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Vietnam’s Industrial Growth Gets a New Twist

Tuesday, September 27th, 2011
vietnam growth

Vietnam, the thickly-populated developing country which had been struggling for the past 30 years due to war, loss of financial support, and the centrally-planned economy, is now slowly stabilizing and is proving to be one of the few fast-growing countries in the world. A number of industrial zones and major economic zones have been established in the country.

Located along the Asia-Pacific Rim in Southeast Asia, Vietnam’s industrial production value is said to have gained satisfactory growth with 73.7 trillion dong, rising 16.1 percent against the same period last year, of which, state economic zone saw a growth of 6.7 percent, private economic regions went up by 18.9 percent and foreign invested economic areas soared 18.5 percent, according to the general Statistic Office.

Key industries focused on in Vietnam currently include food processing, garments, shoes, machine-building, mining, coal, steel, cement, chemical fertilizers, glass, tires, oil, and paper.

According to the Economist Intelligence Unit’s (EIU) country intelligence data and report, Vietnam’s economic outlook forecasts to be strong for the future. In spite of the fact that the entire world is seeing an economic recession, Vietnam is gaining the strength to continue as a highlight in terms of gross domestic product (GDP) growth compared to other economies around the world.

Reports also indicate that with Asia currently being the strongest region in terms of economic growth, foreign investors will remain positive about Vietnam’s long-term prospects.

Vietnam’s economy is mainly dominated by state-owned enterprises (SOEs) which are reported to produce about 40 percent of the GDP. The country is also planning to implement the structural reforms needed to modernize the economy and to produce more competitive export-driven industries.

Way back in 2007, Vietnam joined the WTO and eventually became an official negotiating partner in the developing TransPacific Partnership trade agreement in 2010. Industrial share increased from 36 percent to 41 percent this year. Over the time, foreign trade and foreign direct investment (FDI) also have improved significantly in this place. From 1990 to 2005, agricultural production nearly doubled, transforming Vietnam from a net food importer to the world’s second-largest exporter of rice. The 2001 entry-into-force of the Bilateral Trade Agreement (BTA) between the U.S. and Vietnam was a significant milestone for Vietnam’s economy and for normalization of U.S.-Vietnam relations. Bilateral trade between the United States and Vietnam has expanded dramatically, rising from US$2.91 billion in 2002 to $17.9 billion in 2010. After China, the U.S. is Vietnam’s second-largest trade partner.

Vietnam’s industrial production value in January 2011 is reported to have reached VND73.7 trillion (US$3.52 billion), rising 16.1 percent against the same period last year. Some of the products that reported high growth this year includes; rolled steel 15.9 percent, powder milk 15.4 percent, electricity production 14.3 percent, motors 13.5 percent and adult clothing 12.4 percent. Industries like liquefied petroleum gas reported a growth of 36.2 percent, footwear 35.1 percent, ceramic tiles 32.5 percent, tires for automobile and tractor 26.8 percent, glass 20.7 percent, cement 18.9 percent and textile fiber 17.2 percent.

More foreign investment is expected to flow into supporting industries in Vietnam this year, according to the Taiwan External Trade Development Council (TAITRA).

Vietnam this year is also said to be oriented towards infrastructure development and supporting industries.

Meanwhile, the country is planning to invest nearly US$50 billion in the power sector in the next 10 years to propel its economy and plans to issue domestic and international bonds to raise funds for new projects, the Ministry of Industry and Trade said.

The country’s fruits and vegetable exports in 2011 are expected to touch some US$500 million, according to Ministry of Industry and Trade. The country’s key export products included tropical fruits like dragon fruit, pineapple, mango, avocado, papaya, jackfruit and other canned and processed fruits and vegetables. Vietnam has set up special commodity regions like rice in the Mekong Delta and Red River Delta; coffee in the Central Highland and Southeast region; tea in the mountainous and northern midland; rubber in the Southeast region, Mekong Delta and some northern provinces; vegetable in Lam Dong and provinces in the Red River Delta; sugarcane in the Central coast and so on which has helped in getting a clarity.

Vietnam is currently a net exporter of agricultural products. Other than rice, key exports are coffee, pepper, cashews, tea, rubber, wood products, and fisheries products. In 2010, Vietnam stood among the top 17 suppliers of food and agricultural products to the United States, which strongly indicates Vietnam’s growing importance as a global supplier of key agricultural commodities.

Also, from January 01, 2010, Vietnam took over as the president of the Association of Southeast Asian Nations (ASEAN) which also includes countries like Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore and Thailand. The country aims to utilize its term as the president to accelerate development of the ASEAN Community, strengthen regional solidarity and cooperation, and enhance Vietnam’s image at the international front.

