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Paving the way for development of processing and manufacturing industry

The processing and manufacturing industry has an important role in the overall growth of the economy, but its development still faces many “bottlenecks”. In order to increase the added value of this industry, the Ministry of Industry and Trade is planning to build a separate law on industry and at the same time form the leading enterprises in the processing and manufacturing industry.

Pillars of economic growth

According to the Ministry of Industry and Trade, industrial production in November 2020 continuously flourished, especially the processing and manufacturing industry with a strong increase compared to the same period last year. This industry positively contributes to the overall growth of Vietnam’s economy.

Ms. Trinh Thi Thanh Thuy, Deputy Director of the Institute of Strategy and Policy Research of Industry and Trade (Ministry of Industry and Trade), said this year many countries have leading manufacturing and processing industries in the world but all countries face difficulties. In that context, Vietnam is a bright spot, an exception when the economy grows positively.

Positive growth is based on growth pillars in industry and manufacturing, especially industries with high technology content and value such as electronics, electronic components, and computers, mechanical, products for the automotive industry. Although agricultural processing, garment processing didn’t achieve the same growth as the previous periods, it obtained remarkable results.

Looking at the whole process, Mr. Pham Tuan Anh, Deputy Director of the Department of Industry (Ministry of Industry and Trade), said that in the 2016-2019 period, the industry contributed 30% of GDP, which is the group contributing the highest amount. Structure of this group has seen a positive change. Specifically, the proportion of manufacturing and processing industry increases, avoiding dependence on the mining industry. In recent years, there are many groups of industries with very rapid development, such as electronics, textiles, footwear with export value topping the region and the world.

Recently, Vietnam has established many large private economic groups such as Thaco, Thanh Cong, Vinfast. That shows the right way to encourage businesses to participate in industrial development.

“In the industrial sector, the manufacturing and processing industry contributes the most in GDP in terms of added value, creates a premise and foundation for the industrial development and modernization of Vietnam. If we compare the whole economy, the manufacturing and processing industry has the strongest breakthrough. The rate of value-added growth of this industry is much higher than the growth rate GDP in the last 5 years,” Mr. Tuan Anh said.

Develop separate industry law

In addition to the achieved results, the leaders of the Industry Department also showed that the Vietnamese processing and manufacturing industry has many limitations, not commensurate with its potential development.

Ms. Trinh Thi Thanh Thuy said that the most difficult problem to develop the manufacturing and processing industry is domestic enterprises lacking resources and input materials, being too dependent on foreign markets, especially raw materials imported from China and Korea.

“We are heavily relying on outsourcing, processing, depending on FDI enterprises,” Ms. Thuy said.

Regarding the limitation, Mr. Tuan Anh said the first group was inadequate construction and allocation of resources for industrial development in the past. Specifically, the development of strategies, policy planning is not suitable with current economic development. Credit policies for businesses have not met the needs of businesses. Given the evidence, FDI enterprises entering Vietnam receive preferential treatment from foreign credit institutions or parent groups with low interest rates, Mr. Tuan Anh said that Vietnam’s loan interest rate is high, so Vietnamese enterprises lose out from the beginning.

The second group of causes pointed out by the leaders of the Industry Department is the State’s resources for industrial development are not adequate. Vietnam is lacking industrial corporations which are strong enough to lead the economy.

“Industrial sectors need large capital and a long time to recover capital. Meanwhile, businesses only focus on investment in areas such as real estate, commerce, which have the ability to recover capital faster. Therefore, the State’s support is necessary to mobilize enterprises to participate in the industrial sector,” Mr. Tuan Anh said.

In order to strongly promote manufacturing and processing enterprises in the global supply chain, Mr. Tuan Anh said that the department has always actively coordinated with corporations and enterprises to produce complete products such as Samsung, Toyota, then there are connections with domestic enterprises for the two parties.

“In the long term, we are completing mechanisms to support industrial enterprises in general, supporting industry, and manufacturing in particular. Specifically, the Industry Department is currently implementing contents in Resolution 115 / NQ-CP dated August 6, 2020 of the Government on solutions to promote the development of supporting industries, in which the important content is coordinating with the State Bank and the Ministry of Finance to set a policy of subsidized interest rates for supporting industry enterprises as well as enterprises in the manufacturing and processing industry,” Mr. Tuan Anh said.

According to the leaders of the Industry Department, this Department is studying the need to issue a law on industry, formally institutionalize the content into this law, avoiding the situation of referring to other laws; continue to research to form industrial groups, create “cranes” leading the way to entice enterprises of the next class to develop.