Presentation on theme: "The Impact of Chinas Greater Economic Integration with South-East Asia on Vietnam Amitayu Sengupta."— Presentation transcript:
The Impact of Chinas Greater Economic Integration with South-East Asia on Vietnam Amitayu Sengupta
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 – 30 1994 – 1,200 2001 – 16,200 Removal of QRs and Tariff Reforms Liberalizing Foreign exchange regime Tariff or Trade tax system was introduced in 1988. The original structure was rationalized in 1992 and later simplified in 1999 following Vietnams accession to the ASEAN Free Trade Agreement (AFTA).
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
Vietnamese Exports by percentage 199519961997199819992000200120022003200420052006 Prel. 2007 TOTAL100.0 By economic sector Domestic economic sector 73.070.365.065.759.453.054.852.949.645.342.842.142.8 Foreign invested sector (*) 27.029.735.034.340.647.045.247.150.454.757.257.957.2 By commodity group Heavy industrial products and minerals 25.328.728.027.931.337.234.931.832.236.4126.96.36.199 Light industrial and handicraft goods 28.429.036.736.636.733.935.740.642.741.0 41.244.5 Agricultural products 32.029.824.3 22.117.716.114.313.312.813.713.4 14. 8 Forest products 188.8.131.52.01.51.11.2 1.00.70.8 Aquatic products 184.108.40.206.28.410.112.1 10.89.18.4 7.8 (*) Included crude oil. Table from www.gso.gov.vn figures denote % share
Vietnamese imports by percentage 199519961997199819992000200120022003200420052006 Prel. 2 0 0 7 TOTAL100.0 By economic sector Domestic economic sector 82.081.772.476.871.272.269.3220.127.116.112.963.365.4 Foreign invested sector 18.018.327.623.228.827.830.733.934.934.737.136.734.6 By commodity group Mean of production 84.887.689.991.591.693.892.1 92.293.391.992.291.9 Machinery, instrument, accessory 25.727.630.330.629.930.630.529.831.628.825.324.627.7 Fuels, raw material 59.160.059.661.061.763.261.662.360.664.566.667.664.2 Consumer goods 15.212.410.18.58.46.27.9 18.104.22.168.88.1 Food 0.0 Foodstuffs 22.214.171.124.42.51.93.02.52.4 3.02.8 Pharmaceutical and medicinal products 0.91.93.12.82.32.22.01.81.61.4 1.3 Others 10.87.65.03.23.62.13.03.126.96.36.199 Table from www.gso.gov.vn figures denote % share
YEAR 199019952000200120022003200420052006 Prel. 2007 TRADE DEFICIT 348.42706.51153.81188.73039.55106.55483.84314.05064.914120.8 Vietnamese Trade balance in USD million Imports during 2001-2007 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 2001-2007 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)
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
Vietnam China Trade Terms X= Applied MFN Tariff Rate 2005 2007 2009 2010 X > 20% 20 12 5 0 15% < x < 20% 15 8 5 0 10 < x < 15 10 8 5 0 5 < x < 10% 5 5 0 0 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
X= Applied MFN Tariff Rate ACFTA Preferential Tariff Rate (Not Later than 1 January) 2005 2006 2007 2008 2009 2011 20132015 X > 60% 60 50 40 30 25 15 10 0 45% < X < 60% 40 35 30 25 15 10 0 35% < X < 45% 35 30 25 20 15 5 0 30% < X < 35% 30 25 20 17 10 5 0 25% < X < 30% 25 20 15 10 5 0 20% < X < 25% 20 15 10 0-5 0 15% < X < 20% 15 10 5 0-5 0 10% < X < 15 10 8 5 0-5 0 7% < X < 10% 7 7 7 7 5 5 0-5 0 5% < X 7% 5 5 5 5 5 5 0-5 0 X < 5% Standstill 0 Tariff rate commitments by Vietnam Vietnam gets 5 more years to remove tariffs. The rate of reduction is accordingly lower.
Elimination Track End RateImplementation Date ASEAN 6Cambodia, Laos, Myanmar, and Vietnam Early Harvest Programme 0%2004-20062004-2010 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.
200120022003200420052006 2007 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 2001200220032004200520062007 Partner Title JapanUSA ChinaJapan USAChina Australia SingaporeAustralia China AustraliaSingapore Other partners Top Partners for Vietnam Exports
DescriptionTrade Value% share to total Mineral fuels, oils, distillation products, etc $3,842,867,399 15.50 Nuclear reactors, boilers, machinery, etc $3,214,159,176 12.97 Iron and steel$2,730,589,510 11.02 Electrical, electronic equipment $1,665,184,230 6.72 Fertilizers$1,336,372,200 40 DescriptionTrade Value% of total Mineral fuels, oils, distillation products, etc $21,137,515,643 13.36 Nuclear reactors, boilers, machinery, etc $20,936,060,123 13.20 Electrical, electronic equipment $12,871,937,100 8.11 Iron and steel$12,058,909,489 7.60 Plastics and articles thereof $8,813,825,361 5.55 Vietnam Imports from China Vietnam Imports from World
DescriptionTrade Value% share Mineral fuels, oils, distillation products, etc$6,022,820,74747.01 Rubber and articles thereof$2,120,675,00516.58 Edible fruit, nuts, peel of citrus fruit, melons$631,971,8024.94 Commodities not specified according to kind$546,421,2764.27 Fish, crustaceans, molluscs, aquatic invertebrates ne$507,416,0003.97 Vietnam Exports to China DescriptionTrade Value% of Total Mineral fuels, oils, distillation products, etc $31,999,695,383 23.60 Footwear, gaiters and the like, parts thereof $13,671,300,784 10.08 Articles of apparel, accessories, not knit or crochet $12,585,689,632 9.28 Fish, crustaceans, molluscs, aquatic invertebrates ne $11,600,082,836 8.55 Articles of apparel, accessories, knit or crochet $7,473,980,572 5.51 Vietnam Exports to World
PeriodTrade Surplus 2007$182,596,146 2006$369,776,177 2005$708,005,126 2004$863,742,164 2003$196,120,167 2002$280,547,032 2001$409,155,926 Vietnams Trade Surplus in Petroleum with China Vietnam mainly exports 270900 (Petroleum oils, oils from bituminous minerals, crude) to China and imports 271000 (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.
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.
Chinese FDI in Vietnam 1998-2008 total No of projects Registered Capital (in Mill. USD) China7112188.3 Japan110217362.2 United States4935029.0 Korea215316666.3 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) 19953360 199861120 2001110221 2004391774.9 200540658 200677401.3 20087112188.3
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
Distribution of Chinese FDI in Vietnam Regions with good infrastructure Regions closer to the Chinese Vietnam border Forms of Chinese FDI in Vietnam between 1988-2008 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 3,067 70.02 26260.37 Joint venture1,147 26.19 13731.57 Business cooperation contract 160 3.65 358.06 BOT6 0.14 Total4,380 434
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 1997. 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
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.