August 15, 2020 08:53

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Exports: Expecting to “turn the table” thanks to EVFTA

10:15 | 07/07/2020

VCN – Suffering from the serious impact of the Covid-19 pandemic, in the first half of this year, export goods of Vietnam recorded a serious decline in all key commodities. This situation would change in the second half if the situation of Covid-19 pandemic was controlled worldwide and the country takes advantage of free trade agreements (FTA) including Vietnam-EU free trade (EVFTA) that will take effect from August 1.

exports expecting to turn the table thanks to evfta
Making good use of EVFTA to boost exports in the second half, Vietnam still has a chance to recover export in the first half. Photo: Tuan Anh

Three main sectors face difficulty

According to the latest data from the General Statistics Office (Ministry of Planning and Investment), in the first six months, total import-export turnover of goods was $238.4 billion, down by 2.1% lower than the same period last year. In particular, exports reached $121.2 billion, down 1.1%; imports reached $117.2 billion, down 3%. In the first six months, Vietnam has a trade surplus of $4 billion.

In terms of export, in the past six months, the domestic economic sector reached $41.38 billion, up 11.7%, accounting for 34.1% of total export turnover, while the FDI sector (including crude oil) reached $79.83 billion, down 6.7%, accounting for 65.9%.

The Ministry of Industry and Trade assessed that the fact that domestic enterprises maintained a double-digit growth rate in the context of declining export turnover of FDI enterprises was considered a bright spot of exporting commodity activities.

The Ministry of Industry and Trade analysed that the remarkable point in the picture of exporting in the first months of this year was a decrease in export of all three important sectors. Specifically, in the first five months of the year, the group of processing industry had the lowest decrease of 1.2% compared to the same period in 2019, followed by agricultural products and seafood with a decrease of 4.7% and mineral fuels with the highest decrease of 31.3%. "Therefore, it is no longer just a deceleration, suffering from the Covid-19 pandemic, being cut orders by many partners, Vietnam's exports increasingly faced difficulties in the second quarter of 2020," the Ministry of Industry and Trade said.

The wood industry is a typical example. After many consecutive years of maintaining an average growth rate of about 12-15% per year, in the first five months of this year, the export of wood and wood products only hit $3.94 billion, down 2.5% compared to the same period in 2019.

Talking to Customs News, a representative of the Vietnam Timber and Forest Product Association (VIFORES), up to now, more than 80% of exporters to the US market have announced to stop buying, cancel orders and wait for a new situation. Some 81% of enterprises exporting to the EU market have received a notice of canceling orders or extending orders. The markets of Japan, South Korea and China also dropped by 60-80%.

With the complex development of the pandemic, customers did not come to the factory to approve samples. Therefore, Vietnamese timber enterprises have not signed new orders for 2020-2021. It could lead to the risk of closing and stopping operation for many factories in the near future, meaning hundreds of thousands of workers would face unemployment, job insecurity and social security for workers would not be guaranteed in the long run.

Although Vietnam has succeeded in the fight against Covid-19, the attraction of investment and export promotion depends largely on external factors. Meanwhile, the Covid-19 pandemic in the world is still making complex developments and seriously affecting the global economy, thus the recovery process will take a long time. The Ministry of Industry and Trade said that in the coming months, Vietnam's import and export would likely continue to recover but turnover would still decrease compared to 2019.

Expectations for EVFTA

Besides difficulties, the Ministry of Industry and Trade also pointed out many factors to support exports in the second half of the year. The supply chain, import and export market was interrupted by the impact of Covid-19 pandemic. But from mid-April to now, the situation has improved and European countries have gradually reopened. Many countries have launched large-scale stimulus packages, increased fiscal spending to cope with the pandemic, maintained essential activities and supported workers. In the US, by the end of May, all 50 states were partially reopened after two months of closure for implementing restrictive measures against the pandemic.

Besides that, Vietnam's pandemic control has been highly appreciated by the international community, which is considered a factor to attract more foreign investment into Vietnam. Meanwhile, transnational corporations are considering shifting investment, this is a great opportunity for Vietnam to catch this investment wave. Recently, the Japanese government spent $2.2 billion to support enterprises to leave China. The US government also requested American firms relocate their factories out of China soon.

There has also been a lot of information that major technology corporations plan to move production chains to Vietnam. Specifically, LG moved the entire production line from South Korea to Hai Phong. According to Nikkei, in the second quarter of 2020, Apple would produce 3-4 million AirPods in Vietnam, equivalent to nearly a third of the total volume of AirPods worldwide. Foxconn - a component supplier for Apple has located its factory in Bac Giang. Panasonic Vietnam is also preparing to produce refrigerators and washing machine with large capacity from Thailand at the beginning of September.

Notably, the EVFTA is expected to come into effect from August 2020, so it will create a new motivation for exports in the last months of 2020 and the coming years. The approval of the EVFTA at this time will create motivation for the recovery of domestic economy after the pandemic. Tran Thanh Hai, Deputy Director of Import-Export Department (Ministry of Industry and Trade) analysed: “With the EVFTA, we had great strength.  A few countries signed agreements with the EU. In Asia, the EU only signed a cooperation agreement with South Korea and Singapore, however, the two countries do not have the same production structure as Vietnam. Therefore, in the long run, the agreement will create a stable advantage for Vietnam's exports.”

Pham Tat Thang - trade expert, said that if the EU controlled the Covid-19 pandemic in the second quarter to start recovering production in the third and fourth quarters, the EVFTA would be a wide door to bring goods to the EU market. The EU market needs imported items such as textiles, footwear, furniture, phones and electronic components. These are all items that have a large and major export turnover of Vietnam. If Vietnam can make good use of the EVFTA, it can still compensate for the previous damage on export goods caused by the Covid-19 pandemic.

By Thanh Nguyễn/Thanh Thuy