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Home / Economy / Trade - Service
FDI sector: Driving force behind Vietnam’s trade surplus
Nguyen Tung 17:30, 2018/01/05
As export value of Vietnam in 2017 reached a record high number, the FDI sector still contributed to 73% of export turnover.
The spotlight of Vietnam’s economy in 2017 is export with 200 billion USD in trade value, thus, 10 years after joining the World Trade Organization (WTO), Vietnam’s total export turnover ranking raised to 26th in 2016 from the 50th in 2007. 
 
Vietnam's export value in 2017 reached an all time high number of 213.77 billion USD.
Vietnam's export value in 2017 reached an all time high number of 213.77 billion USD.
Specifically, export value in 2017 reached an all time high number of 213.77 billion USD, up 21.1% compared to the last year’s figure. In this year’s export structure, heavy industrial and mineral goods reached 106 billion USD, an increase of 32.4% compared to the previous year and accounting to 49.6% of total export value; light industrial products and handicrafts of 79.6 billion USD, up 11.7% and 37.2% of total export value; agricultural and forestry of 19.8 billion USD, up 9% with 9.3% of total export value; fisheries accounted to 8.4 billion USD; up 18.5% and 3.9% of total export value. 

Among the export market, the US is still the largest market with 41.5 billion USD, an increase of 8% compared to 2016, European Union (EU) market is in the second place with 38.3 billion USD, up 12.8%; China market with 35.3 billion USD, up 60.6%; ASEAN market with 21.7 billion USD, up 24.5%; Japan with 16.8 billion USD, up 14.2%; Korea with 15 billion USD, up 31.1%.

In particular, the agricultural sector has trade surplus of 7 billion USD, which is a positive sign, indicating the Vietnamese enterprises is on the right direction with investment in agriculture, for which the quality is the priority instead of quantity. 

However, FDI sector is still the driving force behind Vietnam’s trade surplus (contributing 73% of export turnover). On the other hand, the US with its protectionist trade policies are posing risks to the Vietnam’s current trade surplus to the US market in the coming time. 

The National Financial Supervision Commission of Vietnam (NFSC) considered the current export structure of Vietnam is evident to the fact that Vietnam’s trade is depended heavily on the FDI sector. For the first 11 months, Vietnam has a trade surplus of 2.75 billion USD, which is the highest number up to present. However, this number would be higher if trade deficit in the domestic sector was reduced and a better connection between FDI sector with domestic enterprises. Specifically, FDI sector continues to have high trade surplus value of 26.2 billion USD in the first 11 months of 2017. Meanwhile, the domestic sector still experiences huge trade deficit of 23.4 billion USD in 11 months of 2017.  

The fluctuation of trade balance of Vietnam showed that the export structure of Vietnam has not been sustainable, which is heavily depended on importing materials and equipment. This is also the reason why despite Vietnam continues to have trade surplus, but in the process of setting up socio-economic targets, the government has been cautious and set the target for import control at 3% of total trade balance. So trade balance would be more sustainable if there is a better linkage between FDI sector and the domestic enterprises. The main issue should be as Vietnam still depend on importing input materials, with the supporting industries are still developing. 

“Global trade in general and Vietnam’s export in particular in 2018 will be impacted by changes in policies of the US” – NFSC concluded. 
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