Fields with Development Focus in Vietnam

Infrastructure has received great attention from the Government and authorised agencies as it is the foundation for other economic sectors to develop. In recent years, infrastructure facilities, including concentrated urban areas, industrial parks, export processing zones, bridges, roads, seaports, telecommunication and information technology, have received much investment capital. According to a report by the World Bank (WB), total investment capital for infrastructure facilities in Vietnam over the past years reached around 10 per cent of GDP.

In comparison with 1990, Vietnam’s roads have witnessed a double increase in length and quality improvement. Investment in building and upgrading roads accounts for over 80 per cent of total investment capital in the transport sector. At the same time, Vietnam has three international airports and ten international seaports, let alone many domestic airports, seaport and inland ports. According to the Vietnamese Government’s master plan, most projects on developing seaports should be developed and implemented to meet standards for modern seaports in combination with industrial parks and export processing zones, including Cai Lan, Dinh Vu, Nghi Son, Vung Ang, Chan May, Dung Quat, and Cai Mep - Thi Vai…

 

In telecommunications, Vietnam has made a long progress in upgrading its infrastructure. When it initially connected to the Internet, Vietnam connected to the US and Australia on narrowband and low backup. So far, Vietnam’s Internet connection infrastructure has developed in various ways. However, with six mobile phone service providers, the sector needs further investment.

In a five year plan, 2006-2010, Vietnam has a huge demand for investment in infrastructure development. Investment in the sector will not source from the State budget only but also from all economic sectors, which have been encouraged by the Vietnamese Government, to create a breakthrough in infrastructure development as a premise for the country to develop. The Government will also promote the mobilisation of foreign investment sources to build and upgrade facilities of all economic sectors.

 

The sector accounts for 60 per cent of Vietnamese labour force, and agricultural products remain Vietnam’s main exports. Vietnam is the leading exporter of black pepper and cashew nuts, and the second largest exporter of rice and coffee. According to traders, if Vietnam can maintain its existing partners and improve the quality, Vietnam may be able to export 5.42 million tonnes of rice per year in the 2006-2010 period. At the same time, Vietnam’s seafood export has recorded significant achievements with main exports, including shrimps, basa and tra catfish.

 

Vietnamese farm-produce has long been famous among customers in around 100 countries and territories in the world. Apart from the above mentioned main exports, vegetables and fruit are thought to be of great potential. In 2005, Vietnam produced 9.6 million tonnes of vegetables and 9.5 million tonnes of fruit, of which 20 per cent was for export, earning US$235 million. However, Vietnam mainly exports raw or semi-processed farm-produce. Processed farm-produce accounts for 25 per cent of total export volume. The post-processing losses remain high. Therefore, Vietnam needs huge investment in technology and management to improve the situation.

 

To meet the development of the sector through to 2010, the Government has encouraged foreign investment. Accordingly, Vietnam will strive to have a strong commodity-based agriculture, which develops in a sustainable and effective manner based on tapping fully comparative advantages and applying modern technology to have products of high competitiveness when Vietnam joins the World Trade Organisation (WTO), the ASEAN Free Trade Area (AFTA) and Bilateral Trade Agreement (BTA). At the same time, Vietnam will strive for modern rural areas with a reasonable agriculture-industry-service structure, gradually modernising and industrialising agricultural production, thus helping generate jobs for prosperous, democratic, equal and civilised rural areas.

The textile and garment industry has attracted most workers in the industrial service with around two million workers. The industry is under management of State-owned companies, but the private sector plays an important role in textile and garment export with 1,500 enterprises. The private sector, including foreign-invested enterprises, accounts for between 35 and 40 per cent of textile products and between 70 and 75 per cent of garment products. Vietnam is the second largest exporter of textiles and garments to Japan, just behind China, and the fifth largest exporter of knitted products in the world with 1.89 per cent of market share. However, Vietnam has to import up to 90 per cent of cotton and 100 per cent of dyeing chemicals and equipment for the textile industry.

 

Implementing a master plan for the Vietnamese textile and garment industry in the 2006-2010 period, the Vietnam Textile and Garment Group (Vinatex) has planned to carry out 24 major projects with a total investment capital of VND 16,115 billion. The projects are allocated in six fields, including material production, textile development, garment making expansion and development, distribution building, capacity building for design research and training, and infrastructure development. The textile industry has most projects with an aim that in 2010, Vinatex will be able to produce 302 million square metres of woven cloths (190 million square metres for export) and 106 million square metres of knitted cloths (81 million square metres for export.

 

Vinatex will co-operate with localities, domestic and foreign enterprises to carry out projects on building a 1,000 irrigated cotton farm in south of Central Vietnam, producing synthetic fabric with a capacity of 140,000 tonnes per year and 300,000 high-end spindles in the north, Central Vietnam and the Mekong delta. At the same time, Vinatex will invest in building complex weaving and dyeing, and knitting plants, as well as plants for making high-end vestons, and trousers. At the same time, garment making plants will be expanded and relocated in concentrated industrial parks in the Red River delta, coastal Central Vietnam and the Mekong delta. There are huge investment opportunities for foreign investors.

 

A year ago, footwear manufacturers in the EU filed Vietnamese footwear makers for dumping the EU market with leather upper shoes. Before the incident, footwear was the third largest export industry in Vietnam, just behind oil and gas, and textile and garment. The industry has created jobs for more than one million workers. According to statistic of the Vietnam Leather and Footwear Association (LEFASO), leather upper shoes account for over 80 of footwear products exported to the EU, accounting for between 89 and 95 orders.

Also according to figures of LEFASO, up to 60 per cent of Vietnamese footwear products are produced under subcontracts with foreign partners. This means that Vietnamese enterprises only make footwear products and deliver them to wholesalers, who place orders, but not distributors. Therefore, prices of Vietnamese shoes in the EU market are not determined by Vietnamese enterprises but intermediaries, who price on a basis of preferential quotas extended by the EU to Vietnam. As a result, prices are lower than the EU level, despite being higher than the original prices.

 

The Vietnamese footwear industry is boosting the development of support industries, to reduce its dependence on partners, while seeking opportunities to get access to global distributors, instead of intermediaries. In addition, the industry will shift to the US, Japan and Mexico because the demand of the markets is on the rise. At the same time, local makers should focus on other markets, including the Middle East and Africa.

 

Vietnamese banks have played an increasingly important role in the economy. They are now an important capital mobilisation channel for the economy, providing 30 per cent of investment capital for the economy, and meeting 40 per cent of the capital demand of enterprises. Despite being lower than some other countries, total loans via the banking system had reached 60 per cent of GDP in late 2005, much higher than the average level of low income earning countries.

 

There has been a change in loan structure of banks. In the 1990s, three quarters of bank loans went to State-owned enterprises. The figure was reduced to a third in late 2005. Local banks have diversified their retail products and services. With increasingly fiercer competition, commercial joint stock and foreign-owned banks have developed strongly, playing more important role.