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Five goals of supporting industries development strategy
The weakness of supporting industries has been cited as the main reason behind the decreases of added value percentages in industrial production.
Supporting industries weak and fledgling
A survey conducted by the Institute for Industry Policy and Strategy under the Ministry of Industry and Trade showed that the added value in industrial production is tending to decrease. The figure was 42.5% in 1995, and then decreased to 38.45% in 2000, to 29.63% in 2005 and 26.3% in 2007. Most big industries in Vietnam have to import materials for local production. Apparel exports can bring several billion dollars a year, but the majority of the money is used to import materials.
“One of the main reasons behind the decreases of the value added percentage in industrial production is the weakness of supporting industries,” said Pham Ngoc Hai, Deputy Head of the Institute for Industry Policy and Strategy.
Kenichi Ohno, Chairman of the Vietnam Development Forum, said that Vietnam is now in the state of simple production under foreign support.
Mr Ohno said that there are four stages of supporting industries development. In the second stage, technologies take shape and develop, but foreign support is still needed. Thailand and Malaysia are now in the second stage. In the third stage, countries can master technologies and management, are able to make high-quality products (South Korea and Taiwan). The fourth stage comes when countries are capable of designing and manufacturing products of high quality (Japan, the US and EU).
Mr Ohno also said that the open policy and foreign investment will help Vietnam gain the average income of $1,000/capita/year. However, Vietnam may fall into the ‘medium-income trap’, which means it cannot gain higher income levels, if it does not have good policies and a dynamic private sector.
Vietnam needs to create domestic value instead of providing cheap labour and land for construction, he said.
Actions
The Ministry of Industry and Trade has completed a strategy on the development of supporting industries by 2010 with a vision to 2020 with the support of Japanese experts.
The strategy has defined five priority groups of branches for supporting industries development, including the garment and textile industry, footwear, electronics and informatics, automobile and motorbike manufacturing and manufacturing mechanics. Experts say that it is necessary to draw up an action plan to implement the strategy.
Mr Ohno said that if Vietnam does not change, it will not be able to retain foreign investors for the next 10 years, when favourable conditions in taxes and labour costs do not exist any more. He has suggested five groups of actions to implement the strategy. These include the building of enterprises’ capacities, financial support, and the cooperation of enterprises.
If everything goes smoothly, Vietnam will have a detailed action plan to implement the supporting industries development strategy by early 2009.
VNN
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