MOIT warns about trade deficit increase

The Ministry of Industry and Trade (MOIT) has predicted that if the current situation continues, Vietnam’s export turnover in the last two months of the year will only reach $9.4 billion ($4.7 billion a month), which is down by 1.3% when compared to the same period of 2007.

If this happens, the total export turnover for 2008 will be $62.8 billion. The important thing that businesses need to focus on right now is finding the key to the various markets in the world.

A mountain of difficulties

Narrowed export markets and decreasing prices are the biggest problems currently facing Vietnamese exporters. The export turnover in October dropped more sharply than expected. At first, officials predicted a slight decrease in October’s exports in comparison with the average monthly export turnover in previous months: $5.1 billion vs. $5.7billion. However, the export turnover in October sharply decreased to $4.7 billion, which was $400 million lower than expected and $700 million lower than the previous month.

Blame for the decrease in export turnover last month has been placed on smaller exports of rice and rubber, as well as the lower export prices in October in comparison to September. The crude oil price, which began decreasing in September, continued sliding in October. The current oil price is equal to half of the price three months ago. The rice price has also dropped by 20% when compared to September.

The prices of key export items all have decreased: crude oil price by 4%, rubber price by 13.2%, and coffee by 11.7%. However, the price of some farm produce items have increased, including pepper by $148/ton, cinnamon by $240/ton, and tea by $72/ton. Nonetheless, the export volume of the price-increasing items was not high enough to help raise the export turnover .

ADB’s Vietnam Country Director, Ayumi Konishi, said at ACMECS, which was held in Hanoi late last week that export proves to be the main victim, in the Asian regions, of the global financial crisis.

Experts have warned that Vietnamese businesses will have to compete with formidable rivals, including China and ASEAN countries, to scramble for export markets.

They have pointed out that the biggest problem that currently threatens Vietnam’s exports is that many foreign partners cannot open a letter of credit (L/C) as countries around the world are tightening credit, making Vietnamese enterprises unable to deliver products. Some consignments have been seen stuck at ports, as the foreign partners cannot open L/C.

The ways out still exist

Despite these difficulties, experts still believe that Vietnam has many ways to boost exports and fulfill their export plans.

Former Minister of Trade, Truong Dinh Tuyen, has pointed out that there are still existing opportunities for Vietnamese enterprises to boost exports, since the majority of Vietnam’s export items are low-cost and essential products.

In theory, when the economic recession occurs, the demand for low-cost products, as alternatives to luxury ones, will increase.

Tuyen believes that Vietnam can not only retain export markets, but also gain a high export growth rate. For example, Vietnam can increase exports of basa fish to Russia and Ukraine. In addition, beginning in 2009, Vietnam’s garment companies can increase exports to Japan when the bilateral cooperation agreement becomes effective. Under this agreement, Japan will impose a 0% tax on imports from Vietnam to the country.

It is undeniable that Vietnamese enterprises are facing major difficulties as their main export markets, the US and Europe, are cutting imports sharply. The slower export to the US will certainly influence the GDP growth rate of Vietnam. Therefore, enterprises have been advised to diversify the export markets, instead of focusing on the US market. They have also been reminded to gather strength to develop the domestic market, which has 85 million consumers.

Vietnam’s exports to Asian markets in the first 10 months of the year reached $26.5 billion, up by 47% over the same period of the last year, while the exports to Oceania were $4 billion, up by 62%, and exports to Africa were $1.05 billion (+ 75%).