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The Impact of Chinas Greater Economic Integration with South-East Asia on Vietnam Amitayu Sengupta.

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Presentation on theme: "The Impact of Chinas Greater Economic Integration with South-East Asia on Vietnam Amitayu Sengupta."— Presentation transcript:

1 The Impact of Chinas Greater Economic Integration with South-East Asia on Vietnam Amitayu Sengupta

2 Two Phases of the Vietnamese Economy Pre 1986 closed Economy model state-controlled Foreign Trade Corporations (FTCs) Planned Import Volumes State determined prices Doi Moi Relaxation in FTC 1998 – – 1, – 16,200 Removal of QRs and Tariff Reforms Liberalizing Foreign exchange regime Tariff or Trade tax system was introduced in The original structure was rationalized in 1992 and later simplified in 1999 following Vietnams accession to the ASEAN Free Trade Agreement (AFTA).

3 Tariff rates for Vietnam Most Favored Nation (MFN) tariff rates applicable to imports from countries with which Vietnam enjoyed MFN status Common Effective Preferential Tariff (CEPT) rates applicable to imports from ASEAN countries General rates (50 percent above MFN rates) applicable to imports from countries that did not fall under the MFN and CEPT rates

4 Vietnamese Exports by percentage Prel TOTAL100.0 By economic sector Domestic economic sector Foreign invested sector (*) By commodity group Heavy industrial products and minerals Light industrial and handicraft goods Agricultural products Forest products Aquatic products (*) Included crude oil. Table from figures denote % share

5 Vietnamese imports by percentage Prel TOTAL100.0 By economic sector Domestic economic sector Foreign invested sector By commodity group Mean of production Machinery, instrument, accessory Fuels, raw material Consumer goods Food 0.0 Foodstuffs Pharmaceutical and medicinal products Others Table from figures denote % share

6 YEAR Prel TRADE DEFICIT Vietnamese Trade balance in USD million Imports during Total: $158,622,383,302 Major items as per UN Comtrade Database Mineral fuels, etc (HS code 27) Nuclear reactors boilers machinery etc (HS code 84) Electrical and electronic equipments (HS code 85) Iron and steel (HS code 72) Plastic items (HS code 39) Exports during Total: $135,613,762,963 Major items as per UN Comtrade Database Mineral fuels etc (HS code 27) Footwear, gaiters etc (HS code 64) Articles of apparel, accessories, (HS code 62 and 61) Fish, crustaceans, molluscs, aquatic invertebrates (HS code 3)

7 The New Millennium The East Asian Crisis New Reforms Since 2000 – Focus on import liberalization, banking reforms and improved business environment. The China Factor Imbalances in Trade composition and volume. Chinese accession to WTO. Remedies Greater Global Integration. USBTA in 2002 CEPT scheme under AFTA Vietnam joining WTO in 2006

8 Vietnam China Trade Terms X= Applied MFN Tariff Rate X > 20% % < x < 20% < x < < x < 10% X < 5% Standstill 0 0 China Vietnam Trade is mainly dictated by the China ASEAN FTA agreement. Vietnam, Lao PDR, Myanmar as smaller partners agreed to country specific reduction commitments. Under the agreement, the ASEAN 6 and China agreed to the following schedule for tariff reduction. Tariff rate commitments for ASEAN 6 and China

9 X= Applied MFN Tariff Rate ACFTA Preferential Tariff Rate (Not Later than 1 January) X > 60% % < X < 60% % < X < 45% % < X < 35% % < X < 30% % < X < 25% % < X < 20% % < X < % < X < 10% % < X 7% X < 5% Standstill 0 Tariff rate commitments by Vietnam Vietnam gets 5 more years to remove tariffs. The rate of reduction is accordingly lower.

10 Elimination Track End RateImplementation Date ASEAN 6Cambodia, Laos, Myanmar, and Vietnam Early Harvest Programme 0% EARLY HARVEST PROGRAMME EHP includes Live Animals Meat and Edible Meat Offal Fish Dairy Produce Other Animals Products Live Tress Edible Vegetables Edible Fruits and Nuts EHP was a special inclusion to address the concerns of the less developed nations. EHP allows the poorer nations better access to Chinese markets. EHP has provisions for Exclusion List, where products deemed sensitive can be excluded from the agreement by a member country.

11 Partner Title Singapore China JapanOther Asia, nesJapanOther Asia, nesSingapore Other Asia, nesJapanOther Asia, nesSingapore Other Asia, nes Rep. of Korea SingaporeJapan China Rep. of Korea Other partners Top partners for Vietnam Imports Partner Title JapanUSA ChinaJapan USAChina Australia SingaporeAustralia China AustraliaSingapore Other partners Top Partners for Vietnam Exports

12 DescriptionTrade Value% share to total Mineral fuels, oils, distillation products, etc $3,842,867, Nuclear reactors, boilers, machinery, etc $3,214,159, Iron and steel$2,730,589, Electrical, electronic equipment $1,665,184, Fertilizers$1,336,372, DescriptionTrade Value% of total Mineral fuels, oils, distillation products, etc $21,137,515, Nuclear reactors, boilers, machinery, etc $20,936,060, Electrical, electronic equipment $12,871,937, Iron and steel$12,058,909, Plastics and articles thereof $8,813,825, Vietnam Imports from China Vietnam Imports from World

