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Unsustainable growth hinders industrial targets

Update: October, 29/2015 - 09:37
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Director of the Industrial Policy and Strategy Institute Nguyen Anh Son spoke with Hai Quan (Customs) newspaper about the country's 2020 goal of modernisation and industrialisation.

Could you analyse the achievements of the Vietnamese industrial sector after 30 years of implementing the doi moi policy, and the challenges ahead to fulfill the targets to 2020?

After 30 years of doi moi (1986-2015), the industrial sector has passed through significant milestones making numerous contributions to national development.

A recent data estimated this year the sector contributed more than 38.5 per cent to the economy with industrial export making up nearly 80 per cent of the country's total exports.

Industrial products were more diversified and competitive with improved quality meeting both domestic and international market demands.

The sector has so far achieved its planned targets.

However, it is faced with challenges ahead to meet its target by 2020, including an unsustainable and low quality of growth; slow improvement of competitive capacity and weak production due to a focus on outsourcing installation.

The sector has not focused on high value chains such as marketing, designing and researching.

Supportive industry has not been developed and this has hindered the production for exports.

Labour productivity and management capacity were also still low due to a shortage of highly qualified employees and employers.

What are the solutions to overcome such challenges?

Relevant solutions with concrete steps are needed immediately to cope with such challenges.

As national financial resources for industrial development are currently not as available as expected, the sector should first select key and strategic areas and set up priority investment plans for them. It should particularly focus on investment in areas with international competitive strength because these areas would help set a firm foundation for domestic production in the future.

It means the sector should prioritise to produce added value items for exports and create a market for supportive industry to develop, boost investment in high technology and a high standard labour force.

The sector should gradually reduce the exploitation of natural resources and employment of unskilled workers.

Viet Nam is in an all-out effort to fulfill the implementation of new trade pacts with many countries in the region and in the world. What are the particular challenges the country could face in such international integration as well as in its industrialisation and modernisation process?

On one hand, Viet Nam's free trade agreements with many countries will provide more chances for its industrial sector to expand the export market. Domestic industrial enterprises would also be able to access high quality technology with a wide choice of prices.

However, on the other hand, integration demands vast changes in policies to meet international commitments. These adjusted policies at the same time should ensure support to domestic industrial production.

The country is currently maintaining a variety of policies offering support to industry but those policies are very fragmentary and not significant, thus they could not encourage them to develop.

The weak development of supportive and mechanical industries is a very relevant proof of the situation.

Some new polices which have been set up aiming at boosting the development of high added value production, had been ineffective or faced contradiction while being applied to certain industrial areas. The policy for the motor industry was an example.

Regional and international free trade agreements, moreover, will create competitive pressure for domestic industry as it will have to compete with abundant imported products.

Viet Nam has agricultural potential but does not have a qualified agricultural processing industry. Mechanical industry could not either meet the demands for agricultural development. Most of machines made in Viet Nam could not compete with those imported from China and Japan.

Business thinking, method and production capacity of domestic enterprises are very low and unable to meet a global standard.

A draft political report to be presented at the 12th National Party Congress has clarified that Viet Nam, in the next coming years, should continue to strengthen the national industrialisation and modernisation programme with a target to gradually build up industry as the country's trademark. What kind of a policy system does Viet Nam need to fulfill such a macro target?

It is obvious that to fulfill such a target, Viet Nam needs a comprehensive and effective policy system.

The country presently does not lack of policies but it seems that aside from a few effective policies, a majority of them were promulgated in a untimely and unqualified manner.

Policies should be set up based on reality and in a certain period of time.

Policies for in industrial development, in particular, should focus on solving the problem of quality but not quantity. They should help boost the production of high quality items by building a labour force with high qualifications.

The Government should issue policies to protect domestic enterprises in negotiating and signing free trade pacts with foreign partners. It should also help them to solve issues when a trade dispute occurs.

Policies for investment in industry should help attract more foreign companies by providing priorities for strategic investors in large-scale high-tech projects for exports. — VNS

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