Having injected tens of billions of dollars into electronics and smartphone projects in Vietnam, Samsung still has to struggle to look for component suppliers.
The difficulties faced by Samsung are foreseeable. Though the total industrial production value in Vietnam increased by 3.42 times in 2006-2015 and maintains a steady contribution of 31-32% to the country’s GDP, there are still a lot of problems existing.
Head of the Communist Party’s Economics Committee Nguyen Van Binh said at a recent workshop that industrial productivity, especially processing and manufacturing, is at a low level and lower by 6.4 times compared to Malaysia and 3.6 times to the Philippines.
In a long period from 2006 to 2015, the industrial productivity only increased by 2.4% per annum, which was lower than the GDP growth rate.
A report from the Vietnam Economics Institute showed that 76% of equipment and production lines in Vietnam is out of date, manufactured in 1950-1960s, while policies tend to encourage the import of components for domestic assembly.
Industrial production is now based on natural resource exploitation, while manufacturing – the core of industrial development – has obtained low growth rates in the last several years.
Commenting about the policies to encourage industrial production, Nguyen Duc Kien, deputy chair of the National Assembly’s Economics Committee, said Vietnam has too many ‘key industries’ and all industries are listed ‘leading edge’. As a result, it is unclear which industries to prioritize.
Vietnam considers new material, new energy, precision mechanics, electronics and nano as key industries. However, economists doubt that the industries would help Vietnam build highly competitive industries.
Under current conditions, Vu Thanh Tu Anh from Fulbright University thinks it would be better for Vietnam not to pursue policies on giving preferences to some specific products, but prioritizing the development of several production fields suitable to the country’s long-term development.
Vietnam can refer to many successful industrialization models in the world, but it must not copy any model, and needs to design a model suited to its conditions.
The socio-economic development strategy from 2011-2020 aims to turn Vietnam into a modern industrialized economy. However, economists say the policies to push up industrialization will only be valid within a certain period.
The tardiness in figuring out reasonable policies and insufficient efforts to reform the administrative system are why Vietnam still cannot attract much FDI in machinery related fields.
Developing supporting industries is an important strategy to improve the growth of machinery related fields.