VN’s value chain integration praised by WB

Production at the Vietnam Stanley Electric Co Ltd in Hà Nội. - VNA/VNS Photo Danh Lam

Speaking at a workshop on Thursday on Việt Nam’s value chain integration, enhancing enterprise competitiveness and small- and medium-sized enterprises linkages, Ousmane Dione, Country Director for the WB in Việt Nam, praised the country’s efforts in generating more added value, as well as connecting domestic producers and foreign investors, creating a stable business environment and helping the country move up the international economic ladder.

Agreeing with Dione, Deputy Minister of Industry and Trade Đỗ Thắng Hải expressed his support for foreign direct investment (FDI) in Việt Nam, which he considered a drive for export growth and job creation.

Hải affirmed that the country would continue to facilitate FDI through preferential policies and encouraging domestic supporting industries to help Vietnamese producers get involved in the global production chain.

Charles Kunaka, the WB’s Senior Trade Specialist, said at the workshop that with a 180 per cent ratio of exports over gross domestic product, Việt Nam is one of the most active exporters in the world and one of the most open in terms of trade potential.

Kunaka also said that as the country moves up on the global value chain, it has increased total export turnover, and made a name for itself as a manufacturer in Asia, with four industrial sectors joining in the world’s production chain, including automobiles, electronics, agriculture and textile.

Citing the WB’s two reports on Việt Nam’s productivity and competitive factors enhancement, Dione hoped that through climbing in the world’s value chain, the country could attract even more FDI and with more profitable projects, which will create more jobs for domestic workers and opportunities for producers.

The two reports also advised the Vietnamese Government that to quickly integrate itself into the international value chain, Việt Nam must implement comprehensive solutions, such as infrastructure improvement through mobilising private capital, and apply a more consolidated approach in developing communication systems, market competition and customs clearance procedures.

According to Asya Akhlaque, WB’s Task Team Leader, in Việt Nam at the moment, several manufacturers of automobile parts have integrated into the global value chain, though they still focus on final assembly instead of production phases requiring high skilled workers or engineers.

Akhlaque said these Vietnamese firms still had much to do before they could fully connect with foreign investors.

He also considered a lack of financial access as main thing holding Vietnamese firms back, as 21.8 per cent of Vietnamese manufacturers reported having financial troubles with little help from commercial banks, as opposed to just 11.5 per cent of firms having the same issue in more developed countries in the region.

The WB’s reports also pointed out that just roughly 300 Vietnamese firms are fully eligible to join the world’s production chain, though still only in lower tiers.

Advising on this matter, Kunaka said that in the future, Việt Nam must be careful not to stay stuck in the low added value trap by not using creative production methods.

At present, large multinational companies such as Samsung, Toyota or Ford are placing manufacturing plants in Việt Nam, but this might leave little room for growth for domestic firms. Should these foreign companies decide to move their production away from Việt Nam, the country might find itself without demand and at a loss.

As such, Kunaka hoped that the Vietnamese Government would focus on specialised industrialisation across various economic sectors, and take advantage of the new global growth wave to nourish domestic businesses and create a national brand name.

The WB also asked that Việt Nam channel its potential into improving administrative policies for a more transparent business environment, utilising the private sector in terms of capital flow, making use of technological transfer and ensuring a stable economy to attract more sustainable foreign investment.

The workshop was held in Hà Nội, organised by the WB and the Ministry of Industry and Trade.