Vietnam 7-month trade deficit $1.77b

Vietnam 7-month trade deficit $1.77b

HANOI (AFP): Vietnam recorded a trade deficit for the seven months ending July 25 of US$1.77 billion, falling 37.6 percent from a year earlier, according to official statistics released at the weekend.

The drop in the deficit came on the back of a healthy growth in exports and stiff import restrictions causing the import bill to shrink by 1.3 percent during the first seven months.

Exports reached grew 25.2 percent to $4.86 billion for the seven months ended July 25, compared to the year-earlier period, according to the General Statistics Office.

The import bill during the first seven months ended July 24 shrunk 1.3 percent to $6.63 billion compared to the same period last year because of strict import restrictions on key commodities including steel, automobiles and cement.

However the deficit for the month ended July 25 grew 31 percent to $350 million from $266 million for the month ended June 25.

During the first seven months, garment exports rose 38.3 percent to $650 million, while footware exports jumped 78.1 percent to $552 million. These two sectors accounted for nearly 23 percent of Vietnam's export earnings.

Steel imports plummeted 44.8 percent to 560 tones, cement imports 16.4 percent and fully assembled automobiles 21.4 percent to 11,335 units during the first seven months.

However economists questioned the wisdom of shielding inefficient domestic industries, especially in the state sector, behind stiff import barriers.

"Vietnam needs to move to a change in the structure and quality of its imports which are essential for growth," said one Vietnamese economist.

Others said Vietnam had committed itself to trade liberalization within the Association of Southeast Asian Nations (ASEAN) Free Trade Area, and that more protection now implied a more painful adjustment when import barriers are dismantled by 2005.

The Vietnamese economist stressed the need for Vietnam to pursue a more exported oriented strategy, concentrating on value added activities.

"How long can we sustain growth of raw materials like oil, coffee, and rice," he asks.

Others said Vietnam's two top industrial products, garments and shoes, have little domestic value added apart from labor.

Motorbikes, the main consumer durable purchase in Vietnam, saw a 26.8 percent drop in imported units and kits.

However the deficit during the month to July 24 was up 31.6 percent to $350 million compared with the month ended June 25.