Proposed measures towards the balance of vietnamese trade balance today

In addition to focusing on analyzing the causes of trade deficit in two aspects: import-exportrelation and the relationship between investment and savings, the study also measures a numb

1 Lý do ch ọn đề tài

Trade balance is an issue that economists and policymakers are looking forward to In Vietnam, the trade balance in the past 10 years has been inclined to trade deficit from USD 1 million in 2002 to USD 12-15 billion in 2010 Prior to that situation, many

authors have searched for solution to balance the trade balance Most studies have said that exchange rate is the main factor affecting the trade balance and thus the domestic studies focused on measuring the impact of exchange rates on the trade balance has not focused on explaining the causes of the trade balance imbalance, not mentioning the tradeimbalance between Vietnam and China, not yet establishing a J-curve for Vietnam , there

is no complete research on analyzing trade deficit in investment and saving relationships

To add to this issue, the author has chosen the topic "Trade deficit and aims to balance Vietnam's trade balance" to be the research topic

In addition to focusing on analyzing the causes of trade deficit in two aspects: import-exportrelation and the relationship between investment and savings, the study also measures a number of macro factors affecting Vietnam's trade balance Nam by co-analysis analysis techniques and error correction model (ECM -Error correction model) This is a technique applied by many domestic and foreign researchers when studying trade balance, because it

is suitable for the characteristics of time series data In addition, when using the co-linking technique, we can apply the IRF (Impulse Response Function) function to draw a J-curve to see the trade balance response if VND devaluation

2 Tính c ấ p thi ế t c ủa đề tài

It is essential to determine the cause of Vietnam's trade deficit, because the trade deficitreflects many imbalances in the economy and only when determining the exact cause ofthe deficit can then offer reasonable solutions to bring the trade balance to equilibrium

As is well known, trade balances are influenced by many macro factors and measuring their influence on trade balances is also essential for policy makers to select the necessary

tools When it is necessary to intervene in the economy to achieve the expected effect

On the other hand, at present, Vietnam has no agencies to announce the real exchange rate, some topics of some financial and monetary researchers have mentioned this issue, due to the real exchange rate fluctuations in The context of the Vietnamese economy is inthe process of transition, so there may be different ways of assessing the exchange rate policy at different times Therefore, updating the real exchange rate and re-evaluating its impacts on the economy in general, the import and export activities of Vietnamese enterprises in particular and the appropriate exchange rate policy are appropriate Each period is needed

3 M ụ c tiêu c ủa đề tài

In order to contribute an additional perspective, a viewpoint to Vietnam's trade deficit problem, the author analyzes to determine the cause of the trade deficit in both

approaches: export relation import and the relationship between investment and savings.The author measures the influence of a number of macro factors affecting the trade balance Calculate bilateral and multilateral real exchange rates and assess its impact on Vietnam's import and export activities Based on the analysis, the author proposes a number of measures towards the balance of Vietnam's trade balance

4 Đối tượ ng nghiên c ứ u

To achieve the research objectives as mentioned above, the thesis targets the followingsubjects:

- Vietnam's trade balance;

- The VND exchange rate against a number of currencies of major trading partners with Vietnam;

- Local currency exchange rate of these partners against USD;

- Vietnam's CPI and major trading partners, Vietnam's import-export values with the above-mentioned major trading partners Growth rate of gross national product (GDP) ofVietnam and trading partners, the scale of foreign direct investment in Vietnam (FDI);

- Vietnam's export-import value and trade balance;

- The level of investment and savings of the Vietnamese economy

5 Ph ạ m vi nghiên c ứ u

The scope of the research is:

- Vietnam's trade balance from the first quarter of 2009 to the last quarter of 2019

- Vietnam's import and export data with trading partners, Vietnam's CPI and partners, thegrowth rate of gross national product (GDP) of Vietnam and its trading partners model

of foreign direct investment in Vietnam (FDI), import-export value and trade balance of Vietnam, investment and savings level of Vietnam's economy and exchange rate of Vietnam with VND These partners were collected from Q1 2009 to Q4 2019

6 Phương pháp nghiên cứ u

In this study, the author uses many research methods such as:

- Comparison method: Based on actual data collected

The author compares with specific objectives and targets from which to draw points ofgood and bad points;

- Modeling method: This method is used for clarification

qualitative analysis with specific drawings to make the problem easier to understand;

