Vietnam’s exports struggle

Wednesday, 2017-02-01 14:17:29
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Bac Giang's Luc Ngan and Hai Duong's Thanh Ha fresh lychee irradiated before exporting to Australia (credit: Le Hieu)
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NDO - Low statistics on key export sectors in 2016 once again highlight need for boosting export growth.

Minister of Industry and Trade Tran Tuan Anh emphasised at a meeting in July 2016 that the signing of new free trade agreements particularly the Trans-Pacific Partnership Agreement (TPP) and the Vietnam-EU Free Trade Agreement in 2016 will open up great opportunities for Vietnam's exports. However, no one could foresee the unpredictable developments in the world situation experienced in the several remaining months of the year, affecting Vietnam’s key export sectors.

New rival of garment and textile sector

The export of Vietnamese garments and textiles has grown rapidly over a long period of time with several different types of products becoming leading world exporting products in terms of quantity. However, businesses have not paid due attention to building a trademark for Vietnamese goods including apparel products.

Although apparel products are exported in large quantities, these products have only the 'Made in Vietnam' label to identify its origin while consumers are more concerned about trademark rather than source of origin.

In regards to another issue, the garment and textile sector has developed its competitive advantages through skilled workers at a cheap price. However, the International Labour Organisation (ILO) warned that modern technologies could cut the jobs of 86% of Vietnamese workers in the garment, textile and footwear sectors. To avoid this danger, it is vital to invest in research and development and brand building in order to escape the necessity of outsourcing work.

Repositioning rice

2016 was also a gloomy year for rice exports when the total annual rice export reached a mere five million tonnes, a record low since 2009. Paradoxically, Vietnam was forced to visit Cambodia, a country that has only recently joined the world rice market in the past few years, to learn how to develop its own brand.

Cambodia has made good choices when investing in high quality local varieties and won the world's best rice award three consecutive years in a row from 2012-2014. The plantation area of Cambodia's fragrant rice varieties now account for 40% of total plantation area and is increasing.

In addition, Cambodia is building on its model of organic rice production with the participation of 100,000 households on an area of 50,000 ha. Cambodian organic rice is exported to 53 countries across the world including selective markets with prices up to US$1,475 per tonne.

How Vietnam can learn from Cambodia and how the nation can develop a national strategy for Vietnamese rice to be identified in the world remains an unanswered question.

The policy to 'escape from FDI'

According to the Organisation for Economic Co-operation and Development (OECD), the processing and manufacturing industry of the foreign direct investment (FDI) sector contributes 48.8% to the total added value of Vietnam's exports while the content of domestic added value accounts for only 12.7% of the total national export value.

In the context that many signed free trade agreements have taken effect, in addition to others that will come into effect, if domestic exporters do not change themselves quickly, they will be overwhelmed by FDI enterprises, resulting in more dependence of Vietnam's exports on FDI enterprises.

The model for improving the capability of industries from the Republic of Korea (RoK) is a good example for Vietnam. Since 1966, the RoK Government put forward plans to boost the development of their industries for 20 years by dividing their industries into three groups: the group of weak industries including steel, shipbuilding, fertilisers, assembly and electronics manufacturing; the group of industries with high competitiveness including textiles, apparel, and footwear; and the group of self-sufficient industries.

Every five years, under the government’s support, production corporations must lift the poorly performing industries to a higher position. The RoK Government set a target of catching up and surpassing Japan on the export market. As a result, after half a century, RoK's industrial products, namely automobiles and mobile phones are holding a high market share on the world market.

Motivation for exports must be a long-term and consistent strategy but not include band-aid approaches.

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