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President Trump's visit to Vietnam in February highlighted what
trade officials and shipping lines have known for years: The once
war-torn nation of 97 million has become the world's latest trade
export powerhouse.
After recovering from the war with the US, which decimated the
countryside and killed millions of people, Vietnamese leaders in
the 1980s started implementing "Doi Moi", or reform, aimed at
building a Chinese-style economy that would be socialist but
oriented at fostering private companies.
The government's initiative included reducing public subsidies,
inviting foreign investment, and participating in more trade deals
with richer economies around the world. In 1994, the US lifted its
trade embargo on imports from its former adversary. In 2007,
Vietnam formally joined the World Trade Organization.
The result has been an economy that's been growing at over 6% a
year and has been able to aggressively expand export markets around
the world, especially to the US and China.
Top Vietnamese export destinations, first 11 months,
2018
China $49.8 billion (+42%)
US $45.4 billion (+6%)
Japan $19.3 billion (+14%)
South Korea $18.1 billion (+22%)
Hong Kong $8.4 billion (+7.6%)
Germany $8.2 billion (3.7%)
India $6.8 billion (+78%)
UK $6.4 billion (-0.6%)
Netherlands $5.4 billion (+9.6%)
Thailand $5.4 billion (+16%)
Vietnam still faces plenty of hurdles, including lingering
limits on foreign ownership, pressure from Beijing to align itself
with China, and the danger of runaway inflation if it grows too
fast. It also has a massive informal economy, largely unregulated
and untaxed, which it would like to harness. It's also heavily
dependent on imports from China.
Top sources of Vietnamese imports, first 11 months,
2018
China $75.7 billion (+18%)
South Korea $44.5 billion (+2%)
Japan $15 billion (+11%)
Thailand $11.7 billion (+12%)
Singapore $11 billion (-2%)
Hong Kong $9.8 billion (+6%)
Taiwan $9.3 billion (+4%)
US $8.9 billion (+20%)
Malaysia $7.8 billion (+35%)
India $6.2 billion (-14%)
Vietnam is still ruled by the Communist Party but in this
century it's attempted to cut back on the number of firms run
solely by the state. Private companies now account for almost half
of the Vietnamese economy.
Now it faces questions over how it will steer its economy. Will
it, like China, build manufacturing zones and become one of the
world's factories? Or will it strive to build an economy based on
tech, banking, and other services?
Although Vietnam's relationship with China has sometimes been
rocky, there is no doubting the importance of Chinese manufacturers
investing in the country.
Chinese companies have invested heavily in building
manufacturing capacity in the country, to take advantage of lower
wages in Vietnam, and partly to avoid tariffs imposed by the US and
Europe on goods made in China.
Top Vietnamese exports to China, first 11 months,
2018
Electronics $20.9 billion (+22.3%)
Electric machinery & parts $7.6 billion (+12%)
Iron and steel $4.5 billion (+9.9%)
Knitted or crocheted fabrics $3.3 billion (+19.4%)
Optical, photo, medical equipment $2.1 billion (+12%)
Manmade filaments, fabrics $1.9 billion (+29%)
Cotton $1.8 billion (+23%)
A key question for Vietnam is how it will be impacted by the
tension over trade between the US and China. Japan, South Korea,
Singapore, and China are all big investors. Companies like Samsung
and Intel have plants in Vietnam. Both China and the US are vying
for closer relationships with Vietnam. In February, during Trump's
visit, Vietnamese aviation firms agreed to purchase over $20
billion of aircraft parts and services from Boeing and General
Electric. In addition, Vietnam is ramping up exports of
agricultural products, especially rice, coffee, and shrimp.
Top Vietnamese exports to US, first 11 months,
2018
Electronics $10.2 billion (+2.4%)
Apparel, knit or crochet $6.7 billion (+5.7%)
Footwear $5.7 billion (+12%)
Apparel, not knit $4.7 billion (+7.5%)
Furniture, bedding, lamps $4.6 billion (+7.8%)
Electric machinery & parts $2.6 billion (-9.5%)
Edible fruit & nuts $1.2 billion (+6%)
Leather, handbags, etc. $975.6 million (-11%)
Fish, crustaceans $938.1 million (+15%)
Toys & games $659 million (+14%)
After suffering from excessive inflation in the 1980s, Vietnam
has embraced an economic policy of moderate growth. Policymakers
have also worked to diversify the Vietnamese economy, stimulating
investment in its food sector, leather industry, and plastics
manufacturing.
In building on its prosperity and charting a new economic path
while asserting its independence from China, Vietnam still has some
trump cards it can play.
The government has hundreds of state-owned companies it's
looking to privatize. When it does that, it will unlock further
value and economic growth as it has a strong stock market.
Inflation is low and its currency stable, and the wages are lower
than in China. The population is remarkably young, with two-thirds
of Vietnamese are under 35.
Posted 25 March 2019 by John Miller, Guest Blogger
The Trade Numerologist is IHS Markit's unique weekly look at global trade by award-winning journalist John W. Miller, formerly of the Wall Street Journal, using proprietary numbers from IHS Markit's Global Trade Atlas database, the world's most complete and accurate set of trade numbers.
What topic would you like the Trade Numerologist to cover? Email tradenumerologist@gmail.com with comments and questions.