- Method of econometric analysis: The author uses regression techniques

At the same time, it is necessary to link together to analyze long-term equilibrium and ECM model to analyze short-term equilibrium of some macro factors affecting the tradebalance in the period of 2009-2019

7 Ý nghĩa khoa họ c c ủa đề tài

When analyzing the factors affecting the balance of trade, the author is based on the principle of cetaris paribus, meaning that when studying the effects of one factor, we fixother factors

8 D ữ li ệ u nghiên c ứ u

In the thesis, the author used secondary statistics from data sources from the General Statistics Office (GSO), Ministry of Finance (MOF), National Monetary Fund (IMF), World Bank (WB) , Asian Development Bank (ADB) published in the period from 1999

to someone in a foreign country, it is an export

Exports are one component of international trade The other component is imports Theyare the goods and services bought by a country's residents that are produced in a foreign country Combined, they make up a country's trade balance When the country exports more than it imports, it has a trade surplus When it imports more than it exports, it has a

trade deficit

1.1.2 Import

Imports are foreign goods and services bought by citizens, businesses, and the

government of another country It doesn't matter what the imports are or how they are

sent They can be shipped, sent by email, or even hand-carried in personal luggage on aplane If they are produced in a foreign country and sold to domestic residents, they areimports.

Even tourism products and services are imports When you travel outside the country,you are importing any souvenirs you bought on your trip

1.1.3 Trade deficit

A trade deficit also referred to as net exports, is an economic condition that occurs when

a country is importing more goods than it is exporting The trade deficit is calculated bytaking the value of goods being imported and subtracting it by the value of goods beingexported

If a country has a trade deficit, it imports (or buys) more goods and services fromother countries than it exports (or sells) internationally If a country exports more goodsand services than it imports, the country has a balance of trade surplus

A trade deficit can impact a stock market—albeit indirectly—since it can be a positive sign that a country is growing and needs more imports or a negative sign that a country

is struggling to sell its goods internationally

1.2 Factors affect to trade deficit

1.2.1 Reflection of trade balance

From the perspective of import and export, this balance reflects revenues and expenditures

of exports Import of goods in a given period When the trade balance is in surplus it is means that the country has earned more from its exports than paid for and vice versa, when the trade balance is in deficit this means that country has been obtained from exports less than paid for import Trade balance (TB) = Export value (X) - Import

value (M) The trade balance is in surplus when (X - M)> 0; in contrast, the trade

balance is intensive Missed when (X - M) <0

1.2.2 Factors affecting the trade balance

Many research points of view suggest that there are four main factors affecting the

trade balance:

- Inflationary;

- National income;

- Exchange rate;

- Limited government measures

Influence of inflation: If a country has an increased inflation rate compared to other

countries

If other countries have trade relations, the trade balance will be in deficit if the otherfactors unchanged Because consumers and domestic businesses will almost purchasemore from abroad, while exports to other countries fell reduction

Impact of national income: If the income level of a country increases at a rate higher thanthat of other countries, the trade balance will be in deficit if the other factors are equal Due to the actual income increased consumption demand goods also increased especially for imported goods To illustrate, maybe Reviewing Singh's (2002) study of the Indian case, the study found that coefficients correlate India's real national income with the tradebalance This trade is (-1.87) if other influencing factors are fixed

Effect of exchange rates: If a country's currency starts to appreciate with currencies of other countries, the trade balance will be in deficit if the factors equally different, goodsexported from this country will become more expensive to the country if the currency isstrong, the demand for such goods will fall To as illustrated, Qnafowora's (2003)

examines the effect of real exchange rate changes on lamination commercial scales.Qnafowora’s research investigates the three ASEAN countries Malaysia, Indonesia andThailand in bilateral trade with the United States and Japan using the co-fix error model

(Vector Error Correction Model (VECM)) The results show that in the long term real exchange rates have a positive effect on the trade balance in the case, when fixing other factors, the coefficient The correlation was found as follows: Indonesia - Japan (+0,351),Indonesia - US (+0,243), Malaysia - Japan (+1,252), Malaysia - US (+0,644), Thailand - Japan Copy (+1,082) and Thailand - US (+1,665).

