Reducing dependence on FDI sector

Monday, 2021-04-26 11:21:30
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It is advisable to prioritise FDI projects with great spillover effects. (Illustrative image)
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NDO – Export activities made great contributions to Vietnam’s economic growth of 4.48% in the first quarter of 2021. After a year disruption from the COVID-19 pandemic, Vietnam’s import and export activities recovered strongly in the first quarter of this year, gainingover US$152 billion in revenue in the three-month period, up 24% over the same period last year.

Vietnam also posted trade surplus of over US$2 billion during the period with 11 groups of commodities each reporting export revenue of over US$1 billion, accounting for 76.6% of total export revenue.

Amid the declines and slowdown in the exports of many countries, Vietnam's export revenue is still postingpositive growth and trade surplus, demonstrating the great efforts of the whole economy.

The structure of export goods continues to be improved in the direction of reducing the content of raw exports and increasing the export of processed products, creating conditions for Vietnamese goods to participate further in global production and supply chains.

However, it is notable that the exports of the foreign direct investment (FDI) sector accounted for more than 76% of the country's total export revenue in the first quarter of 2021, which was a very high level compared to the thresholds of about 60% to 70% in previous years.

In particular, FDI enterprises accounted for 90% to almost 100% of the export revenue in some key industries such as telephones and components; electronics, computers and components; and machinery, equipment, tools and spare parts.

These figures represent the considerable contributions of the FDI sector to the overall growth, but also show that the export growth of the national economy has becomemore dependent on this sector.

From 2018, import and export activities have shown very good signals that domestic enterprises have started tomake a breakthrough, achieving a higher export growth rate than the FDI sector.

There was time when the export growth rate of domestic enterprises was double that of the general export growthrate of the whole country and was much higher than the growth rate of the FDI sector.

But from the end of 2020 until now, due to the negative impact of the COVID-19 pandemic, that positive trend could no longer be maintained due to the slowdown in export growth of the domestic enterprises coupled withthe FDI sector having strongly recovered.

Economic experts recommended that as an export-oriented economy, Vietnam's export activities need to reduce its dependence on the FDI sector. Accordingly, it is necessary to have a strategy to promote thedevelopment of domestic enterprises to form a new national production capacity and improve the country’s position in the global value chain and its resilience to unusual impacts from the outside.

At the same time, it is advisable to prioritise FDI projects which have great spillover effects and connections with the domestic sector.

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