Forward thinking: Workers on the assembly line of a car factory in Hai Phong. Vietnam companies can benefit hugely by strengthening their capacity to embrace innovation, promote research and development and financial capacity, says an analyst. — AP
HANOI: Enhancing the national competitiveness and capacity of domestic companies is vital for Vietnam to climb up the global value chain in the new context of globalisation, according to a workshop by the Vietnam Institute for Economic and Policy Research (VEPR).
“The abundant foreign direct investment (FDI) has given Vietnam a new image on the global trade map but it has not been able to pull the economy to a higher value ladder,” VEPR vice-president Nguyen Quoc Viet said at the workshop themed “Facilitating Vietnam’s Integration into the Global Value Chain through Enhanced FDI Linkages”.
Viet cited the findings of VEPR’s report that the FDI sector still dominates Vietnam’s exports and imports, while the added value that domestic firms contribute, especially in the processing and manufacturing industries, remains modest.
Vietnam’s exports mainly focus on labour-intensive industries with low added value. The country’s imports of inputs also have low added value and weak technology diffusion, the report found.
“There are emerging linkages in industry clusters towards the global value chain under the leadership of FDI enterprises.
“However, many industries are reaching critical points, which can be seen through the crisis of garment and footwear exports, making it difficult for Vietnam to participate further in the global value chains unless breakthroughs in capacities are made,” Viet said.
Viet pointed out barriers that come from problems in the macro-level competitiveness and internal capacity of domestic enterprises, as well as the lack of efficiency and consistency of policies.
Domestic enterprises remain weak in their capacity to embrace innovation, promote research and development, technology application and financial capacity, he said, adding that the quality of human resources is also a problem, he said.
The global minimum tax will affect the competitive advantage of Vietnam in attracting FDI in the short term because of changes in the preferential tax framework.
“Countries, including Vietnam, will need to cease the race for the lowest taxation and tax-related incentives with other nations in the region,” Viet urged.
“The opportunity to increase the competitive advantage in attracting investment in general and FDI in particular lies in enhancing national competitive capabilities,” he stressed.
“Enhancing competitiveness becomes vital for Vietnam to integrate into the global value chain in the new globalisation context, which raises new requirements including environmental, social and corporate governance, just energy transition and green development,” Viet said.
Emphasising the gap between policy and implementation, Viet said it is critical to carry out a comprehensive review of the legal system to attract investment.
“Vietnam will have to solve the puzzle of balancing national interests and investor interests by amending the law on corporate income tax and the law on investment,” he said.
“Creating connections between regions is becoming a crucial measure to stimulate the development of industrial clusters, opening up new opportunities for the economic growth of Vietnam,” he said.
Catching up with global transition trends and meeting new requirements have become vital for Vietnam, raising the need for transforming the growth model to establish new competitive advantages for further integration into global value chains.
“Garment, footwear and wood industries are facing difficulties as exports have been struggling. Electronics and assembly are predicted to be under pressure in the near future,” Viet said.
Preparations should be made to stress that this cannot be done by a single enterprise alone but requires a comprehensive transition of the entire economy.
According to Nguyen Dinh Cung, former Director of the Central Institute for Economic Management (CIEM), Vietnam has never been in such a difficult situation as today during the past 40 years of reform and development.
The difficulties come from the dramatic decline of global demand with prolonged impacts on production and export coupled with disruptions of property and bond markets, while measures to overcome the difficulty remain vague, Cung said.
“Support policies for enterprises should be extended, even to the end of 2025.
“It’s time Vietnam looked at our internal capacity to find a way out of the difficulty without relying on external resources,” he stressed. “There should be a change in thinking and a long-term vision. Vietnam should build a competitive advantage on the country’s internal strength.” — Viet Nam News/ANN
