Vietnam’s industrial development, exports dogged by low added value

10:30 | 28/02/2020 Industry

(VEN) - While Vietnam has recorded high industrial growth in recent years, its domestic manufacturers are struggling with low added value of their products. 

vietnams industrial development exports dogged by low added value

Fledgling industries

A report by the Ministry of Industry and Trade’s Industry Agency shows that Vietnamese industrial enterprises achieve only modest value added and export revenues, while foreign invested businesses still account for the vast majority of the industrial sector’s production and export values. One explanation for the disparity is the heavy reliance of Vietnamese exports on imported raw materials.

According to the report, the sector’s internal strength and competitiveness remain modest. The number of manufacturing and processing enterprises is small, some 80,000 businesses nationwide, while enterprises’ financial and technological capabilities remain weak.

Industry Agency Director Truong Thanh Hoai says Vietnam only participates in the low segment of the automobile industry value chain, and Vietnamese auto manufacturers heavily depend on the orders of global automobile corporations. They have not yet mastered such core technologies as engines, control systems, and transmission systems and therefore Vietnam’s automobile sector cannot be considered a real automobile industry, Hoai says.

Minister of Industry and Trade Tran Tuan Anh said some key products, including those of manufacturing, processing, mineral, metallurgy and supporting industries, are facing fierce competition in the context of trade disputes and origin fraud. Exports by domestic enterprises have greatly grown, but foreign-invested enterprises still account for the vast majority of the industries’ export value. In order to ensure growth and efficient economic restructuring, Anh said, the factors on which industrial production depends and the government’s role in policy improvement must be clarified.

Productivity and quality improvement

The Ministry of Industry and Trade is focusing on increasing the industrial sector’s added value. Specifically, the ministry is working with other ministries and sectors on policies and solutions for developing such potential prioritized industries as automobile, textile and garment, leather and footwear, electronics, minerals, and supporting industries. “Small and medium enterprises need to be supported by the state until they are able to compete in the global market and become reliable manufacturing partners of the global production chain, including assistance in innovation, production management, and access to preferential credit, new technology and high quality human resources,” Industry Agency Director Truong Thanh Hoai said.

Leaders of the Ministry of Industry and Trade said state management authorities, especially the Industry Agency, need to strengthen cooperation with industry associations and help enterprises digitalize, renovate technology and procure modern equipment in order to improve productivity and the quality and competitiveness of domestic industrial products. For the textile and garment and leather and footwear industries, for example, the role of localities in creating favorable conditions for enterprises to develop knitting and dyeing must be clarified. Their role is not only to open bottlenecks in domestic textile, garment, leather and footwear industries but also to help Vietnam make the most of origin-related preferences offered by such new generation free trade agreements as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the EU-Vietnam Free Trade Agreement (EVFTA).

Minister of Industry and Trade Tran Tuan Anh said industrial development in Vietnam should follow orientations to 2030 with a vision to 2045, as described in Resolution 23-NQ/TW dated March 22, 2018 of the Communist Party Central Committee. The resolution says it is important to develop industry qualitatively and quantitatively, and create breakthroughs in productivity, quality, competitiveness and added value of domestic industrial products. It is important to maintain and expand domestic markets, and maximize the exploitation of export markets for key industrial products, making use of signed free trade agreements’ opportunities, Anh said.

The Ministry of Industry and Trade said Vietnam needs to have a report on industries’ competitiveness to find solutions to industrial development.

Lan Anh