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Strongly developing processing and manufacturing industries to create a new impetus for economic growth
13/6/2019 9:30' Send Print
The processing and manufacturing industries are a major driving force for economic growth in 2018. (Illustration image). Photo: vov.vn

In 2018, the processing and manufacturing industries grew by 12.98%, though lower than that of the same period of 2017, but much higher than those in 2012-2016 period, contributing 2.55 percentage points to the growth rate of the total value added of the economy. The proportion of processing and manufacturing industries in the gross domestic product (GDP) increased from 13.18% in 2014 to 15.33% in 2017 and 18.33% in 2018. This shows a relatively clear trend in industrial development, a shift in the right direction. The Government’s solutions to remove obstacles, and facilitate production and business and the Ministry of Industry and Trade’s implementation yielded effective outcomes.

The growth also shows that industrial production has no longer depended on mineral and resource exploitation when 2018 was the third consecutive year that the mining industry recorded negative growth (decreasing by 3.11%), reducing 0.23 percentage points of the total value added of the whole economy. Meanwhile the processing and manufacturing industries have continued to grow at a high rate, in line with the orientation of restructuring the growth model of the entire industrial sector.

Along with the increasing growth rate, the inventory index of the processing and manufacturing industries has decreased due to improvement in market development and consumption of processing and manufacturing industry products. Broadly speaking, the competitiveness and ability to join the chain of industries of Vietnamese businesses have been improved. The processing and manufacturing industries have made the largest contribution to the overall growth of exports. In 2018, the industries’ export turnover accounted for 82.8% of the total export turnover, achieving a growth rate of 16.2% with many products of high export value. The export turnover growth rate of the processing and manufacturing industries has been higher than the general export growth rate. For 7 consecutive years from 2012 to 2018, the export growth of the processing industry was higher than that of the overall export. The high export growth of the processing industry no longer relies only on the mobile phone manufacturing sector. Other exports, such as iron, steel, chemicals, textiles, footwear, and cement also achieved positive export results in 2018.

This is a great effort of the Government, and ministries and branches in direction and governance, improvement of the business investment environment, in taking solutions to settle difficulties for each branch and product. At the same time, it also proves that guidelines, policies and specific measures in restructuring the economy and industries have achieved positive results, even though they are initial. Economic structuring has not only taken place between economic sectors but also positively within each sector, contributing to economic growth in both speed and quality in the coming time. The industrial sector has shifted towards developing high value-added industries and large export values, in which processing and manufacturing industries continue to be an important driving force for growth, with the active support of foreign invested enterprises (FDI), large economic groups in the global value chains, such as Samsung, LG, Toyota, among others. Especially, there are also contribution of some domestic private economic group, such as VinGroup, Truong Hai, Thanh Cong, Vinamilk, TH True milk, Tan Long Industrial Chemical Joint Stock Company, Loc Troi Group Corporation, Hoa Sen Group, Hoa Phat Group, Nam Kim Steel Joint Stock Company. These good signals demonstrate that the Party’s guidelines, and the Government’s mechanisms and policies have built up confidence and inspiration for domestic enterprises to concentrate investment on large and long-term development of key processing and manufacturing industries of the country.

Although the processing and manufacturing industries have made certain progress, there remain some basic limitations. Their contribution to export has increased but their contribution to GDP has been low. Their revenue has come mainly from raw, preliminary processing and assembling products of FDI enterprises in downstream industries; supporting industry has been inadequate; they have not much involved in the production network and global value chain. A large proportion raw materials, components and spare parts has been imported. In fact, some Vietnamese industries have participated in global production networks and value chains but often in simple, low value-added stages.

