Unreasonable financial mechanism makes trade promotion policies powerless

Unreasonable financial mechanism makes trade promotion policies powerless

Vietnam has a trade promotion agency, in charge of running national trade promotion program, aiming to help Vietnamese exporters reach out to the world market. However, the agency remains helpless with “hand and foot bound.”

Budget on decrease, jobs on increase

While the export turnover has been increasing steadily by 30 percent per annum in recent years, the budget on trade promotion activities has been decreasing continuously from 170 billion in 2009 to 120 billion dong in 2010 and then to 55 billion dong in 2011.

Do Thang Hai, Head of the Vietnam Trade Promotion Agency (Vietrade), said the national trade promotion program has been budgeted 43.93 billion dong for 2012, or just equal to 0.0022 percent of the export turnover. The level is equal to 1/50 of the world’s average rate, and just can satisfy 1/7 of the enterprises’ demand.

Also according to Hai, a paradox exists that while the budget has lessened, Vietrade has been assigned two more tasks. It not only is in charge of helping promote exports, but also has to boost trade in the domestic market, mountainous areas and ensure the high trade growth rates in all the markets.

Some experts think that despite the lower budget for trade promotion, Vietnam’s exports have still been increasing steadily in recent years, therefore, no need to spend more money on trade promotion activities.

However, a representative from the Vietnam Pepper Association, stressed that Vietnam needs to maintain trade promotion activities, saying that one should not expect to see immediate effects.

“You carry out trade promotion campaigns this year, but you may only be able to obtain export orders after some more years,” he said.

Despite the economic crisis, Vietnam’s export turnover still increased by 33 percent in 2011, which should be seen as the result of the trade promotion activities carried out in previous years. The sharp cut of the budget for trade promotion activities would make Vietnamese enterprises suffer.

Boosting exports should be the focus

The Prime Minister has instructed at the recent regular government meeting that ministries need to focus on helping enterprises overcome difficulties, while one of the solutions is to allocate higher budget for trade promotion activities and expand the export markets.

However, businesses have said that the government needs to release a “more detailed message” which says that it’s necessary to focus on expanding the export markets.

“It’s impossible to boost domestic consumption in the context of tightened credit and investments,” said Pham Chi Cuong, Chair of the Vietnam Steel Association.

“The only way out for steel manufacturing is to boost exports,” he added.

General Director of a garment company frankly said that he really wants to expand the domestic market share, but his main markets are foreign markets. Therefore, in order to ease the current difficulties, the company needs to boost exports and it needs the support to do that.

In other countries in the world, the trade promotion agencies only focus on boosting exports. Meanwhile, in Vietnam, though having a modest budget, Vietrade has to take on too many works.

Long term programs needed

Experts have pointed out that Vietnam needs long term trade promotion programs. However, with the current financial mechanism, businesses can only draw up short term programs.

Hai of Vietrade said that under the current mechanism, Vietrade has to submit the trade promotion program for the next year to the Ministry of Finance on July 1 every year. The ministry would submit the program to the National Assembly for approval. In general, the plan gets approval in late November at the National Assembly’s session. After that, the ministry would release a notice on the program on March of the next year, and would only disburse money from September.

vietnamnet