Vietnam has room to climb up global value chains

According to experts, to participate more deeply in the global value chain, Vietnam must be able to do sophisticated steps. Meanwhile, Vietnam's GDP will also increase faster.

dien dan cai cach va phat trien anh 2

Experts believe that Vietnam must improve the level of science and technology in order to participate in the global value chain. Photo: Zing.

The 3rd Vietnam Development and Reform Forum 2020, entitled “Vietnam: Actions to Recover Growth towards Inclusiveness and Sustainability” was organized by the Ministry of Planning and Investment on September 29. This year, the event focuses on the topic recovering growth after the Covid-19 epidemic, as well as how Vietnam can develop rapidly and stably in the following years.

The topic attracted many domestic and foreign speakers for active discussion. Some argued that Vietnam has no other way than participating further in the global value chain. To do that, it is necessary to raise the level, production capacity, and to make sophisticated and complex products.

"Don't miss a crisis"

In his remarks at the event, Minister of Investment and Planning Nguyen Chi Dung said despite the negative economic impact of COVID-19, Vietnam’s GDP grew 2 percent in the first half of this year and FDI inflows into the country are bouncing back after being stagnant in the first few months of the year. Vietnam was the 12th strongest financially out of 66 emerging economies following the devastation caused by the pandemic, he added.

Dung said that though achieving positive growth in the context of the Covid-19 epidemic, Vietnam still faces significant difficulties and challenges in the coming time. The country is still facing the inherent limitations and weaknesses of a developing economy with low middle income, growth depending on capital, cheap labor and foreign investment sector.

In the short term, it is necessary to quickly restore economic growth, ensure social security, make effective use of development opportunities that have emerged since the Covid-19 pandemic.

Therefore, in the medium and long term, overcome the middle income trap, narrow the development gap with other countries, address environmental challenges, build an independent and autonomous economy ... are the major development tasks for Vietnam.

Victoria Kwakwa, Vice President for East Asia and the Pacific of the World Bank, in her online remarks, mentioned the saying "should not waste a crisis" to suggest opportunities that Vietnam can take advantage of after the epidemic.

She said the current trend globally is to accelerate the application of new technology, diversify supply chains, and accelerate reforms. At the same time, there is a change in behavior, applying automation and digital technology more globally ...

Ms. Kwakwa said that diversifying the supply chain and forming new economic alliances creates opportunities for countries like Vietnam. In particular, Vietnam is a country with an increasingly improved business environment, an attractive destination for investors.

Therefore, the continuation of extensive integration, taking advantage of FDI, and promoting trade are the recommendations that she made for Vietnam.

However, to take advantage of the opportunity, Ms. Kwakwa said that Vietnam needs to accelerate its participation in the global value chain. Currently, the level of participation of Vietnam is very low in the region. It is estimated that in the value chain, Vietnam generates $20.4 billion and ranks 55th in the world. This level is less than a quarter of the ASEAN country like the Philippines, which reached more than $80 billion, ranking 34th in the world.

With its outstanding achievements over the past three decades, Vietnam is a development success story and continues to perform well even in the pandemic on a range of indicators, including trade, growth and human capital, she said.

She also emphasized that Vietnam is still very modest in participating in the delicate steps. Even the development of the manufacturing and processing industry is still limited, not to mention the delicate process. To move up the ladder of the global value chain requires advanced services, developed manufacturing and processing industries, and the participation in sophisticated processes.

 

According to calculations, an increase of 1% in the participation in the global value chain will increase per capita income by more than 1%, 2 times higher than the value of traditional trade. On the other hand, this will help Vietnam improve labor productivity, generate high income, and overcome the middle income trap.

Doing sophisticated steps, promoting the processing and manufacturing industry will help Vietnam's GDP increase rapidly, Ms. Kwakwa said.

The government needs to review the strategy for science, technology, innovation, to apply and widely disseminate science and technology. In the long term, it is necessary to develop R&D skills and capabilities, reaching the highest limit of productivity.

Agreeing with this, Mr. Jacques Morisset, chief economist of the World Bank in Vietnam, said that Vietnam must focus on training to have more skilled workers. When investing in Vietnam, foreign businesses all think that the skills of workers need to be enhanced to satisfy more complex jobs.

