Vietnam Should Further Improve Human Resource and Infrastructure

 

Recently, Vietnam has had development policies for technology intensive industries as well as an orientation towards developing small and medium sized enterprises (SMEs) to increase added value for Vietnam’s products, aiming at entering global product value chain and developing supporting industries. However, as time goes by, foreign investment attraction has little “overflow effect” on Vietnam industry development. External investment structure seems static, mostly concentrating on processing and assembling.

 

According to Mr Vu Tien Loc, President of Vietnam Chamber of Commerce and Industry (VCCI), at present, Vietnam is facing weaknesses in attracting investment into the processing and assembling sector. In the past time, assembling technology has caused the deficit to rise rapidly, for example, in 2010, Vietnam’s deficit against China was US$12.7 billion, in which production goods accounted for 55 – 60 percent, machines and equipment accounted for 22 – 25 percent, material import for textile only reached US$5.76 billion, while added value created was less than US$500 million.

 

Meanwhile, domestic production added value is low, human resource training and technology transfer is limited, and most jobs are for unskilled manual labourers. In this field, Vietnam speaks so loud but acts so little said Mr Loc.

 

Agreeing with this opinion, some experts said that component suppliers for Vietnam are still foreign funded enterprises and the gap between domestic and foreign component suppliers is rather large. Besides, Vietnam has so few supporting industry links and the industrial database has not been given much attention, so there’s no reliable database. Vietnam hasn’t created a value chain by connecting enterprises, even using financial and non-financial services, in order to exploit competitive advantages to serve these industries’ development.

 

According to Circular 96/2011/TT – BTC, as of August 18^th 2011, investment projects in supporting industries will be given many preferential policies on import tariff and exemption of land use fees. This is regarded as one of the most important driving forces to boost the industry’s development.

 

In addition, there are many policies issued to boost supporting industries, but they have not caught up with these industries’ development. Therefore, said Mr Loc, policy research has to be continued. Among those, financial preferences are considered a crucial “kick” for supporting industries’ development. However, this is only the first knot to be untied among many obstacles. Thus, apart from factors such as tax reduction or exemption, land use fee or other services, human resources and infrastructure suitable for supporting industries’ development in Vietnam should be improved soon to meet investment demand of foreign enterprises.

 

At present, in Vietnam, “actual” Industrial Zones (IZ) among the 260 IZs in the whole country account for only a small percentage. Therefore, Mr Ichikawa, Chief Representative of Japan External Trade Organization in Hanoi, said investment to develop IZs with the purpose of attracting foreign investment into supporting industries should be balanced with investors’ demand. Since SMEs often have small capital and limited demand for labour and production premises, there should be specialised IZs to serve supporting industries’ development. Not only hard infrastructure, but also soft infrastructure such as law consulting and preferential policies for IZs, should be considered and completed.

 

Especially, to gain success in attracting Japanese investors and enterprises to invest into supporting industries and manufacturing industry, Deputy Minister of Industry and Trade Tran Tuan Anh, stressed: Vietnam should concentrate more on developing highly qualified human resources, suitable infrastructure and pay closer attention to developing quality vocational schools. Particularly, workers should be taught Japanese. Therefore, training human resources is the foundational work. As for specialized manufacturing IZs, standard premises and infrastructure should be ensured to attract investment capital from Japan into Vietnam said the Deputy Minister.