Trade deficit offers hope

FIEs are helping to muscle up Vietnam’s trade deficit stats

The Ministry of Industry and Trade last week reported Vietnam’s total trade deficit in 2012 was forecast to be about $1 billion only, far lower than the $12.8 billion target set in early this year by the National Assembly and $9.78 billion in trade deficit last year. The total export and import turnovers for 2012 were estimated to be $113 billion and $114 billion, up 16.6 and 6.8 per cent, respectively, from the 2011 totals.

“The low trade deficit for 2012 is an encouraging signal as it helps stabilise Vietnam’s balance of trade. However, it also mirrors local enterprises’ ever-increasing difficulties,” said Hoang Duc Than, director of the National Economics University’s School of Trade and International Economics.

 “They have lower demand for imported products and export markets for their products remain difficult,” he added. “Meanwhile, the country’s export and import growth depends largely on foreign-invested enterprises (FIEs).”

For instance, in this year’s first nine months, the total import turnover of FIEs reached $43.8 billion, up 24.8 per cent on-year and occupying 52.3 per cent of the whole economy’s total import turnover. Meanwhile, the performance of local enterprises sat at $39.8 billion, down 8.2 per cent on-year and accounting for 47.7 per cent of the whole economy’s total import turnover.

FIEs’ total export turnover, excluding of crude oil, touched over $46 billion, up 37.9 per cent on-year, while that of local enterprises went down 0.6 per cent on-year to $31.3 billion.

In a specific example, Samsung Electronics Vietnam raked in $7 billion from exporting mobile phones in this year’s first eight months, while Vietnam’s total export turnover of mobile phones and spare parts was $8.6 billion.

Also, the first nine months of the year saw Intel Vietnam and Canon Vietnam contribute greatly to Vietnam’s $5.36 billion earned from exporting electronics and computers. This figure was up 77.3 per cent against last year.

Meanwhile, Vietnam Textile and Apparel Association, which is typical of the local economic sector, said it had to cut down the association’s member companies’ turnover of textile and apparel exports from the initial target of $19 billion to $17 billion for 2012, due to input and output woes.

At present, the local textile and apparel sector has to import 80 per cent of its materials from foreign markets. So the reduced export turnover target would mean a remarkable reduction in imported materials.

As compared to the same period last year, in this year’s first eight months, local textile and garment companies saw a 9.7 per cent reduction in export turnover from Germany, the United Kingdom (down 5 per cent), France (down 13.3 per cent), Sweden (down 27 per cent) and Turkey (down 49 per cent). Normally, materials for making products earmarked for exportation in a year were often prepared and stockpiled in the previous year’s third quarter or earlier.

However, HSBC last week issued its Vietnam Manufacturing Purchasing Managers’ Index conducted over 400 local manufacturing companies, which signaled a fifth successive month-on-month decline. Almost 25 per cent of survey respondents reported a decline in volumes of work-in-hand since August.