To do that Vietnam must promote post-highschool education and update new technology in the world because at present many Vietnamese businesses are lagging behind in innovation.

Meanwhile, Jonathan Pincus, UNDP's international senior advisor, said that Vietnam will face many challenges when transitioning from a labor-abundant economy specializing in using cheap labor to an economy with advanced technology. However, advances in technology and automation may help Vietnam close the gap faster.

He said that increasing depth in industrial production requires the creation of incentives for domestic firms to invest in new technologies and skills. At this time, the Government must play an active role, must think creatively to create tools to promote investment.

To protect its development gains, Vietnam must be well prepared for strong recovery and make most of the new emerging opportunities, according to Dr. Vu Thanh Tu Anh, Senior Lecture at HCM Ciy-based Fulbright School of Public Policy and Management.

Anh pointed out the fact that despite being one of the most open economies in the world, Vietnam’s participation in global and regional value chains remains limited. Vietnam’s level of participation in global supply chains remains well below its ASEAN peers, such as Singapore, Thailand, Indonesia, Malaysia, and the Philippines, he said, adding that the level of Vietnam’s sophistication in participation remains low, particularly in manufacturing and the country needs to move up to improve productivity.

Anh cited a WB report as saying that a 1-percent increase in global value chain participation boosts per capita income levels by more than 1 percent – about twice as much as conventional trade, so strengthening global value chain participation will be important for accelerating Vietnam’s productivity and growth.

He suggested that in the short-term, the diversification of multinational corporations depends on the recovery prospects of alternative production bases. “In the medium-term, being well-prepared for the ‘new normal’ of global value chains is important,” he said. “Supply chains cannot be established overnight, and companies still have to overcome the expensive and time-consuming process of relocation."

For that, Vietnam can take measures to enable stronger linkages between FDI and domestic enterprises. In the longer-term, Vietnam needs to narrow the productivity gap and move towards the productivity frontier, he stated.

Le Ha

Right adjustment could help Vietnam back as high-performing economy: McKinsey

Right adjustment could help Vietnam back as high-performing economy: McKinsey

COVID-19 has interrupted the country’s journey to become a high-performing economy, but the right structural adjustments could help get it back on track, according to McKinsey & Company, a leading US consultant firm.

Foreign banks confident and committed to Vietnam's economy

Foreign banks confident and committed to Vietnam's economy

International Finance Corporation (IFC) announced on Tuesday they have granted a US$70 million loan to Vietnamese Indo Trans Logistics Corporation (ITL Corp). 

 
 

Other News

.
Half of local businesses use IFRS
Half of local businesses use IFRS
BUSINESSicon  12/10/2020 

More than half of companies in Vietnam have been adopting international financial reporting standards to meet investors’ expectations and improve their corporate governance, a survey showed.

Party Resolution boosts marine economy and defence
Party Resolution boosts marine economy and defence
BUSINESSicon  12/10/2020 

The sustainable development of the marine economy in association with the consolidation of defence and security is among the important sections of a resolution from the Communist Party of Vietnam

72% of EU businesses plan to expand in Viet Nam
72% of EU businesses plan to expand in Viet Nam
BUSINESSicon  11/10/2020 

A majority of European businesses in Viet Nam expect to increase their operations in the country, the sixth Business Sentiment Survey of the EU-ASEAN Business Council released on Thursday shows.

VN eyes boosting processed meat industry
VN eyes boosting processed meat industry
BUSINESSicon  11/10/2020 

The husbandry industry is hoped to become a modern economic sector industrialised in all stages from production, processing, preservation and...

Vietnam vows to develop eco-friendly chemical industry
Vietnam vows to develop eco-friendly chemical industry
BUSINESSicon  10/10/2020 

Nguyen Van Thanh, director general of the Vietnam Chemical Agency, speaks about some of the strengths and weaknesses in the 2007 Law on Chemicals.

Banks put pedal to the metal in digital transformation
Banks put pedal to the metal in digital transformation
BUSINESSicon  10/10/2020 

The banking industry has been recently abuzz with digital transformation as lenders embark on their journey to become more tech-enabled to keep pace with disruptive technologies.

