Vietnam Import Activities

2007 - 2012

FOREIGN TRADE UNIVERSITY Ho Chi Minh Campus

Dear Sir, We are submitting to you the report, due Sep 5th, 2012 upon your requested. The report is entitled Vietnam Import Activities in year 2007-2012. We hope that this report will merit your approval.

Respectfully submitted,

Trinh Xuan Mai Group Leader

Content
I. General Review.1 II. Affections and Negative..4 III. Affecting Factors...7 IV. Trade deficit...10 V. Conclusion..12

VIETNAM IMPORT ACTIVITIES REPORT

Sep 05th 2012

I.

GENERAL REVIEW

After 5 years joining in WTO, import and export turnover has 1.86-fold increased (109.21 billion USD in 2007 and 203.6 billion USD in 2011). Retail market has been motivated and increased in sales up to 20-25 % per year. There are some reasons for the excess of imports over exports : Vietnam is affected by the international markets price fluctuations. The market opening since joining WTO leads to easier imports (because of tax reducing) Countrys economy is motivated, income is higher which leads to larger demand of hi-end goods and services. Exports of some industries require increasing imports of raw meterials, such as fertilizer, steel and metals, chemicals, petroleum, pharmaceuticals.
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VIETNAM IMPORT ACTIVITIES REPORT

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Increase in foreign investments lead to larger demand in imports to expand the manufactures.

Government has attached special importance to many large projects which require material resouces from outside the country.

Vietnamese peoples inercia and expectation which cause commercial speculations, such as the whirwind of importing cars, steel, gemstone, gold

Imports of 2007-2012 have met the demand of accessories, equipment, as well as materials for industries. It also supplies Vietnamese people with goods and services which havent been manufactured by domestic industries.

VIETNAM IMPORT ACTIVITIES REPORT

Sep 05th 2012

Excess of Imports over Exports of Vietnam from 2007 to 2011

35 30 25 20 15 20.7 17.8 13.3 Trade gap -excess of imports over exports ( % ) 29.2 28.8

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5 0 0 2007 0 2008 0 2009 0 2010 0 2011

Import ratios increase regularly through years. Trade gap has decreased and it is in control. The excess of imports over exports is 29.2% in 2007, 28.6% in 2008, and 17.3% in 2010. In the early 10 months of 2011, trade gap decreased to 10.4 %. The import price index increased from 2007 to 2008, then decreased dramatically in 2009 and on the way back on growing in 2010. In import structure, consumer goods just take 7-9 %. However, its value still increased continuously from 2007 to 2010. Raw materials and machines still mostly hold the upper hand. Importing products which is being limited is managed well. In classifying by sector of economy, there was a slightly change in structure between domestic and foreign investment sector. Import value classifying to the country had some dramatically change, EUs value accelerated from 2009 to 2010. In opposite, OPECs value decreased strongly from 2008 to 2009.

VIETNAM IMPORT ACTIVITIES REPORT

Sep 05th 2012

II. AFFECTIONS AND NEGATIVENESS

1. AFFECTION OF IMPORT ACTIVITIVIES Since Vietnam initiated a transition from a centrally planned economy to a market-oriented one where the government would keep playing the leading role in 1986, these renovation policies were successful at generating economic growth and reducing poverty. Our country has greatly benefited from the fast development of trade activities, especially the import area. Some of the major advantages of importing are as follows:

VIETNAM IMPORT ACTIVITIES REPORT

Sep 05th 2012

Enhance domestic products quality: Vietnamese manufacturers have to improve their products in order to be able to compete with imported ones Increase sales and profits: domestic market longs for high quality products from foreign countries Gain your global market share: developing trade activities in general or import ones in particular helps Vietnam somehow fit in the global market Reduce dependence on existing markets Exploit international trade technology: the development of importing hitech products leads to the growth of our technology field Extend sales potential of existing products Stabilize seasonal market fluctuations: the shortage of many essential products can be improved by importing Enhance potential for expansion of your business: the increase in the diversity of products helps businesses gain more market share Sell excess production capacity Maintain cost competitiveness in your domestic market Raise positive competition within the country: the competition helps develop domestic products

2. NEGATIVE OF IMPORT ACTIVITIVIES INFRASTRUCTURE Lack of synchronous investments Higher logistics fee Shortcomings in planning Inaccurate predictions Facing with knots as traffic congestions
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VIETNAM IMPORT ACTIVITIES REPORT

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Loading capacity limitation Long traveling time in cities Pollutions or problems with information and procedures Weak logistics activities and limited competition advantages of Vietnam supply chain RELATED LEGAL FRAMEWORK The law corridor for logistics services from Trade Code (2005) and the decree140/2007/N-CP is not adequate for a fairly competing logistics service market and for developing logistics service industry. SERVICE PROVIDER Inadequate investments in human resources and information technology Inadequate support in policy from the Government (In 2012- and at the latest in 2014, logistics services related to transportation and logistics will be open for foreign businesses.) SERVICE USER (MANUFACTURER) Management staff has had inadequate knowledge about logistics management or about supply chain, affecting badly to logistics services. Practice of buying in FOB, and selling on CIF, being afraid of using logistics service outsourcing have been limitations to the development of Vietnam logistics service industry.

