The Impact of China’s Greater Economic Integration with South-East Asia on Vietnam Amitayu Sengupta. 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
The Impact of China’s Greater Economic Integration with South-East Asia on VietnamAmitayu Sengupta
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 Two Phases of the Vietnamese Economy Tariff or Trade tax system was introduced in 1988. The original structure was rationalized in 1992 and later simplified in 1999 following Vietnam’s 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 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 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
Tariff rate commitments by Vietnam Vietnam gets 5 more years to remove tariffs. The rate of reduction is accordingly lower.
EARLY HARVEST PROGRAMME 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. EHP includes Live Animals Meat and Edible Meat Offal Fish Dairy Produce Other Animals Products Live Tress Edible Vegetables Edible Fruits and Nuts
Top partners for Vietnam Imports Top Partners for Vietnam Exports
Vietnam Imports from China Vietnam Imports from World
Vietnam Exports to China Vietnam Exports to World
Vietnam’s 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$1.4 billion to upgrade the road between Hanoi and Nanning into a six-lane expressway • Increase the annual capacity of its main northern deep-sea container port of Haiphong to 25 million tonnes by 2010 and 40 million tonnes by 2020.
Chinese FDI in Vietnam According to the FDI Bureau of Vietnam’s Ministry of Planning & Investment (2007), by April 2007 China ranked 15 out of 77 countries and territories which supports FDI in Vietnam. For China, Vietnam ranks second amongst ASEAN countries in terms of its FDI flows.
Distribution of Chinese FDI in Vietnam Regions with good infrastructure Regions closer to the Chinese Vietnam border Forms of Chinese FDI in Vietnam between 1988-2008
Characteristics of Chinese Investments in Vietnam • Mostly involves Chinese State Owned Enterprises (SOE) • China National Construction and Agricultural Machinery Import/Export Corporation (CAMC) carried out China’s biggest export credit guaranteed project (more than US$ 5 million) with Vietnam by exporting a complete set of machines for producing cane sugar to Vietnam’s 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 agreementin October 2000 on preferential loans of more than 50 million Chinese Yuan with Vietnam’s 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 • Vietnam’s 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.