The import of so-called inessential luxury goods is on the cards due to a favourable low foreign exchange rate.
Imported luxury goods are a bridge too far for the economy
The official foreign exchange rate has declined to VND20,750 per US dollar on May 6, from a record high level of VND20,930 on April 21.
Dollar reserves in Vietnamese banks have increased in recent days as local people sell foreign currency to banks as the black market is squeezed, US dollar deposit interest rates are cut and dong deposit interest rates are increased.
“The more plentiful supply of the US dollars [in the banking system] has made the Vietnam dong’s value increase by 1.2 per cent against the dollar, which means that foreign goods will be cheaper,” said Phan Van Chinh, head of the Ministry of Industry and Trade’s (MoIT) Export-Import Department.
“Higher US dollar reserves will also help local businesses get a better access to forex to fund imports of foreign-made products. This will be good for enterprises which are buying overseas raw materials, equipment and machinery for local production,” Chinh said.
He noted that import value of inessential luxury goods would climb if local authorities took no action.
Products like automobiles, motorbikes and mobile phones are seen by the MoIT as inessential luxury goods.
The import value of goods whose imports “need to be restricted” like complete-knock-down (CKD) automobiles with less than nine seats, CKD motorbikes and other luxury goods was high at more than $2 billion in the first four months, up 17.4 per cent on-year.
MoIT Deputy Minister Le Duong Quang said the import value of those products was alarming.
The import value of products whose imports “need to be controlled” like confectionary, cereal products, steel products, and gemstones and precious metals hit $1.66 billion in the first four months of this year, up 23.2 per cent year-on-year.
Of that, imports of confectionary and cereal products worth $61 million were up 36 per cent year-on-year, steel products worth $588 million up 31 per cent, and gemstones and precious metals worth $387 million, up 42 per cent on-year.
According to Chinh, local authorities would have to make greater efforts to cope with unnecessary imports.
“The MoIT is reviewing the granting of import quotas and measures to control products in the list of unnecessary imports. We are also working with the central bank to limit those needless products being brought into the country,” he said.
Enterprises in Vietnam imported $8.7 billion worth of foreign goods in April, up 30 per cent from last year’s April. Import value stood at $31.8 billion in the first four months, up 29 per cent year-on-year.
Vietnam’s January-April trade deficit was $4.9 billion, or 18.2 per cent of the country’s export value.