INDUSTRIAL DEVELOPMENT

Optimizing Vietnam’s golden population era

10:17 | 27/03/2017 Industry

(VEN) - Vietnam is experiencing a period known as the “golden population structure”, a period that occurs only once in the demographic history of each nation. What it essentially means is that until about 2040, the country will have the biggest labor force ever, after which the number of workers will decline while the number of retired people will grow.  

This context is expected to provide Vietnamese industries with opportunities to develop rapidly. However, finding a way to make the most of the opportunities and advantages for industrial development is crucial.

Lack of depth

To this end, on March 10 the Party Central Committee’s Economic Commission and the Ministry of Industry and Trade held an international scientific workshop on Vietnam’s national industrial policy until 2025, with a vision towards 2035.

Chairing the symposium, Politburo member and head of the Party Central Committee’s Economic Commission Nguyen Van Binh reported that the Communist Party of Vietnam has adjusted its socioeconomic development and industrialization policies, in general, and industrial development policies, in particular, to meet changing realities and needs.

He noted that Vietnam currently has about 300 legal documents pertaining to national industrial policy. Some 38 out of 63 provinces and cities nationwide have promulgated their own resolutions on industrial development, while 40 have announced their action plans to implement the industry and trade sector’s restructuring.

The Ministry of Industry and Trade reported that it had issued 30 plans to develop specific industries and 19 master plans for regional industrial development. It has also provided support for 63 centrally governed provinces and cities nationwide to make their industrial development plans.

According to other reports presented at the seminar, the industrial production value and the added value of industries have grown continuously. From 2006-2015, the total value of industrial production grew by 3.42 times. The industrial sector has contributed 31-32 percent to Vietnam’s gross domestic product (GDP) annually. Vietnam has moved ahead of many other countries in the region and worldwide in terms of industrial production growth.

From 1997-2014, the value of industrial production in Vietnam grew an average 7.7 percent per year while the world’s average industrial growth rate was 2.2 percent; in the US it was 1.9 percent; Japan 1.2 percent; the Republic of Korea 6.3 percent; Thailand 3.6 percent; Malaysia 4.0 percent; Indonesia 5.7 percent, and the Philippines 4.1 percent. From 2006-2015, the export value of industrial products increased by nearly 3.5 times and accounted for 90 percent of Vietnam’s total export value. The industrial sector also tops the list of contributions to the state budget.

However, participants also agreed that the development of Vietnamese industries still focuses on quantity and not quality. Labor productivity remains low. The domestic industrial sector still depends heavily on foreign-invested businesses, while the linkages between domestic and foreign businesses remain loose. The local content of products made by foreign-invested businesses is still low. Vietnamese industrial business participation in global value chains is still limited.

According to Professor David Dapice from Havard Business School, low added value is a major weakness of Vietnamese industries. This is manifested in the fact that Vietnam has to import most materials and accessories to make industrial products for export.

Nguyen Duc Kien, Deputy Head of the National Assembly’s Economic Committee, also indicated a lack of priorities in Vietnam’s industrial development policy, and emphasized the necessity of identifying key areas on which investment should be focused.

Policy suggestions

In the opinion of Deputy Minister of Industry and Trade Do Thang Hai, effective industrial development policies are crucial to turning Vietnam into an industrialized country. “Vietnam does not lack policies. But in fact, only a few policies have had good effect, while most others have been ineffective,” he said.

The deputy minister also indicated the necessity of building suitable roadmaps for industrial development, with milestones for specific periods. He suggested the following policies and mechanisms to ensure sustainable industrial development over the next two decades:

(1) In the processing industry, it is necessary to concentrate on ensuring the safety and quality of products. Processing facilities should be supported in improving technology so that their products can access discerning markets. Agricultural and process engineering projects should be given preference.

(2) Investment in industrial development should not cover all areas but focus on key products. Further efforts are required to attract foreign investment, improve technology and management. Preferential policies should be applied to attract strategic investors, as well as large-scale projects in the fields of high technology, cleaner production, and support industries.

(3) It is necessary to identify commodity markets as a crucial factor to industrial development. Domestic sales and exports should be promoted simultaneously. Special attention should be paid to facilitating Vietnamese industries’ integration to the global market.

(4) It is necessary to build and bring into play the combined strength of industries and other economic sectors. Cooperation between industrial businesses and those from other sectors, as well as between domestic and foreign-invested companies, should be boosted.

The Head of the Central Economic Committee, Nguyen Van Binh:

Vietnam has failed to make the most of opportunities offered by its “golden population structure” and the advantages of a

country that follows others on the path towards industrialization. It is therefore facing post-industrialization risks.

Thuy Linh