Vietnamese trade deficit widened 2006

The Vietnamese trade deficit widened last year, driven by rising imports of machinery, as the country prepared to join the World Trade Organization.
The gap increased by 6 percent from 2005 to 4.81bio US$, according to preliminary figures released by the General Statistics Office in Hanoi. Exports rose 22% to 39.6bio US$, while imports climbed 20% to 44.4bio US$.

Vietnamese companies have increased their imports of foreign-made equipment in order to prepare for increased competition as the country of 85 million people joins the World Trade Organization. Vietnam will become the 150th member of the trade arbiter on Jan. 11.
Bach Van Mung, director of the planning and investment department of the Ministry of Trade, said, "Domestic companies want to upgrade their production technology and expand their operations to strengthen their ability to compete with foreign companies in the post-WTO accession period. The increase in the trade deficit is a positive signal that shows the country's economy is on the move."

Purchases of foreign-made machinery and mechanical goods rose 24% last year to 6.56bio US$, the Vietnamese General Statistics Office said.
"Imports of machinery and equipment recovered strongly," the World Bank said, in a report prepared for a conference last month in Hanoi. "This upturn stems in good part from the equipment needs related to the construction of the Dung Quat industrial zone, which includes an oil refinery."

The refinery at Dung Quat Bay in the central province of Quang Ngai is scheduled to be started in 2009 and could meet as much as two-fifths of domestic gasoline demand. Vietnamese imports of petroleum products in 2006 rose 16 percent to 5.85bio US$.
Steel imports fell 1% to 2.91bio US$. Imports of cloth rose 23% to 2.95bio US$, "reflecting the input requirements of garment exports," according to the World Bank.

Garments and textiles were Vietnam's second-biggest export last year, rising 20% to 5.81bio US$. The quotas that Vietnamese garment exports to the United States have faced will disappear when Vietnam joins the WTO. "The Vietnamese garment industry has matured," said Eric Conforti, the president of Kore Garments of Canada, which operates two plants in southern Vietnam. "They have moved into nonquota categories, and also moved into more niche categories, away from the Chinese-dominated sectors."

Crude oil exports rose 13% by value last year to 8.32bio US$, even while declining 8% by volume, according to General Statistics Office figures. Oil production in Vietnam, the third-biggest Southeast Asian producer after Indonesia and Malaysia, is expected to stabilize this year after two years in decline, according to Ministry of Finance projections.

Footwear exports rose 17% to 3.56bio US$, while seafood shipments jumped 23% to 3.36bio US$. Wood product exports rose 22% to 1.9bio US$.

Vietnam's "wood-processing industry, mainly wooden furniture for exports, experienced rapid growth over the last five years," the agricultural attaché's office at the U.S. Embassy in Hanoi said last month. "The upward trend continues, though at a somewhat less rapid pace."

Source: Bloomberg