The first will be to make domestic enterprise more internationally competitive, says deputy Trade and Industry Minister Nguyen Thanh Bien.

The others will be to:

Check the list of high and fast-growing imports to see which can be made or produced in Viet Nam;

Devise a system to monitor imports; and

Build a barrier to imports based on the requirement of acceptable technology standards that accord with international regulations.

Policy makers, economists and export-import enterprises agree that competitive enterprises are essential to reducing the trade deficit.

Independent National Economic Research director Nguyen Quang A says higher competitiveness is the most stable and effective measure to narrow the deficit.

"Administrative measures, including limiting and monitoring imports or setting standard barriers are short-term and difficult to enforce," he says.

Although the director recognises the necessity to improve the capacity of domestic enterprises, he emphasises the need for them to give more attention to the domestic market and not become too dependent on exports.

"This will not only help them avoid the risks caused by the fluctuation of international prices, it will also help reduce imports," he says.

When former Trade Minister Truong Dinh Tuyen analysed the import-export figures for the first six months of last year and found that the difference between export revenue and import costs had exceeded the threshold of 20 per cent, he emphasised that increased domestic productivity and competitiveness were crucial to narrowing the gap.

Planning and Investment Ministry senior economist Vo Tri Thanh argues the deficit should be assessed by more than just the figure.

"A trade deficit for a developing country like Viet Nam is not a disaster," he says.

"More important is whether the increase in the trade deficit will create greater capacity and effectiveness for domestic enterprises for the long-term development of the economy."

Viet Nam recorded high trade deficits during the 1990s, he says.

These were mostly offset by foreign direct investment capital; today direct and indirect capital as well as remittances do the same job.

"This is more dangerous because indirect capital is not as stable as direct capital."

The Ha Noi Trade Corporation’s Northern Export Centre, Hapro, director Nguyen Thi Hai Thanh says the inadequacy of domestic enterprises has sometimes stopped her company from winning better markets and more investment.

"We’ve had to let export opportunities go because domestic products didn’t meet customer requirements in quality, hygiene or environmental standards.

The key to increased export and fewer imports is in the competitiveness of domestic enterprises.

"Measures such as setting a barrier to imports based on the requirement of acceptable technology standards may have limited effectiveness because most imports are of high quality," she says.

Hapro recorded a 30 per cent increase in export revenue last year after having targeted 17 – 18 per cent growth.

It major exports are agricultural produce, fine arts and handicrafts, steel and machines.

But increasing competitiveness might prove easier said than done.

Viet Nam Electronics Industry Association General Secretary Tran Quang Hung says it’s very difficult for electronic enterprises, which import as much as 90-95 per cent of their materials, to reduce imports for domestic replacements.

"This would require major investment in capital and technology, both of which we seriously lack, he says.

Source: VietnamNews.