Industrial sector still heavily dependent on foreign investment

10:00 | 16/10/2019 Industry

(VEN) - The Vietnamese industrial sector has recorded strong growth in recent years. However, the effectiveness of industrial production in terms of added value and export revenues remains modest.

industrial sector still heavily dependent on foreign investment
The number of processing and manufacturing enterprises remains low

Core industries underdeveloped

According to the Industry Agency under the Ministry of Industry and Trade (MOIT), the domestic industry sector depends on Foreign Direct Investment (FDI), mainly in downstream areas. Processing, assembly, and added value of industrial products remain low while spare parts and components rely largely on imports. The industry sector experienced a slow change in the country’s GDP compared with the requirements for industrialization and with other countries in the region. In addition, the internal strength and competitiveness of industries are weak, as reflected by the relatively small number of industrial enterprises (some 80,000 in the processing and manufacturing industries nationwide), along with their limited financial and technological capabilities.

Industry Agency head Truong Thanh Hoai cited Vietnam’s automobile industry as an example, saying that so far it had joined only in the low segment of the manufacturing chain. It also still depends greatly on the assignments of global automobile groups and has not yet mastered core technologies. Domestic automobile production and assembly have not met the requirements of a real automobile industry, for example in terms of forming a network of large-scale material suppliers and component producers.

At a recent meeting with the Industry Agency, Minister of Industry and Trade Tran Tuan Anh said that some of Vietnam’s major commodity groups in several industries like processing and manufacturing, minerals-metallurgy, and supporting industries are facing fierce competition due to trade disputes and origin fraud. Exports of domestic industrial enterprises have seen a significant growth, however, the export value is still mainly generated by foreign-invested enterprises.

“Therefore, we have to clarify the factors on which industrial production activities depend and the role of government in perfecting policies to ensure industrial growth and higher added value-oriented economic restructuring,” the minister said.

Improving productivity and quality

The Industry Agency is focusing on a number of major solutions to help Vietnam’s industry create higher added values. Specifically, the MOIT is coordinating with other ministries and sectors to draft policies on developing a number of prioritized and high potential industries, such as automobiles, textile/garment, footwear, electronics, minerals, and support industries. “Small and medium enterprises need State supports until they can compete in the global market and become a reliable partner in the global production chain, especially in fields of innovation, production management, and access to preferential credit resources, new technologies and high quality human resources,” Truong Thanh Hoai said.

Talking about the development of key industries, Deputy Minister of Industry and Trade Cao Quoc Hung said the State management agencies, especially the Industry Agency need to strengthen coordination with industry associations, assist businesses in applying the 4.0 Industrial Revolution, acquiring modern equipment, and improving productivity, quality and competitiveness of domestic industrial products.

Minister Tran Tuan Anh also asked industrial enterprises to protect and expand the domestic market and exploit the full benefits provided by export markets under the signed free trade agreements regarding key industrial products.

Lan Anh