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Economic Sector

Last updated: Wednesday, March 22, 2017

 

Industrial Production Records Encouraging Efforts

Posted: Wednesday, January 11, 2017


Vietnamese industry witnessed two remarkable points in 2016: The sharp decline of mining industry and the sustained positive growth of processing and manufacturing industries.

Relatively stable recovery
However, the index of industrial production (IIP) grew only 7.5 per cent in 2016. Particularly, the processing and manufacturing industries posted a steady growth - an important push for the overall industrial growth. In the context of difficult domestic and global situation, the IIP of processing and manufacturing industries climbed 11.2 per cent in 2016, higher than that of 10.5 per cent in 2015 and contributed 7.9 percentage points to the overall industrial growth.

The inventory index of processing and manufacturing industries rose 8.1 per cent year on year as at December 1, 2016, the lowest level in many years.

However, the index of extractive industrial production fell 5.9 per cent in 2016, causing a loss of 1.3 percentage points in the overall industrial growth. This was also the only industry to witness a year on year IIP growth over 2015 owing to falling crude oil prices, giving rise to a sharp drop in crude oil production (down 8.1 per cent in 2016 but up 7.8 per cent in 2015).

On the development trend of domestic production sectors in 2016, the monthly Vietnam Manufacturing Purchasing Managers' Index (PMI) stayed above the medium level of 50 points throughout 2016 and posted a more positive trend in the last months of the year. This bodes well for the possibility of recovery and expansion of domestic production, especially in the coming months of 2017.

The structure of corporate sectors positively changed. Private and foreign-invested industrial sectors recorded relatively rapid growth. Subsequently, the State-owned sector had a diminishing workforce rate (down 2.6 per cent) while the private sector and the foreign investment sector saw respective growth rates of 1.8 per cent and 4.9 per cent.

Industrial companies increased in number and generated more jobs. 2016 also recorded an increase in industrial enterprises, with nearly 1,000 new entities, mainly concentrated on processing and manufacturing industries, which helped create 2.9 per cent more jobs than in 2015.

Existing pressures
The oil and gas industry basically reached the threshold of full domestic extraction. In the coming years, the oil and gas output will tend to decrease on limited reserves, while exploratory operations to increase reserves are increasingly difficult and foreign search, exploration and production projects are facing major challenges.

In spite of huge reserves, the biggest drawback is the more difficult and deeper coal mining, resulting in higher coal prices in the coming time. Additionally, governance renovation and technological innovation remain drawbacks and require fundamental development.

Mechanical engineering and supporting industries generally lacked ground-breaking solutions to create a landmark for development of these very important industries. Many mechanisms and policies were studied for promulgation but actual enforcement effects were not really clear. This was a major bottleneck and shortcoming in existence for years and should be cleared to create a driving force for national industrial production development in the coming years.

Chemical and fertiliser industries still suffered from smuggling and counterfeiting. Key projects underperformed and incurred losses. The shrinking demand for traditional fertilisers posed significant challenges to the development of these sectors.

Besides, highly valued industries like garment and textile, leather and footwear continued to face growing export challenges when orders for simply made commodities were shifted to other countries such as Bangladesh and Cambodia.

In summary, in spite of recognised efforts and positive results in most industries in 2016, inherent shortcomings and weaknesses of industries were still exposed in the current integration process. This is an urgent and long-term request and requirement which needs to be handled for the country’s upcoming industrial development in order to achieve the goal of 8-9 per cent growth of industrial production in 2017.

Huong Ly

 








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