Since Vietnam officially became a member of ASEAN in 1995 , two-way trade between the nation and the regional bloc have come on leaps and bounds with the country's exports to the group rising by 1.5% to US$25.2 billion in 2019, accounting for 9.6% of total Vietnamese export turnover.
Furthermore, the nation’s import turnover from ASEAN grew to US$32.1 billion, up 0.9%, making up 12.7% of the country's total import turnover, whilst the Vietnamese trade deficit with the region was US$6.85 billion, down 1.3% compared to 2018.
According to the Ministry of Industry and Trade (MoIT), the nation’s exports to the ASEAN market in 2019 have enjoyed strong growth, with efforts mainly focusing on Thailand, Malaysia, Singapore, the Philippines, and Indonesia.
Most notably, the main export groups include local goods such as iron and steel of all kinds, telephones and components, computers, electronic products and components, machinery, equipment, tools, spare parts, along with apparel and textiles.
Vu Ho, head of the ASEAN Department under the Ministry of Foreign Affairs, said the country’s integration process into the bloc has been implemented in an effective manner to promote economic growth over the past two decades.
A notable occasion occurred in 1995 when Vietnam joined the ASEAN Free Trade Area (AFTA) and negotiated the signing of the ASEAN Preferential Tariff Agreement. Since joining the AFTA, the nation has enjoyed numerous benefits through gaining an advantage when promoting trade and economic links and creating greater motivation in terms of production and business development, Vu Ho noted.
Moves towards trade balance and a reduced trade deficit
According to the MoIT, ASEAN represents a market that is close to Vietnam both geographically and in terms of similarities in culture and consumption habits. With a total population of 636 million and GDP of US$2,760 billion, there remains plenty of room for the region to stimulate the export growth of many domestic goods.
Recent years has seen the country’s exports to ASEAN primarily focus on farm produce, aquatic products, and minerals, all of which enjoy preferential import duties under the ASEAN Trade in Goods Agreement.
Specifically, Vietnamese agricultural and fishery exports to the region in 2019 reached US$2.69 billion, up 0.9%, of which fruit and vegetable exports enjoyed growth of 68.8%, seafood by 2.3%, rice by 8.6%, and tea by 16.9%.
According to the Vietnam Association of Seafood Exporters and Producers, ASEAN is currently one of the most important export markets for the local fisheries sector. Thanks to preferential treatment offered by the AFTA and other related agreements, a number of seafood products such as shrimp, tuna, and pangasius are witnessing growth both in terms of volume and value.
Staple imports from ASEAN over the past year have mainly consisted of raw materials for production, such as computers, electronic products and components at US$ 3.9 billion, gasoline of all kinds at US$3 billion, other machines, equipment, tools and spare parts at US$2.6 billion, material plastic at US$1.6 billion, other common metals at US$1.17 billion, and chemicals at US$1 billion.
In the context of several manufacturing industries not having control over input materials, the ASEAN market has created opportunities for domestic businesses to have access to an abundant supply of raw materials at reasonable prices. In addition, local firms are also able to simultaneously access capital sources and high technologies, thereby helping them lower prices and improve overall product quality.
As for the apparel and textile industry, export turnover in 2019 reached US$1.5 billion, up 21.4% on-year.
Truong Van Cam, vice chairman of the Vietnam Textile and Apparel Association, said that the sector is likely to increase exports to ASEAN ahead in the coming years, particularly when tariff lines continue to be reduced thanks to FTAs and advantages relating to geographical distance and cultural similarities.
Upon assessing the ASEAN market, Nguyen Cam Trang, deputy director of the Import-Export Department under the MoIT, stated that due to difficulties in exporting to the US and European markets, promoting expansion into the ASEAN market is seen as a right step for many local businesses. This therefore represents a stable plan for expanding export markets, while also avoiding dependence on a select few markets.