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Wasting dollar on luxuries expands trade deficit
Vietnam’s per capita income remains low at $1000 per year, yet its citizens spent billions of dollars in the first three months of 2010 to import cars, motorbikes and electronics, creating a trade deficit of $3.5 billion.
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“Imports of cars and motorbikes in the first quarter of 2010 showed that some Vietnamese people misspend their money in the context of the difficulties of the country.
Vietnam used some tools to restrict imports, such as imposing high import tariffs, but these measures did not succeed. This does not mean that we should not use administrative measures to curb imports. It is necessary to keep a long-term outlook. For example, Vietnam can apply measures to encourage people to make investments and practice thrift”.
Nguyen Dinh Cung, Deputy Head of the Central Institute for Economic Management (CIEM) |
According to the General Statistics Office, the export turnover in the first three months was $14 billion, but the import turnover was $17.5 billion. The imports included many luxury items and goods that can be produced domestically.
Vietnam imports . . . everything
Besides petroleum products, machines and equipment that the country needs to maintain local production, Vietnam imported gold, silver and precious stones (Increasing by $200 million compared to the same period of 2009). The import turnover of electronic products and computers, including iPhones was over $1 billion in the first quarter of 2010, an increase of 53 percent over 2009.
The import turnover of cars and car parts was also very high, estimated at $582 million, up by 66 percent. Also in the first quarter, Vietnam spent $207 million to import motorbikes and motorbike parts, up by 38 percent.
Vietnam also imported products that can be made domestically, such as cowhide, corn meal and soybeans, and even scrap paper. In the first quarter of 2010, Vietnam spent $623 million to import animal feed, an increase of 136 percent from 2009.
Why?
At a Ministry of Industry and Trade and economic conglomerates meeting in late March, Nguyen Gia Tuong, Deputy General Director of the Vietnam Chemical Group, tried to explain the high trade deficit. He stated that Vietnamese people are fond of foreign-made products, citing fertilizer as an example.
Vietnam now has 300,000 tons of fertilizer in storage, including 160,000 tons of NPK, while domestic factories are running at below capacity, but enterprises continue importing NPK fertilizer.
Luong Tan Duc, Deputy General Director of the Paper Corporation, revealed that current mechanisms encourage imports rather than use of domestic products. Duc remarked that Vietnam still imports scrap paper since producers do not want to purchase it from small merchants who cannot provide a “red bill” (An official permit from the Ministry of Finance).
Ngo Van Tru, Deputy Director of the Heavy Industry Department under the Ministry of Industry and Trade, commented that many enterprises prefer Chinese products, though Vietnam made products also have high quality. “Vietnam can now create a system to direct the power plant or supplementary equipment, but they still import products from China for domestic projects,” Tru observed.
According to Doan Hong Quang, Senior World Bank Expert in Vietnam, the country needs to impose high tariffs on imported luxury items. He also thinks that Vietnam needs to take necessary measures to encourage domestic production as it will not be able to develop well if it purchases more than it can produce and sell.
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* In March 2010, Vietnam only imported 1600 cars with less than nine seats, a decrease of 400 cars over the previous month.
However, the number of customers ordering medium and high-class cars worth one billion dong or more is still increasing. A car importer in HCM City estimated that he can sell two or three Toyota Venza 2.7 (Imported from the US) a week, worth $67,000.
A Euro Auto representative noted that Vietnam is the third country in Asia to introduce the BMW X1 line and 50 clients have ordered the model worth 1.466 billion dong. Euro Auto still believes that the luxury car market will grow at a rate of 20 percent in 2010.
* Lam Hoang Vinh, Deputy General Director of Vietnam Post and Telecommunication Group and Director of Vinaphone, calculated that, to date, Vinaphone has imported 5000 iPhone 3G and iPhone 3GS, all completely-built units. |
vietnamnet, Tuoi tre
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