Electronics fuelled Vietnam’s expanding exports

Tuesday, 2021-03-16 13:17:52
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Vietnam has been boosting its exports with increasing international integration and electronics items
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NDO - Over the past few years, deep international integration has enabled Vietnam to expand its exports, with electronics taking the lead in the structure of export goods, especially amid the health crisis.

A few days ago, general director of Samsung Vietnam Choi Joo Ho visited the north-central province of Thanh Hoa to hunt for investment opportunities for the group, which is turning Vietnam into its largest mobile phone manufacturing base in the globe.

Ho highly values the province’s geographical and traffic conditions in addition to an improved business climate. He said that Samsung will help Thanh Hoa attract further investment.

In last December, Ho also worked with authorities of the northeastern province of Quang Ninh towards the same purpose.

At present, Samsung is pouring its investments in the northern provinces of Bac Ninh and Thai Nguyen, and Ho Chi Minh City, with total investment capital of over US$17.5 billion, employing more than 160,000 local workers. The group is also now constructing a US$230 million research and development centre in Hanoi.

Ho also visited the Dong Mai Industrial Park in Quang Ninh, which covers 168 hectares and currently boasts 18 investment projects registered at more than US$350 million.

It is expected that if Samsung expands investments in Vietnam, it will continue to increase its exports to foreign markets, further contributing to Vietnam’s export picture.

Last year, the total export turnover of Samsung Vietnam hit about $57 billion – or 20.2 per cent of Vietnam’s total export turnover. This was an important milestone for the company as one of its most important branches, Samsung Electronics, aims to become the largest chip manufacturer in the industry, targeting a value of around $400 billion in the global market.

Samsung Electronics, one of the largest conglomerates of South Korea, along with many other economic groups, has been raising its investment in Vietnam for many years, driven mostly by low taxes, cheap labour, and good land incentives.

With the contributions of Samsung, Vietnam’s export picture is now being dominated by foreign-invested enterprises (FIEs) which accounts for 69 per cent of the country’s total export turnover, according to the Ministry of Industry and Trade.

This has contributed to bringing Vietnam into the group of the few countries still achieving positive economic growth during the first year of the pandemic, as well as maintaining a trade surplus of nearly US$1.29 billion in the first two months of 2021.

Boosting international integration

Implementing the proactive policy about international economic integration of the Party and the state, Vietnam has expanded and deepened its relations with many nations step-by-step. It has also actively and responsibly partaken in international forums and organisations.

Notably, in recent years Vietnam has boosted the negotiations and inking of some free trade agreements (FTAs). To date, the country has joined 17 FTAs including seven inked as a member of ASEAN (CEPT/AFTA – which is the existing ASEAN Trade in Goods Agreement, and FTAs between ASEAN with China, South Korea, Japan, India, Australia and New Zealand, and Hong Kong); eight FTAs signed bilaterally with Chile, Japan, the Republic of Korea, the UK, and the Eurasian Economic Union (Armenia, Belarus, Kazakhstan, Russia, and Kyrgyzstan); the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), the EU-Vietnam FTA (EVFTA), and the Regional Comprehensive Economic Partnership (RCEP); and two FTAs currently under negotiations including the FTA with the European Free Trade Association (EFTA), and the Vietnam-Israel FTA.

These trade deals have and will greatly benefit Vietnam’s economy in general and exports in particular. For example, The EVFTA has a scale accounting for 30% of global GDP, while the RCEP is similar with 2.2 billion consumers, taking up more than 30% of global GDP.

Only accumulating these two regions, Vietnam has penetrated the economic sector with GDP accounting for 60% of global GDP with extensive and continuous tariff reductions with commitments to open markets for Vietnamese products, services and goods in the direction of transparency, openness and convenience with open commitments in all areas. Not to mention, the signing of FTAs also contains reforms of the economy.

Rise in exports

According to updated figures from the Ministry of Planning and Investment (MPI) recently reported to the government, since 2011, Vietnam’s export turnover soared from US$93.6 billion in 2011 to US$263.5 billion in 2019.

Last year, despite massive difficulties caused by COVID-19 in the whole global market, the figure hit US$282.65 billion, in which Vietnamese firms earned US$78.2 billion – accounting for 27.8% of the economy’s total export turnover, with foreign-invested enterprises having raked in US$204.45 billion including crude oil exports – taking up 72.2% of the country’s total export value.

“Vietnam has been boosting its international economic integration in all levels, and gradually participating in the global production network and supply chains,” said an MPI report. “A rapid rise in export turnover has become an important driving force for the country’s economic growth over the past many years.”

In the entire 2011-2020 period, the export turnover has increased by 3.01 times, helping improve Vietnam’s export rank in the world’s export-import map. Specifically, the rank was 50th in 2007 before climbing to 27th in 2017.

According to experts, Vietnam’s exports have shifted from relying on crude oil to focusing on electronics. However, the fact that this sector lies mainly in the hands of FIEs has a large impact on the country’s export growth.

While in 2010, exports of phones and spare parts thereof only accounted for 3.2% of the total export turnover, by 2020, this sector ranked first among six commodity groups with a turnover of more than US$10 billion. The export value of this group in the first two months of this year was already estimated at around US$9.3 billion, accounting for 19.2% of the total export value, representing a 22.8% rise compared to the corresponding period of last year.

Meanwhile, Vietnam’s import turnover soared from US$105.8 billion in 2011 to US$253.5 billion in 2019 and US$262.7 billion in 2020, focusing on the commodities in service of production and exports, as well as investment projects in the sectors of energy and electronics. The MPI said that imports of this group of commodities always account for more than 90% of Vietnam’s total import turnover.

For example, in order to earn such a big export turnover of $57 billion last year, Samsung also spent dozens of billions of US dollars importing materials and equipment into Vietnam for its production.

These achievements have created an improvement in the trade balance, from a deficit of US$9.8 billion in 2011 to a big surplus of US$9.94 billion in 2019 and US$19.95 billion last year.

“Such a big trade surplus has enabled Vietnam to have a bigger foreign exchange reserve, facilitating the State Bank of Vietnam to perform it activities to stabilise the market, and making an important contribution to maintaining the stability of the economy’s macro-economic indexes,” the MPI report said.

In the first two months of this year, with many developed countries still struggling with the pandemic, Vietnam has maintained a trade surplus of close to US$1.29 billion, in which Vietnamese businesses suffered from a trade deficit of US$4.14 billion and FIEs earned a trade surplus of US$5.43 billion including crude oil exports.