Effect of restrictive government measures: If the government of one countries levy taxes on imports, prices of foreign goods actually increase In fact, if there is no trade retaliation, the trade balance will be improved Out Import duties, governments can alsouse import quotas to cut Imports aim to improve the trade balance

1.2.3 Relationship of Trade deficit with Investment and Savings

According to economic theory in terms of investment and savings, the trade deficit

(The main contributor to the current account deficit) is due to an imbalance betweeninvestments and save We use a fundamental equation in economics that expresses respect

The relationship between trade deficit, savings and investment is as follows:

TB=S–I

In particular, TB (Trade balance) is the deficit / surplus of the trade balance,

S (domestic savings) is savings in the economy and I (investment) is investment

This basic equation clearly shows the relationship between trade deficit trade (trade

deficit) with savings and domestic investment Also according to this equation,

The problem of trade deficit does not lie in trade policy, but in the source rooted inmacroeconomic issues

In a closed economy, there are no import and export activities:

Y = C + I + G (i)

In which, Y is the national income, is spent on the items C is consumption, I is the

beginning

Private and G are expenditures of government sector The equation (i) above is rewrittenas:

Y-C – G = I (ii)

Y - C - G is savings, called S We will have S = I Thus, in a closed economy,

There is always a balance between saving and investing

In an open economy we have import and export activities, so the equation (i) will

be write the following:

Y = C + I + G + (X - M) (iii)Where X is exports, M is imports, the difference between (X - M) is deficit trade deficit /surplus If we consider (X - M) = TB, we will have:

TB = Y - C - G - I (iv)And we know Y - C - G is saving S So we can write:

TB = S - I (v)

1.1.1 Relationship of Trade deficit and Budget deficit

One of the causes of the trade deficit is the budget deficit

State book, to see the relationship between budget deficit and deficit commercially, werewrite the equation (v) above as follows:

TB = Sp + Sg – I = (Y - T - C) + (T - G) – I (vi)

Where Sp is the savings of the private sector, Sg is the difference between the cashier

budget book (G) is the budget deficit From the above equation, we see an increase in

savings of the private sector will improve the trade deficit The increase in investment or increase budget deficit will lead to trade deficit (the main cause of deficit Missing currentaccount) And so, if the other factors have not changed, then there is The main budget deficit will lead to trade deficit in particular and account current in general One of the risks causing the economic crisis is the problem dual deficit problem: There is a large current account deficit and the budget deficit The government is also big Currently, according to the World Bank (WB) reports.

It seems that Vietnam has a double deficit problem In many cases, the balance of tradedeficit is indicative of an economy

The economy is growing well When an economy has good growth potential, there are many investment opportunities with high profits, higher investment needs than the ability

to save in water, this will cause foreign capital flows into that country in response meet investment needs, which one country can use the resources of another domestic economicdevelopment In many other cases, a country can use it Using other countries' resources

to develop domestic economy, a typical example is the current account of the US

economy, which is always in deficit In recent years, this doesn't show that the United States is a weak economy

1.3. Experiences sources

1.3.1 The research of foreign authors

In recent years, there have been numerous studies by authors from many countries on thetrade balance The authors focus on measuring how the effects of macroeconomic factors

on the trade balance are common, measuring the effect of real multilateral exchange ratesand real national income in country and real national income of trading partners Below,the author introduces some case studies of trade balance of some Asian countries

The study of Singh (2002), using Cointegration theory and Error Correction Model (ECM) and using statistics from 1960-1995 the author has conduct a study of the effects

of real exchange rates (REER), domestic real national income and real trading partners' real national income on India's trade balance The results of the study show that the real exchange rate and real domestic income have a significant influence, while the income oftrading partners has a strong impact on the country's trade balance The correlation coefficient found in this case is (+2.33) for the effect of the real exchange rate and (-1.87)

on domestic real GDP

Research by Qnafowora's (2003), the author measuring the trade balance of the three ASEAN countries Malaysia, Indonesia and Thailand in bilateral trade with the United States and Japan using the co-theory theory associated with the model Correct co-link errors (Vector Error Correction Model (VECM)) The author uses the data source

published by IMF from Quarter 1, 1980 to Quarter 4, 2001 The research results show that in the long term, the exchange rate actually positively affects the trade balance in the cases when Other factors, correlation coefficients were found as follows: Indonesia - Japan (+0,351), Indonesia-US (+0,243), Malaysia - Japan (+1,252), Malaysia-US

(+0,644) , Thailand - Japan (+1,082) and Thailand - US (+1,665)

