Up to 2005, Vietnam had more than 20,000 industrial enterprises, doubling the figure of 2000. In the 2000-2005 period, industrial enterprises reached an annual average growth rate of 13.7 percent and their scale of business was mainly focused on agro-forestry-fishery processing, garments and textiles and footwear. There were positive changes in restructuring economic sectors including industry. The participation of State owned enterprises in the industrial sector gradually reduced from 41.8 percent in 2000 to 35.5 percent in 2005 while that of private and foreign-invested enterprises was likely to increase. The participation of economic sectors in the industrial sector gave a boost to diversification of industrial production in terms of production scale, technological know-how and product design and quality to meet domestic and export demands.

However, enterprises’ low competitive capacity due to outdated technology, low product quality and poor business management and failure to provide adequate materials for domestic production are challenges to the industrial sector’s sustainable development in the coming time, especially when Vietnam joins the WTO.

Head of the Industrial Policy Research Institute Phan Dang Tuat said the number of businesses providing support for a basic product in the world ranges between 1,400-2,000 while the figure in Vietnam is much lower. For instance, the automobiles sector has only 137 supporting businesses, the motorbikes sector, 150 businesses and the electronics sector, 123 businesses.

The underdevelopment of industrial supporting businesses in Vietnam has raised two issues: First, which way will be taken by industrial supporting businesses in service of the world’s giant companies so that they can further climb up the industrial ladder and increase their competitive capacity?

Second, how can we solve the issue of restructuring industrial production with such under-developed supporting industries? Currently, Vietnam’s competitive edge in the field of industrial production, only lies in products of low added value. For example, in the garment and textile sector, from the total cost of producing a shirt, enterprises can earn just 4-10 percent of real value as product design and marketing are undertaken by foreign companies.

According to experts, it is important to maintain competitive capacity for traditional products and sectors of low-value added such as garment and textile, leather footwear, crude oil and seafood because these sectors can earn a huge volume of foreign currencies. However, to become a medium income-earning country by 2010, Vietnam should produce more value-added commodities. Dr Nguyen Trong Hai from the Vietnam Automobile Industry Corp said that Japan’s successful experience in the development of its industrial sector includes transparency in policies. Japan’s industrial policies require an evaluation council comprising government officials, members of associations, and scientists. Can Vietnam’s industrial development policy make a sustainable development breakthrough? The question depends on the Ministry of Industry’s planning.

Source: VOV news