Over the past nine months, Vietnam’s trade deficit has risen to US$8.6 billion, accounting for 16.7 percent of total export turnover.

A Radio Voice of Vietnam (VOV) reporter interviewed Dr. Ho Duc Hung, Head of the Economic Development Research Institute at the Ho Chi Minh City University of Economics on the issue.

Reporter: Many economic analysts have predicted that the import surplus is likely to rise by the end of this year. What has caused the rapidly increasing trade deficit in recent months?

Mr Hung: Firstly, the Vietnamese economy is bouncing back from the global economic downturn and businesses’ demands for imports to boost production are rising. Secondly, there are growing needs for commodities for the lunar New Year Festival. Lastly, to fulfill their export targets, businesses have to import raw materials, which has sent the import surplus soaring in the remaining months.

Reporter: The industrial sector has an import surplus of less than US$13.5 billion for 2010. With the increasing trade deficit, is this target achievable?

Mr Hung: The National Assembly’s target is to keep the trade deficit, 20 percent lower than export turnover. However, this target is unlikely to be reached as it is hard to post a high export growth in agricultural and aquatic products and minerals this year.

In addition, the export of crude oil is dropping as oil producers have to provide a relatively high volume of crude oil for the Dung Quat Oil Refinery which has led to lower oil exports.

Garments and textiles are facing tough competition from China, especially in the US market.

Reporter: What should be done to limit the trade deficit and stabilise the macroeconomy?

Mr Hung: In fact, the import surplus is good, if it supports an export surplus. However, it is a question of the structure of imported goods, not measures to control the trade deficit. Therefore, we need to root out the problem by limiting the import of luxury goods, develop supporting industries and stop the import of goods through unofficial trade channels.

Reporter: Do you think the adoption of policies to encourage businesses to build domestic distribution systems for the rural market is a good way of controlling the trade deficit?

Mr Hung: Expanding the domestic market is also a way of competing with imported goods. By doing so, it is essential to develop distribution networks from urban to rural areas to help these products gain a foothold in the domestic market, and encourage Vietnamese to use Vietnamese products and minimise the use of foreign goods.

In addition, it is necessary to create environmental hygiene and safety standards to protect domestic production. If such measures are taken comprehensively, import surplus will fall.

Reporter: Thank you very much.