VIETNAM IMPORT ACTIVITIES REPORT

Sep 05th 2012

III. AFFECTING FACTORS

1. GENERAL FACTORS Accession to WTO in 2007 As Vietnam's accession to the World Trade Organisation (WTO)

boosts the level of foreign investment as well as the need of expanding producing scale. Besides, domestic enterprises also invest more in order to cope with foreign competition. Imported materials also serve for many projects conducted by the government. Joining global playground, VN is obliged to reduce import taxes.

That the domestic products are not highly competitive with foreigners and inefficient regime to control import influences on import activities. The increase in price of products which are to be imported (steel, plastic, chemical, fertilizer...).
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VIETNAM IMPORT ACTIVITIES REPORT

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The exchange rate. A change in the value of the dong should raise or lower the cost of foreign goods, thereby reducing or increasing VN demand for imports.

The global crisis and downturn. 2. ANALYSIS

A. 2007: There was an increase in demand for imports to serve the economys growth. The substantial increase in the prices of main imported goods: steel increased by 23.1%; fertilizer by 19.1%; gasoline increased by 12.2%; plastics increased by 9.6%. The U.S. dollar on the world market declined compared with other strong foreign currency was also one of the factors that increased the value of imports when converting USD. B. 2008: The price of crude oil, raw materials and other goods on the world market increased. Inflation occurred in many countries around the world; global financial crisis led to a large economic downturn together with global economic depression also cause the import of raw materials for the production in the end of 2008 to steeply decrease, which was a sign of a slowdown in investment and production. That imports of consumer goods tended to increase at the end of the year showed that foreign consumer goods put pressure on Vietnam's consumer goods in the local market. C. 2009:
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The country's economy continued to face many difficulties and challenges. The financial crisis of some major economies in 2008 pushed the world economy into recession, which negatively affected our import in the first 8 months of 2009.

At the end of 2009, as there were signs of the worlds economic recovery, some commodity prices increased. In the last few months of 2009, despite the global crisis, countries achieved GDP growth rate of 6.23% which was fairly good, the demand for production goods and consuming goods impact positively on the import.

D. 2010: Although the world economy in 2010 recovered from the global financial crisis and there were positive changes, the domestic economy generally was not really stable. Furthermore, many underlying factors adversely affected the VNs economy. The average price increased, which contributed to the rise in the import value in 2010. E. 2011: There were still intrinsic challenges in the world economy: public debts, stagnant economic growth. Increased prices of imported goods in the world market are one of the major causes of increased imports this year. F. 2012: Increased prices of imported goods in the world market are one of the major causes of increased imports in the first half of 2012.

VIETNAM IMPORT ACTIVITIES REPORT

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IV. TRADE DEFICIT

1. GENERAL DEFINITION A deficit in the balance of trade arises if the value of imports exceeds the value of exports. In terms of "payments," this indicates that the domestic economy is generating a net outflow of payments to the foreign sector. Fewer payments are coming in for the sale of exports than are going out for the purchase of imports.

CONSEQUENCES OF TRADE DEFICIT The net outflow of payments means that the pool of aggregate revenue or income available to the domestic economy is less than it might be otherwise. That is, domestic producers, on net, have less revenue that can
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VIETNAM IMPORT ACTIVITIES REPORT

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be either distributed to resource owners as national income or diverted to the government sector as taxes. This lesser income and tax revenue then be reduces induced consumption expenditure, saving (which is the used for investment expenditures), and government purchases. Less revenue -> less income -> less expenditures -> less production -> lower living standards and less prosperous economy. Ironically, however, a balance of trade deficit, which is deemed to be "bad" for a country might arise because the domestic economy is enjoying a serious business-cycle expansion. The growing economy and resulting boost in aggregate income induces an increase in domestic consumption expenditures, including the purchase of imports from the foreign sector. 2. SUGGESTION Promote exporting activities (improve quality, increase both quantity and value). However, keep the amount at a reasonable level; avoid re-import goods that were exported before. Allocate import quotas for luxury goods and unnecessary goods, reduce importing such goods as much as possible. This can save up a huge sum of money for other purposes. Reduce taxes, tariffs on any domestic product, and also increasing those on Imports. Try to produce goods affordable and nice enough for people to choose when they have demand. They will pick domestic goods rather than imported goods.

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Develop new industries and technologies in order to improve effectiveness in production and business activities. Develop alternative energy, clean energy for better environment protection and saving much more money. Try to have an independence energy source if possible, even taxing gasoline at 100% or 200% if needed and give the free trade market enough time to come up with a solution. Drastically reducing corporate tax rates for manufacturing plan: aggressive depreciation deductions for manufacturing plants but only for facilities physically located on domestic area and employing at least 95% domestic workforces. Creating better training programs through schools designed for the knowledge worker economy. High schools are still turning out manufacturing-oriented workers. They are dinosaurs that teach people to produce rather than to think, create and solve problems.

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VIETNAM IMPORT ACTIVITIES REPORT

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V.

CONCLUSION

Vietnam import activities show its pros and cons, but the operation and the management are quite good. Although from 2007 to 2012, the problem of trade deficit had the tendency to decline but they are of acceptable level. Government also proves that they can manage the activities quite well. Vietnam importers prove to be effective in their decision. Thanks to that, Vietnam has created itself more opportunities in global market, which helps us to be able to get more profits. Taking all points into consideration, we are inclined to believe that Vietnam import and export will be able to overcome the recession period and strongly develop in the not too distant future.

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