The study of Nusrate Aziz of the University of Birmingham, UK, published in June 2008,also uses cointegration theory and error correction model (ECM) - Error Correction Model) The study measures how the impact of the multilateral real exchange rate, real national income and real national income of trading partners on the Bangladesh trade balance The author used data from 1972 to 2005 to carry out research The study results show that real multilateral exchange rate, real domestic national income and real trading partner's national income have an effect on Bangladesh's trade balance both in the short and long term The correlation coefficients of variables as stated in the long term are (+1.07), (-0.75) and (+0.27)

Thus, it can be seen that the studies on trade balance authors use co-association theory anduse data published by IMF to regression analysis And according to the authors, the

quarterly statistics will have more reliable results The real exchange rate of the

multilateral exchange is an important factor affecting the trade balance in a positive way,while national income has an unclear influence

1.3.2 The research of domestic authors

Over the years, there have been many different studies on the factors affecting the trade balance, which are popular as the influence of multilateral real exchange rate and real national income, the studies using the The least squares method in the quantitative modelhas very few studies using coherence theory Studies use quarterly data for analysis Hereare some case studies:

Assoc.Prof.Dr Tran Ngoc Tho (2006) studied "Approach of exchange rate management mechanism in Vietnam", in this study, the author calculated real multilateral exchange rate for the period of Q1 1999 - Q4 2005 The author also verify the relationship between exchange rate (VND / USD) and import-export period from 1995 to 2005 According to the author, there is a relatively high correlation between exchange rate with import-exportand trade deficit, the correlation coefficient is found showing that the VND / USD

exchange rate has a negative impact on the trade balance (- 0.661)

Research by Phan Thanh Hoan and Nguyen Dang Hao (2007) on "The relationship between exchange rates and Vietnam's trade balance period 1995 - 2005" 1, in their article, the authors analyze quantify the relationship between the exchange rate and the Vietnamese trade balance by using Cointegration theory and Error Correction Model (ECM) to use the model quantify the author calculating these two variables with quarterlyfigures taken from the International Financial Statistics (IFS) data source The study period here is from Quarter 1 of 1995 to Quarter 4 of 2005 and Quarter 1-1995 is the baseperiod to establish the real multilateral exchange rate Major trading partners present in calculating the real exchange rate include Singapore, Japan, USA, China, South Korea, Hong Kong, Taiwan, Australia and Germany The regression results show that in the long

term real multilateral exchange rate has a positive impact on the trade balance, the

correlation coefficient is found as (+0,7042) The delay in the impact of the real exchangerate on the trade balance is quite large, the model shows that the fluctuations of exchangerates in the third quarter and before will have an impact on import and export activities atthe time present

Pham Hong Phuc's researh (2009) on "Real exchange rate and Vietnam's trade balance"

2, in this study, the author has calculated the real exchange rate and measured the impact

of real exchange rate to import and export activities The author uses data from various sources and selects the base period as Quarter 1, 1999 to calculate the real multilateral exchange rate and there are 10 currencies selected to be included in the currency basket

to calculate the actual exchange rate is SGD (Singapore) ), THB (Thailand), TWD (Taiwan), KRW (Korea), JPY (Japan), CNY (China), EUR of Germany and France, USD(US) According to the author, the fluctuation of the ratio of exports to imports is

positively influenced by the real multilateral exchange rate (+1,0777) while the real income of trading partner countries has a negative impact ( -4,7362)

Thus, it can be seen that the domestic studies focused on measuring the impact of

exchange rates on the trade balance but did not focus on explaining in depth the causes ofthe trade balance imbalance, not mentioning the trade imbalance between Vietnam and China, not yet establishing a J-curve for Vietnam, there has not been a complete study of trade deficit analysis in the relationship of investment and saving

CHAPTER 2: ANALYSIS THE SITUATION OF BALANCE

TRADE IN VIETNAM

2.1. Overview of Vietnam's trade balance period 2000-2019

2.1.1 Overview

2.1.2 The situation of trade balance with a number of trading partners

2.2. The cause of Vietnam's trade deficit

In an open economy, it's normal for a country to have a surplus or a trade deficit For our country in the process of developing with high economic growth, the trade deficit may benecessary to take advantage of external resources to meet the requirements of economic development, but the trade deficit is too high large (over 10% of GDP) and increasing, it can cause many risks to the economy Therefore, according to the author, it is necessary

to fully identify the cause of the large trade deficit in the past time, in order to find out thecause of the trade deficit as mentioned, the author conducted the analysis below two The perspective is the trade deficit with the perspective of import and export and the trade deficit under the perspective of investment and saving relations

