Vietnam’s Trade Future Looks Bright with U.S. and Chile as Prime Markets
Hanoi – By the end of 2013, Vietnam had committed to six regional FTAs with ASEAN and two bilateral FTAs with Japan and Chile. Additionally, Vietnam continued its negotiations on the Trans-Pacific Partnership (TPP), the Regional Comprehensive Economic Partnership (RCEP) and a number of other FTAs with the EU and Korea.
Vietnam’s participation in these various trade agreements has helped to elicit a strong upswing in the nation’s two-way trade turnover. Trade included within existing agreements accounts for nearly 60% of total import–export turnover (50 percent of export turnover and nearly 70 percent of import volume).
Mr. Bui Huy Son, General Director of Vietnam’s Asian–Pacific Markets Department, stated that the signing of the FTAs helped Vietnam expand its market and promote exports. In particular, during 2011 and 2012, Vietnam’s export and import values with ASEAN increased by 30.7 percent and 27 percent respectively, for Japan 39.5 percent and 25 percent, China 52 percent and 17 percent, and Korea 52.5 percent and 18 percent.
However, Vietnam is still running large trade deficits with many of the countries it is trading with in Asia.
The United States and Chile stand out as the top markets for Vietnam in the Americas. Total export turnover to the U.S. in 2013 amounted to an estimated US$28 billion, an 18 percent increase from 2012.
A senior official at the Ministry of Industry and Trade (MOIT), Vo Ta Luong, recently urged businesses and relevant agencies to “clear the way” for Vietnamese exports to the two American markets. The MOIT is particularly enthused about the “great opportunities” it sees in the region, specifically the Trans-Pacific Partnership and recent free trade agreements (FTA).
Mr. Luong also highlighted the increasing strength of the relationship between Vietnam and the U.S. and Chile. This is evident by the increasing export turnover levels between the countries – the numbers are particularly surprising given that the global economy struggled somewhat in 2013.
In the first 10 months of 2013, Vietnam’s export turnover to the U.S. reached US$19.5 billion; this was an increase of 18.9 percent over 2012. In the case of Chile, export turnover amounted to US$177 million, an increase of 39 percent over the previous year.
Vietnam’s exports to the U.S. are primarily made up of garments, footwear, wooden furniture, electronics and seafood. These items account for 0.88 percent of the U.S.’ total imports, an amount worth around US$20 billion. On the other hand, the U.S. export turnover to Vietnam is only worth US$4.6 billion.
The U.S. has a large population with a high income and, as the country is looking to diversify its supply sources, Vietnam is in a prime position to take advantage of the opportunities arising. An additional help is the large Vietnamese diaspora in the U.S.
With respect to Chile, according to Nguyen Thanh Quang, a Vietnamese trade counselor in Chile, Vietnamese products that are particularly competitive include seafood, farm produce, food, cement, leather shoes, garments, electronics, handicrafts and tires. The new FTA between Vietnam and Chile reduces tariffs and a number of tax categories.
However, Vietnam still has a number of hurdles to overcome in order for the country to be truly competitive on the international stage. In particular, local companies will have to greatly improve their productivity so that they can deal with much larger orders and the associated transportation fees. Companies that can provide advice or services to these Vietnamese companies could be very well positioned to ride the wave of rising exports from the country.
Dezan Shira & Associates is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in emerging Asia. Since its establishment in 1992, the firm has grown into one of Asia’s most versatile full-service consultancies with operational offices across China, Hong Kong, India, Singapore and Vietnam as well as liaison offices in Italy and the United States.
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