In 2019, complicated and unpredictable developments are forecasted in the international and domestic situation with mixed opportunities, advantages and difficulties, challenges; economic growth of key economies is no longer evenly and widely as in 2017 and early 2018; the momentum of the major economies declines; the growth of most of the emerging economies slows down. Moreover, strategic competition continues to increase more drastically through economic linkages, while disagreements among big countries on the global trading system widens. The tendency of raising interest rates, unpredictable fluctuations of the international financial and monetary markets and oil prices continue complicatedly, affecting credit growth, psychology and market expectations. However, in spite of challenges, in 2018, the Vietnamese economy created fundamental drivers for economic growth in 2019 and the following years. Vietnam’s international economic integration has moved to a new stage, closely linked to the regional and global economy, marking the time when Vietnam completed the committed roadmap to join the World Trade Organization (WTO) and tariff reduction under the ASEAN Trade in Goods Agreement (ATIGA), began to implement commitments to free trade agreements (FTAs) with an extensive reduction. Vietnam has and will sign to deploy new generation FTAs, such as the Comprehensive and Progressive Agreement on Trans-Pacific Partnership (CPTPP), the Vietnam-EU Free Trade Agreement (EVFTA) with extensive commitments, high standards and expansion in many areas. These FTAs have constituted a driving force for Vietnam’s economic growth, as well as opportunities to attract and utilize FDI inflows in 2019 and subsequent years. The business environment has improved markedly, the business community has benefited greatly from reforms through reducing conditions for business investment, simplifying administrative procedures and supporting policies for business development. The wave of startup has mobilized capital for the economy. At the same time, economic restructuring has not only taken place between economic branches but also positively within the economic sector. The industrial sector has also shifted towards developing high value-added industries and large export values, of which the processing and manufacturing industries continue to be an important driver of economic growth in 2019.

For the processing and manufacturing industries to continue leading economic growth in 2019 and the following years, the Ministry of Industry and Trade has been implementing many key tasks and solutions to develop the processing and manufacturing industries in particular and the industrial sector in general.

First, closely follow the tasks set out by Resolution No.01-2019/NQ-CP of the Government on the main tasks and solutions to implement the socio-economic development plan and State budget estimate for 2019; Resolution No. 02-2019/ NQ-CP of the Government on Continued implementation of major tasks and solutions for improving the business environment and the national competitiveness in 2019 and orientation towards 2021. This will be the most important factor that should be considered as a focus throughout the implementation of the tasks of the whole year 2019.

Second, concentrate efforts to effectively implement the national industrial development policy to 2030, vision to 2045. Urgently review and study to supplement or develop a new strategy for industry development or the Master Plan for Development of Industries as required by Resolution No.23-NQ/TW dated March 22, 2016 of the Politburo. Accelerate the process of restructuring the industry and trade sectors under the Overall scheme for economic restructuring in association with the growth model transformation approved by the Prime Minister in Decision No.339/2013/QD-TTg, dated February 19, 2013 and the Plan on Restructuring Industries in association with promoting innovation, strong and substantial realization of the Fourth Industrial Revolution in areas of activities. In which, the focus of restructuring in the next stage must be accelerated in the principle of quality, and the criteria of this process must be to raise product competitiveness, investment effectiveness and enterprises’ ability to participate in the global value chain.

Third, enhance the capacity of domestic enterprises in supporting industry to create high added value for the industry. Developing the supporting industry is considered a pillar to push forward the transition from processing and assembly industry to deep processing industry with high added value. Development of the supporting industry is considered a priority in Strategy on Vietnam’s Industrial Development through 2025, vision to 2035. Continue to strongly implement the Program on Development of Supporting Industries during 2016 - 2025 approved by the Prime Minister in Decision No.68/QD-TTg, dated January 18, 2017. Besides, actively cooperate with international organizations, donors and multinational corporations to synchronously implement different programs in order to improve the capacity of domestic industrial enterprises; train domestic human resources and expedite programs to promote links between domestic supporting industrial enterprises and FDI enterprises. Bring about a clear and substantial change in economic restructuring in association with innovation of growth model, improvement of growth quality, labor productivity and competitiveness of the economy.

Fourth, continue to focus on building and improving institutions to create favorable conditions for business investment, attracting resources for economic development, reducing conditions for business investment, simplifying administrative procedures, and facilitating private economic development. Coordinate with relevant ministries and branches to support and form large-scale private economic groups having large scale production and development. This will be an important foundation for the development of Vietnam's industry.

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This article was published in the Communist Review No. 918 (April 2019)

Tran Tuan AnhMember of the Party Central Committee, Minister of Industry and Trade