The added industrial value increased by 7.6 per cent and the production value by an average of 10 per cent in the 2011 - 2015 period, according to the Ministry of Industry and Trade. Many key manufacturing and industrial sectors saw strong growth rates. However, there are a lot of issues to be addressed to pave the way for these sectors to advance further and deserve their roles as economic growth engines.
Primarily relying on outsourcing
The Ministry of Industry and Trade said the index of industrial production rose 7.9 per cent in February 2016 and 6.6 per cent in the first two months from a year earlier. Particularly, the processing and manufacturing industry expanded by 8.5 per cent; electricity production and distribution climbed 12.8 per cent; water supply, waste disposal and wastewater treatment looked up 9.2 per cent. The industrial production importantly contributed to the overall economic growth.
However, according to many experts, these sectors are only developing on the surface rather in depth and relying on outsourcing and assembly. Industrial restructuring was slow and unsustainable. Industrial products have weak competitiveness and are yet to engage in global value chains.
For example, Vietnam is the world's fourth largest footwear exporter, but up to 90 per cent of exports are made for orders from foreign contractors. So far, the localisation ratio of this sector accounts for only 40-45 per cent and the most important raw materials are still imported.
In addition, some key industries of Vietnam like automotive, processing and manufacturing are still underdeveloped or agricultural industry (manufacturing farming tools, processing products, etc.) is weak and lack of industrialisation and modernisation momentum. “The technological level of the industry still lags behind other countries in the region and the pace of technological innovation in State and private enterprises is slow.”
At a recent forum themed “TPP Agreement - Opportunities and challenges for industrial development in Vietnam” hosted in late March by the Ministry of Industry and Trade, a representative from the ministry’s Department of Heavy Industries affirmed that leading industrial sectors like garment and textile, leather and footwear, mobile phone and electronics are depending heavily on outsourcing. Therefore, exports do not bring in high added values for these sectors and the economy as a whole. The inability to supply enough inputs for production and export is also a hindrance in accessing markets with FTAs signed with Vietnam when the originality principle is taken into account.
According to experts, outsourcing helps solve temporary needs of employment, income and working skills. However, in the long term, this reality is a real concern.
Vietnam Business Forum Magazine- VCCI will host the Conference titled “Vietnam Manufacturing and Industry Forum 2016" in Hanoi on April 21.
This important event is expected to provide recommendations and solutions for developing manufacturing and industrial sectors in Vietnam and help solve existing difficulties in keeping manufacturing and industrial quality.
Main contents of the conference include orientations and important roles of manufacturing and industry to the country's economy; experience sharing presented by former Minister of Industry of Thailand; and chemical roles in industrial production.
Two panel sessions, namely “Orientations and important roles of manufacturing and industry to the economy” and “Role of chemicals in manufacturing and industry in Vietnam”, will provide forums for attending companies share practical experience, understand chemical roles to manufacturing and industry in Vietnam, and connect manufacturers with banks and commercial producers to enhance the competitiveness of Vietnamese companies in manufacturing and industry.
Companies interested in the event, please contact: Mr Do Van Son
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Opportunity for change
Vietnam will see many important milestones in international trade in 2016 since it joined Trans-Pacific Partnership (TPP) and ASEAN Economic Community (AEC). The investment wave into Vietnam will be stronger than ever. This will create pressures on market opening and competitiveness of manufacturing and industrial companies in Vietnam. Without good preparation, many industries may fall into trouble.
To break the freezing of many industrial production sectors and make breakthroughs, Vietnam needs to have industrial development policies to tap potential and advantages. Policies should focus on upgrading capacity and technology, diversifying and renovating products, boosting added value in various industries, and enhancing long-term cooperation with potential partners.
Being aware of this, some garment and footwear producers have actively built closed production chains. Many have gradually shifted to source local input supplies. However, these are only the first moves as forming production chains is not a simple task. Cooperation among companies and support from authorities are also needed to achieve this objective.
Thu Ha
Vietnamese
