0% for several strong Vietnamese commodities in processing for exports. Accordingly, shrimp and tuna are the items of high export values.

From the point of view of a policy maker, Vu Nhu Thang recommends that enterprises should take the initiative in strengthening their governance capacity, improving the quality of human resources, enhancing the links with the global supply chain, creating competitiveness to take advantage of all opportunities provided by the commitments. As integrating, enterprises should set out development strategies, build their brands and set up distribution system to be successful in both domestic and international markets. In addition to challenges, the positive impact of the implementation of FTAs on the country’s economy in the coming period is quite clear.

Thousands of tariff lines will be cut to 0%, so enterprises can access to resources of high-quality and cheap materials, contributing to increasing the production and business efficiency as well as the competitiveness of enterprises. In order to help Vietnamese businesses improve their position during the process of international integration, management agencies should change ways of thinking in making policies, reform administrative procedures, proactively remove difficulties and create favourable condition on production and business environment for enterprises. Ministries and relevant agencies should also improve non-tariff barriers, particularly technical barriers, in line with WTO’s rules.