Vietnam's Foreign Trade Development Issues:

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Vietnam's Foreign Trade Development Issues:
Focus on Export Performance and Strategies

Hanoi, 10/2002

I. An Overview of Trade Liberalization, Institutional Reforms and Export Encouragement:

The introduction in 1986 of doi moi policy has brought about profound changes in the policy environment for economic and trade development in Vietnam. The Government, in response to the needs of economic restructuring, has been considering and adopting various policies and measures to gradually liberalize trade and encourage the country's export. Economic entities, particularly those involved in foreign trade, have responded impressively to these changes.

1. Trade liberalization

Trading rights

Prior to 1989, all foreign trade transactions were carried out by a limited number of specialized state-owned enterprises (SOE). As the result, exports could only grow at an average rate of 15 per cent per annum throughout the period of 1980-1988, much lower than the average growth rate seen in the 1990s. The first break-through took place in 1989 when producers of exportable goods, irrespective of their forms of ownership, were allowed to export their own products and import the inputs needed for their production. In order to control the set of commodities that a particular enterprise could trade, a system of business licensing was introduced. Despite the restrictiveness of this system, the number of foreign trade enterprises increased from less than 50 to over 100 right in 1989, of which more than 10 per cent were private production firms.

Business licensing requirement, with minor changes from time to time, lingered on for almost 10 years before full abolition in 1998, when the second break-through in trading rights took place. In that year, by virtue of a Government Decree, all legally established locally-owned enterprises were given the right to export and import goods that are consistent with the scope of business identified in their business registration certificate. As the result, the number of enterprises engaged in foreign trade activities increased sharply from around 2,000 in mid 1998 to over 8,000 in mid 1999, of which more than 3,500 were private firms. The present number is well above 13,000 and still keeps rising.

Quantitative restrictions

The relaxation of trading rights has been accompanied by a gradual relaxation of control over imports and exports. The system of so-called "shipment permits", a legacy from the days of central planning, was totally phased out in 1995. The number of import and export quotas has been reduced greatly. By mid 2001, the quantitative restriction was applied to only 15 export and import commodities, which are listed below.

Table 1: Commodities subject to quantitative restriction 2000 to mid 2001

Exports- Rice

Imports- Egg- Wine and spirits- Ceramic tiles
- Rice- Cement and clinker- Construction glass
- Sugar, raw and refined- Petroleum products- Construction steel
- Vegetable oil, refined- Fertilizer- Motorbikes
- Paper, newsprint- Car and minibus

Source: Prime Minister's Decision No 242/1999/QD-TTg dated 30 December 1999

In April 2001, the Prime Minister issued the Decision No 46/2001/QD-TTg to further relax the trade regime. The export quota, the system of state trading and the mechanism of price control was abolished altogether for the export of rice. Regarding import quantitative restrictions, some were removed instantly (e.g. fertilizer, ceramic tiles), others were to be changed into less restrictive forms of control, e.g. tariff rate quotas.

Other licensing requirements

Together with the relaxation of quantitative restrictions, the licensing procedures for the so-called "commodities subject to the management of line Ministries" were also simplified in 2001. For these commodities, licenses are still required to ensure the country's security and social...
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