2.2.1 Imbalance between exports and imports

The trade deficit is caused by imports that exceed the country's export level Data show that over the past 10 years Vietnam's international trade in goods has increased rapidly Both imports and exports are growing rapidly, probably as a result of the economic reforms that Vietnam implemented in the 1990s, as evidenced by the signing of bilateraltrade agreements and, most recently, the Vietnam joined the WTO, the competitiveness

of export goods increased, the demand for imported machinery and equipment for

production and consumption investment also increased The imbalances in the structure

of export and import goods or the weak competitiveness of domestic enterprises or the instability of macroeconomic factors can be considered as the main causes of the deficit

According to preliminary statistics of the General Department of Customs, the total export value of the whole country in December 2019 reached US $ 44.86 billion, up 1.7% over the previous month In December 2019, the export value reached US $ 22.56 billion, down 1% from the previous month (corresponding to a decrease of US $

import-0.23 billion); import reached 22.3 billion USD, up 4.5% (equivalent to 0.96 billion USD)

By the end of 2019, the total import-export turnover of the country reached US $ 517.26

billion, up 7.6% (equivalent to an increase of US $ 36.69 billion) compared to 2018

In which, the value of exported goods exports reached 264.19 billion USD, up 8.4% and imports reached 253.07 billion USD, up 6.8%

Figure 1- Kim ngạch, tốc độ tăng xuất khẩu, nhập khẩu và cán cân thương mại giai đoạn năm 2011-2019

2.2.1.1 Structure of exports

In 2019, in the context of a decline in the total demand of the world economy, world trade and investment decline, Vietnam's import and export of goods still maintained a positive growth rate with the total turnover import and export was estimated at 516.96 billion USD, up 7.6% compared to 2018 Besides, the structure of export goods

improved in a positive direction The scale of exports and import-export markets

continues to expand, not only strengthening in traditional markets but also exploring newmarkets, effectively taking advantage of FTAs Industrial production in the past year alsohad positive results In the growth rate of the whole economy in 2019, the industrial sector is estimated to increase by 8.9%, reaching the set target Production index of the whole industry is estimated to increase by 9.1%, exceeding the set target Processing and manufacturing industry maintained the growth momentum, estimated to increase by 10.5% compared to 2018 Many industries have high and solid growth in the context of

difficult markets such as: Manufacturing coke, refined petroleum products, metals, motor vehicles, manufactured products from prefabricated metal (except machinery and equipment), electronic products, computers, optics Mining industry minerals have a positive growth The electricity industry increased 8.7% over the same period last year.

According to the Report "Taking advantage of opportunities to promote exports to markets participating in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership(CPTPP)" of the Ministry of Industry and Trade, 2011-2018 is a period of excessive growth

in terms of export and import turnover, in which, export growth exceeded the set target with

an increase in 8 years, 2.51 times, from USD 96.91 billion in 2011 to USD 243.48 billion peryear 2018 In terms of the size of export markets, if in 2011 only 24 export markets reached

a turnover of over 1 billion USD (including 3 markets over 10 billion USD), by 2018, there will be 31 export markets exports reached over US $ 1 billion (of which, in 4 markets with turnover of over US $ 10 billion, 7

markets with over US $ 5 billion), thanks to that, Vietnam has quickly improved its position to occupy a high rank on map of world import and export If in 2007, Vietnamranked 50th, by 2017, it would have reached the 27th position in export.

Remarkably, exports in 2018 reached US $ 243.48 billion, up 13.2% compared to 2017, far exceeding the planned targets assigned by the National Assembly and the Government(the National Assembly assigned targets increased by 7-8%; targets assigned by the Government increase by 8-10%) In absolute terms, exports in 2018 increased by US $ 28.36 billion compared to 2017 2018 is the third consecutive year that Vietnam has a trade surplus and is also the year in which the trade balance surplus reaches the highest level ever The record surplus achieved in 2018 was nearly $ 6.8 billion, nearly 3 times higher than the surplus in 2017 ($ 2.11 billion) With the maintenance of trade surplus in

