Chairman’s Insights – January 21st 2019
World Bank Recommendations in line with Government thinking
The Government has over the last 12 months been highlighting the lack of linkages between the foreign invested sector and the domestic sector, enabling the growth of domestic companies and enabling them to participate in the global supply chain. The Government has also signaled their intention to focus more on higher value added investment into the manufacturing sector to ensure sustainability and higher productivity growth.
In an address to the Vietnam Economic Forum held in Hanoi on January 17th 2019 World Bank Country Director Ousmane Dione signaled the significant opportunity that Vietnam had to upgrade its domestic value contribution to really fully capture the benefits of the current high level of foreign investment into the manufacturing sector. He also pointed out that Vietnam’s ratio of foreign trade to GDP of 200% + makes Vietnam one of the most open economies in the World and Vietnam has received more FDI than any other ASEAN country in the last 10 years. This has helped contribute to rapid growth, job creation and poverty reduction. One should remember that the poverty level in Vietnam in 1995 was around 70% whilst today it is under 10%.
Vietnam will need to change its focus away from assembly and processing to more higher value added activities, Dione said, reflecting the stated ambition of the Government. Over 80% of Vietnam’s exports are manufactured products to put this into perspective. However Vietnam also has an unusually high import component, in their exports, currently around 50% making it higher than Any other ASEAN economy.
He advised the Government that to achieve the desired outcome Vietnam will need to introduce comprehensive measures to strengthen competiveness of domestic enterprises, which in turn will require continued improvements in the business environment, better access to finance and the strengthening of skills and creativity.
He concluded that expanding the county’s global value chain participation should lead to higher output and productivity, more added value and more jobs.
It is good to see the Government’s aims and objectives in line with World Bank views.