12 loss-making mega-projects proceed slowly
12 loss-making mega-projects proceed slowly
BUSINESSicon  10/10/2020 

The assets of the 12 loss-making mega-projects under the Ministry of Industry and Trade (MOIT) total VND59.1 trillion, while total accounts payable is VND63.3 trillion.

Vietnamese businesses wait for new rescue package
Vietnamese businesses wait for new rescue package
BUSINESSicon  11/10/2020 

Most enterprises say they are still experiencing a sharp decrease in revenue, cash flow imbalance and decline in confidence.

Equitisation doesn't necessarily mean a better future for SOEs
Equitisation doesn't necessarily mean a better future for SOEs
BUSINESSicon  10/10/2020 

Equitisation should be a magic wand to improve the performance of a State-owned enterprise (SOE), but in some cases, it is not.

Banks push bancassurance amid low credit growth
Banks push bancassurance amid low credit growth
BUSINESSicon  09/10/2020 

Banks are pushing the sale of life insurance products (bancassurance) in the context of low credit growth since the beginning of this year due to the impacts of the COVID-19 pandemic.

Sound direction for Vietnam’s chances of economic revival
Sound direction for Vietnam’s chances of economic revival
BUSINESSicon  09/10/2020 

Despite heavy aftermaths caused by the global health crisis, the Vietnamese economy remains in positive growth in the first nine months of the year on the back of the government’s sound responses to curb the pandemic return.

Reforms to cut unwanted administrative processes
Reforms to cut unwanted administrative processes
BUSINESSicon  09/10/2020 

In a bid to boost institutional reforms towards a modern market economy, further abolishing and reducing business regulations to create a bigger space for the private sector to develop will serve as a new driving force 

Rising handling charges neccessary to advance
Rising handling charges neccessary to advance
BUSINESSicon  09/10/2020 

International shipping lines are expected to face an increase of 12 per cent in domestic container handling service charges at Vietnamese seaports from early 2022, triggering concerns over a possible charge burden on local shippers.

Fish sauce producers in a tight spot
Fish sauce producers in a tight spot
BUSINESSicon  09/10/2020 

Traditional fish sauce is one of the most typical components in Vietnamese cuisine and while its nutritional value has been analysed thoroughly, getting EU customers to consume it more regularly remains a challenge.

Tra fish famers, exports hit hard by Covid-19 pandemic
Tra fish famers, exports hit hard by Covid-19 pandemic
BUSINESSicon  09/10/2020 

Tra (pangasius) fish prices have dropped to their lowest levels in 11 years since exports have been hit by Covid-19, according to the Vietnam Association of Seafood Exporters and Producers (VASEP).

September surprise: fruit prices soar to record high
September surprise: fruit prices soar to record high
BUSINESSicon  09/10/2020 

Passion fruit, pomelo, dragon fruit and fresh coconut have been exported to Europe in large quantities under the EVFTA, which took effect this year.

Mystery businessmen pours VND150 billion into ITA, Dang Thi Hoang Yen makes surprise move
Mystery businessmen pours VND150 billion into ITA, Dang Thi Hoang Yen makes surprise move
BUSINESSicon  09/10/2020 

The ITA shares of the Tan Tao Group unexpectedly witnessed an impressive trading session with a record high trading volume.

VN rice exporters gear up to penetrate EU arena
VN rice exporters gear up to penetrate EU arena
BUSINESSicon  08/10/2020 

Vietnamese companies have been stepping up investment to boost rice exports to Europe – however, it remains a challenging task penetrate the market efficiently.

VRDF highlights advantages of value chain development
VRDF highlights advantages of value chain development
BUSINESSicon  08/10/2020 

Amid the heavy impact the pandemic has had so far on Vietnam’s economy, possible solutions to overcome the crisis and come out even stronger have been under discussion at this year’s Vietnam Reform and Development Forum.

Plastic stocks surge in two months, boosted by low production cost
Plastic stocks surge in two months, boosted by low production cost
BUSINESSicon  08/10/2020 

Listed plastic companies have seen their market values expand 15-50 percent in the last two months on low oil prices and increased consumption.

 
 
 
Leave your comment on an article

OR QUICK LOGIN