In recent times, total investment capital for industrial development has been continuously expanded, with the ratio of industrial investment to total social development investment consistently accounting for approximately 40% of total social investment, second only to the services sector (approximately 50%), with a shift from investment by the State sector to investment by the non-State sector (mainly FDI), in which the processing and manufacturing industry has always been the sector attracting the most FDI investment. In the 2011-2019 period, investment growth in the industrial sector was estimated to increase by 11.79% and by nearly 14% in 2020, higher than the overall growth rate of the whole society.
Data from the Ministry of Planning and Investment shows that in the first 7 months of 2022, the processing and manufacturing industry attracted more than USD 10 billion in foreign investment capital, accounting for 64.3% of total registered investment capital, continuing to be the sector attracting the most FDI in the country. In terms of the number of new projects, the processing and manufacturing industry was also among the 3 sectors attracting the most projects, accounting for 26.6%. Many projects producing and manufacturing electronic and high-tech products have continuously expanded investment in Vietnam after a period of effective investment and operation, with investment capital of up to hundreds of millions of USD per project.
However, the difficulty facing Vietnam's industry lies in its still-weak domestic capacity, with the economic restructuring depending too heavily on FDI enterprises. For example, FDI enterprises account for more than 70% of Vietnam's total export turnover; in particular, in key export sectors such as electricity and electronics, textiles and garments, and footwear and leather, the number of FDI enterprises is only about 20% of the total number of enterprises yet accounts for more than 80% of export turnover. These enterprises are mainly concentrated in the downstream segment to take advantage of tax incentives and input costs such as cheap labour and Vietnam's not-too-high environmental and labour requirements.
In that context, the Ministry of Industry and Trade assesses that in order to maintain economic growth and avoid the middle-income trap, Vietnam needs to continue pursuing the goal of industrialisation with the processing and manufacturing industry as the focus, concentrating on building a self-reliant production base.
Therefore, social resources should focus on building and improving the capacity and productivity of domestic industrial enterprises, forming and developing strong industrial enterprises and domestic supply chains and value chains (including production and service activities across the entire chain) with sufficient global competitiveness; and on creating an open and favourable investment and business environment so that domestic industrial enterprises can grow strong, generate greater domestic added value, connect with the foreign investment sector and participate more deeply in global value chains.
Investment management and investment incentive policies need to be built tightly so as to attract investment capital, especially foreign investment, effectively, creating favourable conditions for large-scale investment in industrial development, thereby improving capacity, the level of science and technology and human resources, as well as promoting linkages and participation in production networks for domestic industrial enterprises. These policies will also serve as a catalyst to help resolve the “vicious circle” of lacking capital, technology and human resources that has hindered industrial development over the past long period.
In addition, complementary policies are needed to create effective production models in order to develop industry along value chains and to build industrial clusters, creating more favourable conditions for attracting investment as well as for specialising production and connecting industrial enterprises within clusters so as to take advantage of the competitive advantages between localities and regions, thereby creating strength and competitive advantage for products.
Implementing the Government's directions and absorbing the comments of ministries, sectors and localities as well as the appraisal opinions of the Ministry of Justice, the Ministry of Industry and Trade has developed and drafted a dossier submitted to the Government proposing the formulation of the Law on Industrial Development, which is currently collecting opinions from citizens and enterprises. Accordingly, the Law on Industrial Development will focus on regulating development activities of a number of foundation and priority industries that have a spillover effect in promoting other industries and the economy.
The Law on Industrial Development will also not focus on State administrative management activities and business investment conditions, but rather on promoting the development of the processing and manufacturing industries by creating attractive mechanisms and an attractive environment to boost investment in industry, improve the capacity of industrial enterprises, develop industrial and regional-local economic linkages, and at the same time build appropriate industrial management models and mechanisms in the context of current international integration.
The formulation and promulgation of the Law on Industrial Development is expected to create synchronisation and connectivity, bring into full play the potential of the processing and manufacturing industry, mobilise development resources to the maximum and create a breakthrough to contribute to fulfilling the goal of industrialisation and modernisation of the country.
Source: Tapchicongthuong
