Viet Nam’s industrial sector growth has slowed in recent years (from 14.3 per cent in 2006-10 to 10 per cent in 2011-15) despite its production value rising 3.5 times in the past decade. Low labour productivity, compared to other countries in the region, has also been an issue. Nguyen Thi Tue Anh, deputy director of the Central Institute for Economic Management, spoke to local media about the current state of the sector and what needs to be done about it.
What is your assessment of the shortcomings in Viet Nam’s industrial sector?
Obviously, the sector’s growth has slowed, and its productivity and added value aspects have not impressed either.
It should be noted that although processing and manufacturing industries account for a large portion of the industry in general, they have the lowest labour productivity. Where it is high, like in electricity generation, its portion in the industry’s total added value is small.
We should also note that the industry’s growth in the past few years has heavily depended on labour and capital, and its contribution to technological development is still low.
The Government should, therefore, increase the technology component as the sector is restructured over the next four years (2017-20) period. This could help increase labour productivity as well as competitiveness.
The added-value factor is mentioned often. What can be done to improve the situation in this regard?
The industrial sector has expanded in term of scale, but its added value has been low because the main focus has been on processing and assembly.
Over the last few years, the electronics sector has shown a strong growth rate and contributed much to the national economy, but its added value has been low despite large scale exports. This is because most of the sector’s inputs are imported. So the activity that happens in Viet Nam is still processing and assembly, which delivers low added value.
But we should continue to grow as it is still possible to expand the scale of operations. I think that the industry should continue to expand production, but it has to deeply join into the global production chain.
If the industrial sector has to import a large amount of inputs, what is the direction for the support industry?
The Government should concentrate on developing support industries for specific sectors and fields. For example, Viet Nam should only invest in support industries for large-scale sectors like electronics because of its relatively large market size. The sector has sufficient conditions to develop to the next stage. What is lacking is the capacity of domestic enterprises.
Samsung has requested Vietnamese firms to become its component suppliers. Since Samsung produces the final products, they need intermediate products, which they have to source through imports or get them produced in the country. Although Viet Nam cannot provide all the products needed, it should develop the ability to supply some parts or components to the standards required by SamSung.
For this the Government should support local companies by facilitating training and developing standards so that businesses are able to meet set requirements.
The Government should also urge Samsung enter into commitments with domestic component suppliers and increase their localisation rate. — VNS