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Vietnam’s trade deficit with Thailand to balloon

Vietnam-Thailand trade is likely to hit 20 billion USD in 2020, but the target to keep the trade value in balance may not be met with Vietnam currently running huge trade deficit with the neighbouring country.
Vietnam’s trade deficit with Thailand to balloon ảnh 1Thai rice sold at Vietnamese market (Photo: laodong.vn)

Hanoi (VNA) – Vietnam-Thailand trade is likely to hit 20 billion USDin 2020, but the target to keep the trade value in balance may not be met withVietnam currently running huge trade deficit with the neighbouring country.

Thailand has become the largest trade partner of Vietnam in the Association ofSoutheast Asian Nations (ASEAN). Trade in goods between the two countriesincreased 14.7 percent to 8 billion USD in the first half of 2018.

After the ASEAN Economic Community was formed, Vietnamese exports to Thailandhave been on the increase, but they are still modest compared to the growingpace in imports. Therefore, trade deficit with Thailand during January-June of2015, 2016, 2017 and 2018 amounted to 5.09 billion USD, 5.15 billion USD, 5.65billion USD and 2.61 billion USD, respectively. The figures were equivalent to,and even higher than, Vietnam’s export earnings from Thailand.

Amongmarkets with which Vietnam runs a trade deficit, Thailand is at the first placeamong ASEAN markets and the third place overall, following the Republic ofKorea and China.

More than half of Vietnam’s imports from Thailand are machines, equipment,sparing parts and essential materials, which means domestic production andexports will be impacted if Vietnam stops or reduces the import of thoseproducts from Thailand.

Reduction in import taxes as part of the ASEAN Trade in Goods Agreement (ATIGA)has been attributed to the trade deficit with Thailand. Vietnam has alreadyremoved import tax for 90 percent of all tariff lines, and the figure is set toincrease to 98 percent in 2018. And Thai exporters know how to take theadvantage. From the outset of this year, 80 percent of CBU passenger car importswere from Thailand.

Meanwhile, Thailand has erected barriers for Vietnamese goods.

In addition, although Thailand only landed an investment of more than 8 billionUSD in Vietnam, which is inconsiderable compared to investments from theRepublic of Korea, Japan, Hong Kong and Malaysia, they are among the few rareinvestors having come early and establishing permanent foothold in theVietnamese market.

The Thai-invested CP Breeding Joint Stock Company is owning 7 percent of porkmarket share, 16 percent of industrial egg market share, 22 percent of chickenmarket share, and 18 percent of animal feed.

Furthermore, popular retail brands in Vietnam such as Big C, Metro, andelectronic appliance retailer chain Nguyen Kim have fallen into the hands ofThai investors. Also, they had ownership in Vinamilk, Prime, Binh MinhPlastics, and Sai Gon Beer, Alcohol and Beverage Corporation (Sabeco).

Thanks to those investments, Thai companies gradually dominate distributingsystems and bring made-in-Thailand products to replace those produced inVietnam.

Last year, Vietnam shipped 36 million USD worth of vegetables and fruits toThailand, decreasing 10 percent year on year, but Thailand’ export of thoseproducts to Vietnam rose 21.5 percent to 857 million USD.

Thai investors have been successful in Vietnamese market thanks to theireffective strategies.

Therefore,the goal of working towards bilateral trade balance set by the two countries atthe third meeting of the Vietnam-Thailand trade joint committee is still a longway to go.-VNA


VNA
#Vietnam-Thailand trade #bilateral trade balance #huge trade deficit #ASEAN Trade in Goods Agreement (ATIGA) #tariff lines #permanent foothold #popular retail brands #Vietnam News Agency #Vietnamplus Thailand Vietnam
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