Manufacturing could mitigate Việt Nam middle-income trap

Update: April, 22/2016 - 09:00
The precision mould production line of Sài Gòn Industry Corporation in HCM City. Promoting the manufacturing sector could help Việt Nam escape the middle-income trap, experts said. - VNA/VNS Photo An Hiếu
Viet Nam News

HÀ NỘI – Việt Nam could only escape the middle-income trap by developing the manufacturing and industry sector to create new products, the Việt Nam Chamber of Commerce and Industry (VCCI) heard yesterday.

Đoàn Duy Khương, vice chairman of the VCCI told the Việt Nam Manufacturing and Industry Forum held in Hà Nội yesterday that the country could lead other industries based on knowledge and creativity instead of natural resources and low labour cost.

Last year, there were only 36 per cent of Vietnamese enterprises participating in the production chain toward exports, he added.

“The rate is too low in comparison to the rate of around 60 per cent in Malaysia and Thailand,” Khương said.

The strong development of industrial and construction sectors in 2015 was one of the factors contributing to the highest economic growth rate over the past seven years. However, 21 per cent of small and medium-sized enterprises in Việt Nam have joined the global supply chain.

He said most of the local firms do not have adequate knowledge of the challenges they could encounter when meeting international organisations or as part of teams involved in free trade agreements with regions and big economies. Domestic businesses are not well prepared to compete with competitors in the region, especially in the labour market.

“In the international integration process, Việt Nam should pay attention to three issues. These are clarifying on manufacturing and industrial sectors which have competitive advantages, clarifying on products and supply chains, and improving competitiveness of manufacturing and industry,” he added.

Sharing ideas, Trần Đình Thiên, director of Việt Nam Institute of Economics said that after 30 years of Đổi mới (Renewal), the proportion of industry and construction in the GDP rose 16 per cent.

However, Thiên said that the processing and manufacturing sector, which has been the core of the industry and construction, increased by only 1.6 per cent.

“In the hi-tech era, the increase of processing and manufacturing in GDP was much lower than the world’s average level,” he added.

The director also said that State-owned groups and corporations have not targeted the use of technologies, but it was hard to compete with private firms in exploiting natural resources and minerals, if the environment was not conducive.

He said Việt Nam should review its real advantages as natural resources and cheap labour cost could be no longer competitive tools. The advantages should be left on private firms to develop in association with foreign companies.

“We should associate with foreign firms and choose the right supply chain,” he said.

Lê Phước Vũ, chairman of Hoa Sen Group said foreign firms from countries such as Thailand have perceived opportunities from FTAs signed between Việt Nam and other countries. Some groups acquired Vietnamese firms through listed or unlisted companies, as well as supermarkets.

Tomoyuki Sasama, Việt Nam country manager of US Dow Chemical Group, said they committed to continue give aid to the country’s support industry and production sectors to increase the value-add to take advantages of TPP, AEC and other FTAs. – VNS