Vietnam and India have established very solid legal frameworks. The two countries formed the strategic partnership in 2007. India recognized Vietnam as a country with a full market economy. A series of agreements, particularly the Agreement on ASEAN-India Trade in Goods (AITIG), facilitate Vietnamese competitive goods to deepen the roots in India. The results prove that India is a very potential market for Vietnam in all fields of cooperation, especially trade and investment.

Vietnam’s Fishing Industry

Viet Nam has a coastline of 3,260 km and has over 4,000 islands. There are four main fishing areas: Gulf of Tonkin, shared with China; Central Vietnam, the Southern Mainland Shelf; Southeastern Vietnam, the Northern Sunda Shelf and part of the Central Sunda Shelf; and Southwestern Vietnam, part of Gulf of Thailand, shared with Cambodia and Thailand.

The Vietnamese aquaculture followed some of the successful quality management program under developing countries’ standard. Export aqua-products of Vietnam were trusted in foreign markets as Japan, EU and the United States. The country’s aquaculture industry aims to achieve annual growth of 8-10 percent until 2015, with export revenue estimated to reach US$6.7billion by 2015 and $8billion by 2020. In a conference held recently, the former deputy Minister of Fishery, Nguyen Thi Hong Minh, said that the Viet Nam Fishery Export Development Plan is all set to develop the fishery sector into a large-scale production sector with high global competitiveness. Minh also said that by 2015, fishery materials for processing exports is expected to reach 3.2-3.5 million tones, 2.5-2.6 million tones of which will come from local production and the remaining from imports. In addition, he also said that the industry will also focus on developing the processing industry to raise product value and improve the competitiveness of Vietnamese fishery products. In the coming years, besides seeking new export markets, the industry would maintain the key export markets of the EU, Japan and the US, Minh said.

Vietnam’s Forestry

Vietnam is currently facing a rapid growth capacity for wood products manufacturing. The Country is likely to continue its rising status as a wood products exporter. Vietnam’s hardwood imports have increased. Forestry in Vietnam is seeing major important changes with the transformation in managing mechanism from state to society; allocating forest and land forest to household management, connecting responsibility of forest resources guards, managers to benefit from forest; encouraging development of bio-diversification and so on. The country is gearing its strength to become a leading furniture manufacturing country in Asia. Vietnam wood serves as a vital platform to address the needs and anticipate the demand of the local furniture industries. Vietnamese wooden products exporters have already signed contracts worth US$3.4 billion recently. China is becoming a big importer of Vietnam’s furniture, after the U.S., the EU and Japan which respectively imported US$889 million, $387 million and $271 million in Jan.-Aug, 2010. Preliminary statistics from the Vietnam Industry and Information Center shows a 38.4 percent year-on-year increase in Vietnam’s wooden product exports.

Agricultural Industry

Vietnam’s agricultural sector is better positioned than any other industry after 1988 when collective farming was effectively abolished and prices began to stabilize. Year 2000 marked a remarkable growth in creating favorable environment and conditions for companies. After enforcing the Enterprise Law, Vietnam issued many important legal documents such as Decree on business registration, guide to some articles of the Enterprise Law or Decision to remove 145 kinds of licenses, limiting business performance. The Land Code was adjusted in 2001. Trading rice and fertilizer was liberalized with participant of all economic sectors. Enterprise reform was promoted. Agriculture has demonstrated a remarkable response to the economic reforms introduced from the 1980s onwards. Not only has agriculture grown rapidly, it has also underpinned the success of the rest of the economy.

Mining and Minerals

Vietnam’s mining industry is also presenting evidence of considerable growth potential. The mining industry plays a very important role in Vietnam’s economy, as mineral trade accounts for a large share of the country’s overall trade. Vietnam now is taking advantage of some 38 kinds of minerals which are used for production of more than 54 commodities. Value gathered from minerals and products manufacturing from minerals, as indicated, reached about US$25 billion in 2010. Iron, titanium and copper were the leading metals exported. Other minerals include tin, wolfram, gold, lead, zinc, uranium, antimony, rare earths, gem, limestone and clay. Some minerals with large potential and high economic value are being exploited for socio - economic development of the country. Some large-scale mining projects are being implemented such as Lam Dong bauxite mining, Co Dinh chromites mining and Thach Khe iron mining.

Problems Faced

However, many problems still exist related to the effectiveness of economic development, the competitiveness of companies, environmental protection, employment and post-industrialization problems. The Vietnamese agriculture, forestry and seafood sectors are expected to face a number of difficulties in the next two years as the country goes through a process of serious economic restructuring, including rising inflation and costs, tightened monetary and credit policies, instability in the international agricultural market, climate change, and disease epidemics.

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