Over the last 15 years, Vietnam has emerged as a strong manufacturing hub in Asia Pacific. In its Competitive Industrial Performance (CIP) Index 2020, the United Nations Industrial Development Organization (UNIDO) recorded the country climbed two places in CIP – ranking 38 in 2018 in a global index of 152 countries up from its 41st position in 2017.
The report noted that Vietnam has been in an upward trajectory in terms of CIP since 1990.
Indeed, the report stated that Vietnam is going above world average in nearly but two key performance indicator in terms of competitiveness, particularly with the country’s manufactured goods accounting nearly 90% of the national exports way ahead of 60% global average.
However, the country’s ranking in terms of the share of medium and high-tech activities in manufacturing has shown signs of a slowdown moving down one notch in by placing 40th in 2018. Its global ranking in terms of the share of medium and high-tech activities in total manufacturing value added index is only climbed a place higher to 31st in 2018.
Keeping industrialisation on track
In September this year, the Vietnamese government issued an action plan implementing Resolution No 23/NQ/TW, which sets out a national industrial policy until 2030, with a vision towards 2045. The law was signed more than two years ago in March 2018.
The action plan is designed to put Vietnam in the top three industrialised economies of the ASEAN, the sub-regional 10-nation economic block of Southeast Asia.
Among the goals set include the following:
- The industrial sector will account for over 40% of Vietnam’s gross domestic product (GDP) by 2030, with manufacturing and processing industries making up some 30% and manufacturing industry alone accounting for over 20%.
- The value proportion of high-tech products from processing and manufacturing industries will reach at least 45%t. The average annual growth rate of industrial added value will be over 8.5%, in which that of the processing and manufacturing industries will constitute 10%
- It also foresees a 7.5% average annual growth rate of labour productivity in the industrial sector
- The proportion of labour in the industrial and service sectors will surpass 70%, and a number of large-scale, multinational and globally competitive industrial clusters and industrial enterprises will be built.
The action plan stipulates the introduction of policies to develop priority industries, as well as to create favourable environment for business opportunities and talent cultivation – using science and technology to spur industrialisation while keeping an eye on environmental protection and having the ability to adapt to climate change.
Writing in Vietnam Briefing in October, Julia Nguyen said Vietnam seems well on track to achieve its goal of being among the top three ASEAN countries in 10 years’ time.
“From the period of 2006 to 2016, Vietnam climbed 27 positions in UNIDO CIP Index, which tracks the progress of countries’ manufacturing sector. This significantly narrowed the gap between Vietnam and the top countries in the region: Singapore, Malaysia, Thailand, Indonesia, and the Philippines,” she said.
Noting that Resolution No. 23-NQ/TW focuses on three key factors: value-added, exports, and job creation she pointed out industries that can contribute the most these factors should be prioritised.
“Food, textile and footwear, electronics, and automobile are the industries that have the highest competitive advantage, and can immensely benefit from greater research and development (R&D), technical innovation, SME, and start-up support, among many other possible interventions to help the country attain its goals,” she said.
Vietnam Briefing, first published in 2009, provides insights on business and investment in the country. The website is run and manage by Dezan Shira & Associates, a foreign direct investment consultancy that employs over 300 professionals, including lawyers, accountants, auditors, and business specialists from across the world. Local experts at the firm provide services tailored to the unique challenges facing international businesses in Asia.
Nguyen cited challenges ahead such as dependence on foreign imports that supply nearly 8% of raw materials, spare parts and components needed for production, even while government policies and local manufacturers have stepped up the development of supporting industries for key industries.
Focusing on Industry 4.0
While Nguyen agree that focusing on Vietnam’s “tried and tested” sectors will hasten industrialisation, she said the country also needs to prepare for Industry 4.0 to stay competitive.
“Industry 4.0 introduces technologies such as big data, cloud, Internet of Things (IoT), and many more technologies that promise to optimise production processes so that productivity and profits are increased,” she said.
She observed that the first steps of Vietnam’s “digital revolution” are already underway.
Polices on the development of enabling infrastructure, creative capacities, human resources, and priority sectors and technologies are already in place to achieve the country’s ambitions to be among the top Southeast Asian Nations in the Global Innovation Index (GII) ranking.
In 2019, the Ministry of Planning and Investment (MPI) released the draft national strategy on Industry 4.0 and developed a national program to transform Vietnam into a digital society by the next decade.
“There is a consensus among government, industry players, and intellectuals on the benefits and opportunities of Industry 4.0. Experts stress the importance of having a coherent strategy and the need for collaboration in order to create an ecosystem that supports the creation of advanced technologies.
“Coordination across ministries and between private and public sectors is especially crucial when dealing with the inevitable challenges that will arise with Industry 4.0 adoption, such as labour displacement and cybersecurity issues,” Nguyen said.