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Manufacturing could mitigate Vietnam middle-income trap

Apr 24. 2016
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By News desk
Viet Nam News

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HANOI - Vietnam could only escape the middle-income trap by developing the manufacturing and industry sector to create new products, the Vietnam Chamber of Commerce and Industry (VCCI) heard yesterday.
Doan Duy Khuong, vice chairman of the VCCI told the Vietnam Manufacturing and Industry Forum held in Hanoi 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,” Khuong 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 Vietnam 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, Vietnam 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, Tran Dinh Thien, director of Vietnam Institute of Economics said that after 30 years of Doi moi (Renewal), the proportion of industry and construction in the GDP rose 16 per cent.
 
However, Thien 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 Vietnam 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.
 

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