VCN- Vietnam's economy has been deeply integrating into the world economy with remarkable results on export growth as well as expanding the market. However, new developments in international trade, typically escalating protectionism, have posed many challenges for Vietnam's economic integration in the coming time.
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GDP and exports are increasing
According to the Ministry of Industry and Trade, Vietnam's international economic integration has achieved certain results, contributing to the socio-economic development of the country. The total import turnover in 2018 is estimated at 475 billion USD, of which export value is 239 billion USD, up 11.2% compared to 2017. Vietnamese goods are continuing to exploit traditional markets and expand into new markets. In particular, export to the countries which have signed FTA with Vietnam showed a high growth rate compared to 2017. The preferential utilization rates from FTA signed markets are about 40 %, a sharp increase from the figure of 35% in the previous years. This shows that Vietnamese enterprises are increasingly focusing on exploiting opportunities from the integration and implementation of FTAs.
Referring to Vietnam's international economic integration in the new context, especially, Vietnam completed negotiations and signed two new and important FTAs. They are the Trans-Pacific Partnership and Transition Partnership (CPTPP) and the Vietnam-EU FTA (EVFTA).
Deputy Minister of Industry and Trade Ministry Mr Do Thang Hai, said that with the preparation for implementing the CPTPP and awaiting for the approval of EVFTA, Vietnam is expected to be able to significantly improve accessing export markets, thereby creating more employment and promoting economic growth.
A report by the Ministry of Planning and Investment estimates that CPTPP can help Vietnam's GDP and exports increase by 1.32% and 4.04% respectively by 2035. However, the actual increases will be higher if Vietnam has substantial economic institutional reforms and attraction of quality investment projects. The Central Institute for Economic Management (CIEM)’s recent estimation shows that by 2030 the 4.0 industrial revolution could boost Vietnam's GDP from 28.5 to 62 billion USD, equivalent to GDP growth of 7-16% depending on each case.
Although the process of international economic integration of Vietnam up to the present time has achieved satisfactory results, some experts commented that: There is still some doubt in the process, such as a number of localities are confused in the implementation of international economic integration; There is a great gap in capacity and lack of cohesion and support between FDI and domestic enterprises, especially small and medium enterprises. Besides, information and communication on integration, capacity of trade dispute resolution and international investment are limited, and full advantage of FTAs has not been taken.
Deputy Minister Do Thang Hai said: the current context poses many challenges in the process of integration with an open economy like Vietnam. Specifically, Vietnam is faced with the impact of divergent trade shift from the US-China trade war. It is even more difficult to deal with this challenge as cross-border e-commerce is more common, with the risk of cyber-security attacks. Some investors may relocate from China to Vietnam. At the same time, screening of projects that fit the needs of both economic and social and environmental dimensions is a difficult task. "In addition, the trade war between the United States and China could have far-reaching effects on global growth and trade, spreading the wave of protection to other markets. Vietnam's key export products to many markets may face trade restrictions. The devaluation of the US dollar and the risk of other countries devaluing the local currency also poses challenges for Vietnam's exchange rate, trade and financial markets," said Deputy Minister Do Thang Hai.
Around this issue, Dr. Sudhir Shetty, chief economist at East Asia and the Pacific (World Bank), commented, "Trade tensions may create opportunities for Vietnam to export some of its exports to the Chinese and American markets. However, Vietnam may be negatively impacted when trade and global growth slows down and increased uncertainty is greater than the gains from trade diversion.”
Some analysts added: The challenge to sustain Vietnam's reform will be greater if it is too focused on dealing with the adverse effects of the US-China trade war in particular and the increase in protectionism in general. Meanwhile, the delay in reform could affect the motivation for enterprises, as well as the ability to catch up, go along and across to countries in the 4.0 Industrial Revolution.
The synchronous implementation of the solution
Deputy Minister Do Thang Hai said: New trends in trade will continue, at least in the medium term. The 4.0 Industrial Revolution is fast, independent of Vietnam's subjective will on the pace and scope of efforts to catch up with this revolution. The trade trends and the 4.0 Industrial Revolution can interact in a variety of ways. Being a big open economy, Vietnam will certainly be affected by these new trends.
In response to new trade trends in international trade and economy, Deputy Minister Do Thang Hai commented that the Government and ministries, sectors and localities should consider implementing a number of measures. The first step is to continuously monitor and update scenarios in sufficient detail to cope with world economic turbulence, including trade policy dynamics and exchange rates of key economies; Monitor the dynamics of third country policy to assess more closely the situation and learn the response. Second, Vietnam should also actively review domestic policy regulations, ensure that there are appropriate tools and resources to guide export-oriented goods and respond to unfavorable market movements. At the same time, encouraging access to and utilization of the achievements of the 4.0 Industrial Revolution; strengthening the capacity and operation of the diplomatic missions and agencies, forecasting and handling events for the import and export market, checking the origin of technology, etc.
"In addition, the solution is promotion and encouraging the active spirit of the business community in understanding the development of new trade trends and the 4.0 Industrial Revolution. Thus, identifying the need for strategic adjustment of production and business, paying special attention to the transformation and updating of new technologies; Facilitating enterprises to participate in policy consultations, and recommending barriers and inadequate policies that state management agencies need to remove," said Vice Minister Do Thang Hai.
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Strengthening the coordination of ministries, branches and localities in the process of handling inter-sectoral issues and assisting enterprises in implementing international economic integration commitments. The close coordination and determination of integration of ministries, branches, localities and enterprises is a decisive factor for international economic integration in the new situation in the spirit of initiative, practicality and effectiveness.
Around this point, Dr. Shetty suggests: Vietnam should strengthen its macroeconomic response to international financial and trade turbulence; Strengthening national competitiveness with trade facilitation policies, improving the business environment and strengthening the link between foreign investment and domestic suppliers. In addition, Vietnam needs extensive trade and investment reforms, including simplification of non-tariff measures that distort trade; promoting trade in services, deepening regional (and global) integration; strengthen commitment to support reform of global commercial governance system.
By Thanh Nguyen/ Quynh Lan