2018, Vietnam had a trade surplus in 6 years from 2012 to 2018 and only in 2015 had a trade deficit This result has contributed positively to the balance of payments and

stabilized other macroeconomic indicators of the economy

2.2.1.2 Structure of imports

In the period of 2011-2018, Vietnamese goods will continue to exploit imports into

traditional markets and expand search and develop more new markets Up to now,

Vietnamese goods have been exported to more than 200 countries and territories In

particular, the Asian market always maintains a share of about 51% of Vietnam's total

merchandise export value; Americas and Europe market area maintained at 20-23%,

Africa and Oceania lower than the remaining 3 regions, totaling these two regions

is about 4%

By the end of December 2019, the country's import value of goods reached US $ 253.07 billion In particular, there were 38 major commodity groups reaching over 1 billion USD, accounting for 90.7% of the total import value of the country With this result, the import value of goods in 2019 was 16.2 billion USD higher than in 2018, corresponding

to an increase of 6.8% compared to 2018 The main increase items were: computers, electronic products & components increased by 8.22 billion USD; machinery, equipment,tools and other spare parts increased by 3.87 billion USD; complete automobiles of all kinds increased by 1.33 billion USD; coal of all kinds increased by US $ 1.24 billion; crude oil increased by US $ 849 million Besides, there were a number of commodity groups falling sharply such as: gasoline of all kinds decreased by US $ 1.68 billion; phones of all kinds & components down US $ 1.3 billion; common metal and products fell 1 billion USD; wheat decreased by 455 million USD

2.2.2 Macro factors affecting international trade

2.2.3 Trade deficit due to the imbalance between investment and savings

If considering the trade deficit as the difference between domestic investment and saving,there are two basic issues to consider: investment and savings The trade deficit is due tohigh investment while saving is low

According to the diagram above, we see the sources for forming investment capitalinclude: domestic savings (savings of households - Sh, savings of enterprises - Se,Government savings - Sg) and foreign savings (FDI, ODA, FII and commercial loans).The financial system only mediates a part of the nation's total investment becausecompanies and households fund most of their investments directly from their own

savings, which the financial system has the role of transferring savings from surpluseconomic units to deficit units.

In Vietnam in the average period of 2009-2019, compared with GDP of householdssaving 10.5% and investing 4.3%, they still have a surplus of 6.2%; the enterprise sectorsaved 16.2%, invested 20.8% and had a deficit of 4.6%; the government saved forinvestment 2.4%, invested 11.7% and had a deficit of 9.3%; net foreign lending was 7.6%16

2.2.4 The safety level of trade deficit and Vietnam's economic growth

2.2.5 Empirical analysis affecting macro factors on Vietnam's trade balance

for the period 2000-2019

2.3 The safety level of trade deficit and Vietnam's economic growth

Borrowing foreign capital to meet the requirements of increasing domestic investment toenhance Vietnam's future production capacity is a reasonable solution as it will help to curb inflation However, there are also limitations that the debt repayment pressure and VND may be devalued when the convertible debt will increase Vietnam needs higher human and capital resources to compete in the world market with higher value-added products, such as electronics

At the same time, Vietnam is still a relatively low-income transition economy, which needs to invest heavily in infrastructure and people to raise the long-term value-added ratio with the expected GDP growth target an average of 7.5% - 8.5% / year in the period

of 2011 - 201523 Vietnam needs to invest in hospitals, schools, vocational training, developing transport corridors and support services, reducing expenditures, utility and telecommunications service charges, consolidating the business environment, enhancing the level of research and development centers The size of the economy is small, so the total domestic savings are low and it is difficult to meet the capital needs of these

investment projects Therefore, it is necessary to attract foreign investment or borrow capital to meet the capital needs of these projects This process will inevitably make the current account deficit in general and trade balance in particular

The trade balance is fundamentally safe in the long run, if Vietnam can afford to create future trade surpluses to create accumulated foreign exchange reserves to pay off foreigndebt To ensure this requirement, Vietnam will have to ensure good implementation of investment decisions and the wise use of foreign debt In terms of IMF debt rating criteria, Vietnam's external debt has been in the safe ratio for many years (Table 2.13 andTable 2.14) In the short term, the trade balance will become unsafe if Vietnam falls into insolvency or does not have enough foreign currency to pay for import activities becauseinternational reserves may fall down too low The level of foreign currency reserves is considered low when only 3 months of import are completed However, ―the

representative of the State Bank said that Vietnam's foreign exchange reserves currently reach nearly 9 weeks of imports, by the end of 2010, they will recover to international standards of 12 weeks of imports