13 DescriptionTrade Value% share Mineral fuels, oils, distillation products, etc$6,022,820, Rubber and articles thereof$2,120,675, Edible fruit, nuts, peel of citrus fruit, melons$631,971, Commodities not specified according to kind$546,421, Fish, crustaceans, molluscs, aquatic invertebrates ne$507,416, Vietnam Exports to China DescriptionTrade Value% of Total Mineral fuels, oils, distillation products, etc $31,999,695, Footwear, gaiters and the like, parts thereof $13,671,300, Articles of apparel, accessories, not knit or crochet $12,585,689, Fish, crustaceans, molluscs, aquatic invertebrates ne $11,600,082, Articles of apparel, accessories, knit or crochet $7,473,980, Vietnam Exports to World

14 PeriodTrade Surplus 2007$182,596, $369,776, $708,005, $863,742, $196,120, $280,547, $409,155,926 Vietnams Trade Surplus in Petroleum with China Vietnam mainly exports (Petroleum oils, oils from bituminous minerals, crude) to China and imports (Oils petroleum, bituminous, distillates, except crude) from China. This surplus helps Vietnam fund a part of its imports from China. A lot of Chinese FDI is involved in Vietnamese Petroleum sector.

15 The GMS initiative China is actively investing in Vietnam to develop its transportation and energy sector. $710 million Cao Ngan Thermal power station $340 million Hanoi – Ha Dong Railway Project Pan-Tonkin/ Beifu Gulf Economic Cooperation. Integrate the Vietnamese growing industrial sector with the Chinese industries in its Yunnan and Guanxai Provinces. Road linkages between Vietnam and Yunnan and Guanxai Provinces Develop a chain of ports and markets in Vietnam and Guanxi, Hainan and Guangdong regions of China in the Tonkin/ Beifu Gulf. Vietnam already committed to US$1.4 billion to upgrade the road between Hanoi and Nanning into a six-lane expressway Increase the annual capacity of its main northern deep-sea container port of Haiphong to 25 million tonnes by 2010 and 40 million tonnes by 2020.

16 Chinese FDI in Vietnam total No of projects Registered Capital (in Mill. USD) China Japan United States Korea According to the FDI Bureau of Vietnams Ministry of Planning & Investment (2007), by April 2007 China ranked 15 out of 77 countries and territories which supports FDI in Vietnam. For China, Vietnam ranks second amongst ASEAN countries in terms of its FDI flows. PeriodNumber of Projects Registered Capital (USD million)

17 Composition of Chinese FDI in Vietnam project registered till 2007 OrderIndustry No. of Proj. Total Investment Capital Disbursem ents I Industries and Construction319861,234,569154,365,481 Light Industry85165,197,05246,271,545 Heavy Industry183602,196,02680,899,692 Food Processing Industry2123,733,7189,183,636 Construction3070,107,77318,010,608 II Agriculture-Forestry-Aquatic61113,317,15738,439,307 Agriculture & Forestry5084,822,15129,608,443 Aquatic1128,495,0068,830,864 III Services54206,835,86951,164,546 Services1917,194,4211,026,325 Transportation & Telecommunication75,735,000772,400 Hotel & Tourism751,188,4485,032,340 Finance-Banks115,000,000- Culture, Health Care & Education1622,218,0006,650,253 Office & House Rental340,000,00017,616,214 Industrial zones, Export Processing Zones155,500,00020,067,014 Total4341,181,387,595243,969,334

18 Distribution of Chinese FDI in Vietnam Regions with good infrastructure Regions closer to the Chinese Vietnam border Forms of Chinese FDI in Vietnam between overall FDI in VietnamChinese FDI in Vietnam Form of investment Number of project % of total projects Number of project % of total projects 100% foreign- invested 3, Joint venture1, Business cooperation contract BOT Total4,

19 Characteristics of Chinese Investments in Vietnam Mostly involves Chinese State Owned Enterprises (SOE) China National Construction and Agricultural Machinery Import/Export Corporation (CAMC) carried out Chinas biggest export credit guaranteed project (more than US$ 5 million) with Vietnam by exporting a complete set of machines for producing cane sugar to Vietnams Binh Dinh province in May China Petroleum and Chemical Corporation (SINOPEC) owns 30% of Petroaisa, which in association with Saigon Petro is active in exploring Vietnamese oil fields. Chinese aid specified as reciprocal economic cooperation in few agreements Refurbishment of Chinese-built plants in Vietnam (before 1978) such as Hebei nitrogenous fertilizer enterprise and Sanba textile enterprise In 1993 the Bank of China provided loans of 400 million Chinese Yuan to Harbin Power Equipment Corporation (HPEC) for its contracted construction of power plant in Vietnam. Exim Bank China signed an agreement in October 2000 on preferential loans of more than 50 million Chinese Yuan with Vietnams Ministry of Finance for it to pay for Chinese produced machines for overpass construction. Stepping stone for Chinese entrepreneurs to the World TCL Group has held 18-20% of the Vietnamese television market after its entry in 1999

20 CONCLUSION Vietnams engagement with China has been cautious and guarded. Vietnam recognizes China as the best source of imports, but prefers Western developed nations for exports to protect value added exports. Even in FDI, Vietnam accepts more from the Developed West than China. Vietnam is strategically more important for China than China is perhaps for Vietnam.


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