Part 2: Analyzing Vietnam's Balance of Payments (BOP) and Import-Export Structure.

1. Introduction:
As for the Vietnamese economy, our country is a developing market economy
oriented towards socialism, with important contributions coming from agriculture,
tourism, raw material exports and foreign direct investment. The Communist Party
of Vietnam supports the establishment of a socialist-oriented market economic
system in Vietnam. From the early 1990s to the present, Vietnam has continued to
demutualize state-owned enterprises. In 2020, despite the global economic
recession and negative growth, our country's economy still achieved constant
growth. According to the Global Economic Outlook report commissioned by the
Institute of Chartered Accountants in England and Wales and published by Oxford
Economics, Vietnam's economic recovery prospects are the brightest in Southeast
Asia amid the Covid-19 pandemic, and the Vietnam will be the only country in the
region to achieve economic recovery in 2020. An economy that records positive
growth every year. Vietnam, together with Nigeria, is considered one of the fastest
growing economies between now and 2050.

2. Balance of Payments:
a. Overview of the BOP concept:
The balance of payments (BOP) is the method countries use to monitor all
international monetary transactions in a specific period. The BOP is usually
calculated every quarter and every calendar year. All trades conducted by both
the private and public sectors are accounted for in the BOP to determine how
much money is going in and out of a country. If a country has received money,
this is known as a credit, and if a country has paid or given money, the
transaction is counted as a debit. Theoretically, the BOP should be zero,
meaning that assets (credits) and liabilities (debits) should balance, but in
practice, this is rarely the case. Thus, the BOP can tell the observer if a country
has a deficit or a surplus and from which part of the economy the discrepancies
are stemming.

b. Recent BOP data for Vietnam (2022):

The international balance of payments of the Vietnam in the Quarter 4/2022.
The graph below will give you an overview of Vietnam's balance of international
payments in 2022.

c. Analysis of current account, capital account, and financial account:

In the period 2016 - 2021, Vietnam's overall balance is always in surplus with a
value of nearly 81.14 billion USD. Therefore, Vietnam's foreign position has
become stronger. However, this may also imply that there are weaknesses in the
domestic sector relative to the export sector, and private sector investment has
not been focused (US Treasury Department, 2021). It is worth noting that the
level of error and omission in the BOP of Vietnam is quite large. In the period
2016 - 2021, the total value of errors reached 44.47 billion USD, equivalent to
54.8% of the total surplus value of the overall balance. Among them, the value
of inflows that were not recorded or omitted during the whole period was nearly
USD 8.95 billion and the value of unrecorded outflows was nearly USD 53.42
billion. In addition, the number of suspicious transaction reports related to
money laundering that the SBV received has also increased from 1,300 reports
in 2016 to 2,000 reports in 2019 and 1,811 in 2020. This is a big challenge for
Vietnam's macroeconomic management.

d. Surplus or deficit in the BOP:

According to Trading Economy, Vietnam recorded a Current Account deficit of
2% of the country's GDP in 2021. Nevertheless, Vietnam’s ability to overcome
external shocks gets better and better over time. As of the 2nd quarter of 2022,
Vietnam's Current Account recorded a deficit of 4.9B USD in Jun 2022,
compared with a deficit of 2.0B USD in the previous quarter.
Vietnam's Current Account Balance from Mar 1996 to Dec 2022
Vietnam Current Account recorded a surplus of 3.9 USD bn in Dec 2022,
compared with a surplus of 1.7 USD bn in the previous quarter. In the long term,
the Vietnam Current Account is projected to trend around 2.7 B USD in 2023.
3. Import-Export Structure:

a. Overview of Vietnam's import-export structure:

In previous years, Vietnam's ability to cope with external risks has improved year
by year thanks to a current account surplus due to an increasing trade surplus.
However, this ability has weakened in 2021.
Industry is forecast to grow slowly, at 7.5% in 2023, contributing 2.7 percentage
points to GDP growth. Services are expected to grow by 8% in 2023 as tourism
and related services recover. The reopening of China will also benefit the
agricultural sector, as the country receives 45% of Vietnam's fruit and vegetable
exports. Exports in the first two months of 2023 fell 10.4% year-on-year, while
imports fell 16.0%. Both imports and exports are forecast to decline to 7% this
year and next. Slowing trade growth could create a current account deficit equal to
1.0% of GDP this year, before reaching a surplus again in 2024.
Going forward, Vietnam needs to continue to reform to ensure a more sustainable
finance, significantly reducing its dependence on unsustainable sources of revenue
such as land and crude oil.
b. Major export commodities and destinations:
Merchandise export turnover in 2022 is estimated at 371.85 billion USD, up
10.6% over the previous year. In which, the domestic economic sector reached
95.09 billion USD, up 6.5%, accounting for 25.6% of total export turnover; the
foreign-invested sector (including crude oil) reached $276.76 billion, up 12.1%,
accounting for 74.4%. In 2022, there are 36 items with export turnover of over 1
billion USD, accounting for 94% of total export turnover (there are 08 export items
with over 10 billion USD, accounting for 70.1%).
c. Major import commodities and sources
Import turnover of goods was estimated at 360.65 billion USD, up 8.4% over the
previous year, of which the domestic economic sector gained 125.79 billion USD,
up 10%; the foreign-invested sector reached $234.86 billion, up 7.5%. In 2022,
there are 46 imported items with a value of over 1 billion USD, accounting for
93.3% of the total import turnover (there are 06 imported items with over 10
billion USD, accounting for 52.1%).
 d. Comparative advantage and disadvantage in export-import:

- Advantage:
Vietnam is located at the crossroads of major trade routes, connecting the East and
West, and providing easy access to key markets in Asia and beyond. This strategic
location has helped Vietnam to become a major trade hub in the region, attracting
significant foreign investment. Vietnam has a young and growing workforce, this
provides Vietnam with a significant demographic dividend, as the working-age
population is expected to continue to grow over the next decade. Vietnam's labor
costs are relatively low compared to other countries in the region. This has helped
Vietnam to attract foreign investment, particularly in labor-intensive industries
such as textiles, footwear, and electronics manufacturing. Vietnam has enjoyed
political stability in recent years, which has provided a favorable environment for
economic development. The government has implemented policies aimed at
promoting economic growth and reducing poverty, which has helped to attract
foreign investment and boost domestic consumption.
- Disadvantage:
Vietnam's reliance on exports as a driver of economic growth. makes it vulnerable
to external shocks. Moreover, Vietnam's export structure is dominated by low
value-added products such as textiles, garments, and footwear, which offer limited
opportunities for innovation and value creation. This makes it difficult for
Vietnam to move up the value chain and improve its income level. In addition,
Vietnam's export-oriented industries often face challenges related to labor
standards, environmental protection, and social issues. Furthermore, Vietnam's
export-led growth strategy has led to widening regional disparities, as many of the
export-oriented industries are concentrated in certain regions, particularly in the
South, leaving other regions behind in terms of development