09:50 | 09/06/2015 Trade
Clothing and apparel is expected to remain the country's top export item in the foreseeable future, contributing almost 20 percent of the projected growth in total merchandise exports in the decade to 2030, according to an HSBC report.
Workers sew sportswear at a factory in Bim Son Town in the central province of Thanh Hoa.(Photo: VNA)
Global Trade Connection, released on June 4, said Vietnam has also built up a strong presence in the global market for telecommunications in recent years and this should put it in a good position to meet rising demand for consumer goods in emerging Asia.
Indeed, behind clothing and apparel, ICT equipment will make the second largest contribution to Vietnam's export growth in 2015-30. Vietnam's geographical location in Asia, with good access to India, China and Southeast Asia, leaves it well placed to trade with fast-growing neighbours.
It is anticipated that the country's fastest-growing export destinations in the decade to 2030 will be China, India and Malaysia, with exports to all these growing by at least 14 percent a year.
Within emerging Asia, trade liberalisation has risen in recent years and free-trade negotiations between ASEAN members are well under way.
Though the US remained Vietnam's largest export market, China is forecast to become Vietnam's largest export destination by 2030.
The report forecast China's economy to grow by 5.5 percent a year in the decade to 2030, slower than in the decade to 2014 but still a healthy pace.
Vietnam's location and strong foothold in both clothing and telecoms means it is well-placed to access this buoyant consumer market.
The US and Vietnam enjoy historically strong commercial linkages, and by 2030 the US will still account for 15 percent of Vietnam's exports. The two are among the 12 countries currently negotiating the Trans-Pacific Partnership (TPP). Once the agreement is finalised, Vietnam's exports will become even more competitive in the US, probably boosting trade between the two countries.
According to the annual World Economic Forum Global Competitiveness report, Vietnam's score for infrastructure has improved over the last decade, supported by higher FDI inflows and reflecting strong growth. However, it still ranks only 81st in infrastructure out of 144 countries in the latest report, well behind Thailand (48th) and Indonesia (56th).
Substantial infrastructure development means industrial machinery will continue to be Vietnam's largest import sector through 2030, contributing around a quarter of import growth over the forecast period.
The next two most important import sectors will be textiles and ICT equipment, supporting Vietnam's export base in these sectors.
China and the Republic of Korea, emerging Asia's two leading export nations over the last decade, will continue to be Vietnam's largest import partners through 2030. As well as having strong footholds in the global market for industrial machinery, the two countries also present relatively easy transport logistics, with China sharing a border with Vietnam and the RoK just a short journey by sea. By late 2015, the Regional Comprehensive Economic Partnership, a free-trade agreement being negotiated among ASEAN countries and the six states with which ASEAN has existing trade agreements, is due to be finalised and this should give a further boost to regional trade.
Imports from India will also grow strongly, contributing 14 percent of total import growth in the decade to 2030, propelling India past Singapore to become Vietnam's third largest import partner.
Mobile phones and associated items accounted for 16 percent of Vietnam's exports in 2014, while electronics, computers and components accounted for another 8 percent, leaving the electronics sector accounting for a quarter of Vietnam's total exports.
Both exports and imports of electronics are forecast to grow by around 11 percent per annum over the 2015-30 period, slightly ahead of headline growth in trade flows.
Vietnam ran a small trade surplus in electronics and this is expected to rise gradually over the forecast period. The growth of the ICT sector has been led by Samsung, which first opened a 2.5 billion USD mobile phone plant in Vietnam in 2009.
This plant has doubled its output each year since then and another 2 billion USD plant was built in 2013.
In Q4 2014 the RoK giant announced plans for two more factories: a 600 million USD facility manufacturing household appliances and a 3 billion USD smart phone plant.
ICT companies are able to take advantage of the country's large and low-cost but well-educated workforce, and investment has increasingly been aimed at services and consumer products to take advantage of the expanding young market.
LG electronics and Microsoft also have operations in Vietnam and plans to expand.
Vietnam is a signatory to the WTO's Information Technology Agreement (ITA) and has scrapped tariffs on around 250 electronic goods covered by the accord.
Under the terms of its WTO accession, the country has agreed to eliminate tariffs on half the electronic goods considered as part of the ITA expansion.
The authorities are currently focusing their attention on the TPP, which is likely to boost exports in the medium term. The telecom, IT and e-commerce sectors have been identified as a key area of focus for the TPP.
The Government remains committed to streamlining State-owned enterprises (SOEs) and curbing SOE borrowing, and the need to ensure firms meet the terms of the TPP should give this trend extra impetus and improve private firms' credit supply./.