Growth momentum from the "make in Vietnam" strategy
Báo Dân trí•26/12/2024
In recent years, Vietnam's import-export turnover has achieved many successes. In 2023, Vietnam had a record trade surplus of over 25.57 billion USD, an increase of 111% compared to 2022. As of mid-November 2024, Vietnam had a trade surplus of 23.31 billion USD, showing stable growth of the economy. In addition to the above highlights, the import-export situation still has many alternating bright and dark colors. Enterprises with foreign direct investment (FDI) contributed significantly, accounting for 72% of total export turnover and 63.6% of total import turnover of Vietnam. We have not taken advantage of the opportunity to penetrate huge markets such as China, India, and Indonesia, accounting for nearly 40% of the global population, even having a trade deficit of over 50 billion USD from these countries. One of the issues that has emerged in recent years is the situation of cross-border goods dominating the Vietnamese market. Chinese goods with the advantage of large-scale production, low cost and e-commerce distribution network have flooded most market segments in our country, from cheap products such as clothes, household appliances, electronic components to high technology. Participating in the FDI supply chain will help Vietnam improve its competitiveness and global integration (Illustration photo: CV) Meanwhile, Vietnamese enterprises are not yet capable of producing import-substituting products such as high technology and mechanical equipment. Vietnam's supporting industry depends heavily on foreign supplies, hindering competitiveness. Cheap imports have reduced the motivation for innovation and weakened production capacity. The textile, fashion, household goods and agricultural industries are under great pressure from cheap imports. Small and medium-sized enterprises are facing difficulties and have had to close down because they cannot compete on price and supply. The motivation to develop "Made in Vietnam" products has declined. Vietnam's growth potential is huge but is somewhat limited by import dependence and weak domestic production capacity. In a hypothetical scenario where Vietnam has the capacity, determination and effort to increase its trade surplus by an additional 50 billion USD compared to the current 20 billion USD (raising the total trade surplus to more than 70 billion USD), especially reducing imports, GDP will increase by at least 10%. This growth comes from expanding production, developing domestic value chains and improving competitiveness. Localizing production also has a positive impact on labor. With labor costs accounting for an average of 40% of revenue, the additional revenue of 50 billion USD per year from increased trade surplus can create 1.5 million jobs, with an average salary of 260 million VND/person/year. This is very important when there is a surplus of labor from streamlining the state apparatus and new jobs are needed. Achieving the above scenario depends on the success of the "Make in Vietnam" strategy, implemented from 2021. This strategy is similar to successful models such as "Made in China" turning China into the world's factory, or "Make in India" localizing Indian production, or South Korea's industrialization policies over the past six decades creating the Miracle on the Han River. The goals of the strategy are to promote domestic production, increase localization and increase the added value of Vietnamese products, develop key industries, high technology, and supporting industries to reduce import dependence, create jobs, and promote sustainable economic growth. Despite clear goals and many efforts to implement over the past time, the "Make in Vietnam" strategy faces many challenges. Domestic enterprises face difficulties due to weak production capacity, lack of high-quality human resources, and limited international integration. High logistics costs, an undeveloped transportation system, and complex, opaque administrative procedures increase the burden. Digital transformation is also an obstacle. The lack of policy consistency, along with the problem of counterfeit and substandard goods and an unfriendly business environment, have reduced the effectiveness of the strategy. To successfully implement the "Make in Vietnam" strategy, Vietnam needs to learn from Singapore and the UAE to overcome shortcomings and create a friendly business environment. Improving domestic production capacity and promoting research and development (R&D) are the foundation for developing high technology and supporting industries, helping to reduce dependence on imports. Vietnam needs to accelerate the shift from informal to formal exports, while ending the flow of raw resources across the border and banning the export of raw resources. Raw materials must be refined to increase value before being exported. Participating in the FDI supply chain will help Vietnam improve its competitiveness and integrate globally. Business support policies include industrial parks with up to 100% tax exemption, VAT reduction for domestic products, preferential interest rates, and land rent exemption/reduction for the first 5 years for start-up projects. The implementation of a "sandbox mechanism - a pilot institutional framework" for technology initiatives will create conditions for businesses to innovate and develop sustainably. Technical barriers are a strategic tool to protect domestic goods in the context of international integration. Currently, many substandard products are still circulating in Vietnam due to weak inspection capacity and unsynchronized implementation, causing great losses for domestic enterprises. The effective application of technical barriers, from food safety to machinery standards and origin, will protect the domestic economy and enhance the international competitiveness of Vietnamese enterprises. Vietnam needs to learn from other countries in applying high quality standards, checking origins and protecting domestic products. Japan uses high environmental standards for industrial products and increases the import inspection rate to 10% to protect people's health. The EU applies "CE Marking" and strict chemical residue limits in food. In 2024, the United States will increase tariffs and protection measures for the steel industry, while China will only import high-quality agricultural products with low pesticide residues to protect consumers and farmers. In addition to technical barriers, Vietnam needs to apply tariff barriers to reduce the competitiveness of imported goods. VAT on small items on e-commerce platforms will limit tax evasion. Anti-dumping taxes against low-priced goods are disadvantageous to domestic enterprises. Environmental taxes are applied to unfriendly goods, and special consumption taxes limit the import of luxury goods. Fees such as origin, environmental inspection, or compliance with technical standards also increase the competitiveness of domestic goods. Tariff and fee barriers not only protect domestic enterprises but also create a budget source for reinvestment in supporting industries and innovation. Successfully implementing the "Make in Vietnam" strategy with transparent support and protection measures, in compliance with international commitments, will help Vietnam achieve quality, self-reliant and sustainable growth.
Author: Dr. Bui Man is a senior engineer, Director of GTC Soil Analysis Services Laboratory, Dubai UAE; an expert in soil characterization with over 20 years of experience, focusing on quality management and control, specializing in advanced geotechnical testing and soil dynamic characterization.He used to be a lecturer in bridges and roads at Ho Chi Minh City University of Technology, and worked for many large-scale infrastructure projects of leading UK-based consulting firms such as Fugro, WS Atkins, Amec Foster Weller.
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