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CIEM warns Vietnamese export enterprises’s competitiveness low
Eighteen production sectors have been admitted to the “billion dollar club”, i.e, the club of sectors which have the annual export turnover of one billion dollar and more. However, the success proves to be unsustainable, because the competitiveness of Vietnamese enterprises remains very low, according to the Central Institute of Economic Management (CIEM).
What’s behind the halo?
Of the 18 production sectors, textile and garment, footwear and electronics have been recognized as the most successful industries, as they have always been leading in terms of the export turnover.
However, the survey on the competitiveness of enterprises in the three sectors conducted by CIEM, has pointed out that the competitiveness of the enterprises remains very low.
Most of the product items which have been succeeding on the international market over many of recent years; are the ones which can enjoy the preferences offered by the State, or can take full advantage of the cheap labor cost and the country’s natural resources. However, the advantages will no longer exist. As Vietnam has joined the World Trade Organisation (WTO), the state’s preferences would be “limited nutrients”, while the advantages of the cheap labor force and the natural resources will not last for ever.
Since Vietnamese enterprises are still mostly doing the outsourcing for foreign partners, they cannot earn much money. Though the export turnover is high (Billions of dollars a year), the value added per product remains low, which explains why Vietnamese enterprises in the three sectors cannot pocket much money.
According to Nguyen Thi Tue Anh, from the Business Environment and Competitiveness Division under CIEM, up to 70 percent of garment companies are doing the outsourcing for partners, and 60 percent of enterprises are making products and exporting products directly, but 100 percent of enterprises have to import materials for local production.
The problem is that materials account for a very big proportion in the garment production costs; therefore, when the material prices increase, Vietnamese enterprises will lose their competitiveness in the international market.
Garment is the sector which has the lowest productivity level in the three surveyed sectors.
Esquel Vietnam, a Taiwanese invested enterprise, now has to import nearly 100 percent of materials from China, because it cannot find suitable materials in Vietnam. Though sewing thread now can be made in Vietnam, the enterprise still believes that the product cannot meet the quality requirements. When asked about the productivity, Esquel Vietnam answered that the productivity in Vietnam is lower than that in China.
Nguyen Minh Thao from CIEM, who was in charge of surveying the competitiveness of the electronics sector, said that most of the enterprises in the sector are foreign invested enterprises, and most of them simply do the assembling.
Canon, which has a factory that makes printers in Vietnam, said that it still cannot find the screw suppliers in Vietnam, though it once contacted 20 domestic companies. As for Panasonic and Sanyo, the only domestically made products are using are carton boxes. Meanwhile, Fujitsu said it has to import 100 percent of necessary components. Though the electronics sector has been witnessing high growth rates in the last few years, the growth proves to be unsustainable.
Seven barriers on the business environment
Tue Anh said that there are seven worrying barriers to Vietnamese enterprises. The biggest problem for them is the lack of capital and technologies. Since enterprises do not have much capital, they dare not make heavy investment in technologies. As the result, they cannot make the products with high added value, which makes their products less competitive.
The quality of the labor force is also a problem. According to Thao, in 2010, Intel planned to employ 3000 workers, but it could employ 40 only. Meanwhile, Luu Minh Duc from CIEM said that less than 50 percent of seafood companies are satisfactory about the worker,s skills
Many other factors have also been cited ase barriers which have hindered the development of enterprises, including the energy cost increases, the bad quality of the infrastructure, and the banking services. Especially, the thing that most worries businesses are the regular electricity cuts.
Pham Huyen
vietnamnet
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