Tuesday, 19 Feb 2019

Production cooperation is key for sustainable exports

Updated at Wednesday, 08 Aug 2018, 17:27
The Hanoitimes - The lack of cooperation between enterprises in forming a value chain is one of the main restrictions for Vietnam in its quest towards sustainable exports, according to economist Pham Chi Lan.
Production cooperation is considered key for creating high added-value products, which, in turn, contribute to sustainable exports, said Tran Thanh Hai, deputy head of the Ministry of Industry and Trade's Import-Export Department. 
Overview of the conference. Source: Hai Yen.
Overview of the conference. Source: Hai Yen.
Exports as highlight of the economy

During the course of extensive global economic integration, Vietnam's exports stand out as one of the country's main achievements, Hai said at a conference held in Hanoi on August 8. 

Vietnam's export turnover exceeded the US$200-billion mark for the first time in 2017, reaching US$214 billion, up 21.2% year-on-year. The country is on course to achieve the goods import and export strategy for the 2011 - 2020 period, with vision toward 2030, Hai added. 

In 2018, the export sector is forecast to maintain its growth momentum thanks to positive impacts from various integration commitments in removing trade barriers that Vietnam is a party to. 

As of July 2018, total Vietnam's trade value climbed 12.7% year-on-year to US$264.32 billion, of which export turnover amounted to US$133.69 billion, up 15.3% year-on-year and equivalent to 56.5% of the year's target. 

However, there remains challenges that Vietnam's exports are facing, including the growing trend of protectionism and the FDI sector taking a 70% share of the country's export turnover, Hai warned.

Moreover, the participation of local enterprises in trade activities is still modest. 

According to economist Pham Chi Lan, reason behind this issue is a lack of cooperation between enterprises in forming a value chain. 

Echoing Lan's view, Dang Trieu Hoa, CEO of Century Synthetic Fiber Company, referred to the fact that Vietnam's textile and clothing exports increased from US$15.8 billion in 2011 to US$31 billion in 2017, making the country the world's fifth largest garment exporter. 

However, companies in Vietnam do not create much value addition in the supply chain since they merely do low value-added work such as cut-make-trim services, Hoa said.

Additionally, Vietnam's textile and garment industry still relies heavily on imported materials, with domestic producers importing 86% of their fabrics, he continued.

With regard to agricultural products, Doan Anh Tuan, chairman of a tea manufacturing company, informed that Vietnam is among the world's top exporter in terms of volume, however, 90% of the products are exported in the raw form with quality and value lower than other foreign competitors.

Statistics from the Ministry of Agricultural and Rural Development (MARD) showed that there are about 700 produce value chains in Vietnam, only half of which are operating efficiently. 

Tuan said that most of local enterprises are of small scale, lacking capital and long-term strategy for development. 

With a short-term mindset, Vietnamese enterprises do not make sufficient effort for brand building, Tuan added.

Enhancing competitiveness

According to Hai from the Ministry of Industry and Trade, in order to achieve sustainable exports, it is vital to form a value chain by creating higher added value for products and building brands.

For agricultural products, there should be more of production cooperation between enterprises, while tapping on technological advancements is needed to restructure its agriculture, with solutions to smart and sustainable system of agriculture, Hai continued. 

With regard to manufacturing and processing, there will be no sustainable exports without the presence of supporting industries, which is aimed to increase the localization rate, Hai noted. 

In addition to legal frameworks, enterprises would play a key role in developing supporting industries, he added.

As part of the effort towards sustainable exports, the Prime Minister has approved the project for enhancing the competitiveness of Vietnam's exports by 2020, with the orientations to 2030, Hai said.

The decision stipulates improving the quality and value of products that show export advantage so as to reach an average export revenue growth of 8% per year during the 2016-2020 period.

Under the plan, exports of major agriculture and fishery products must increase on average by 20% yearly and be promoted in developed countries and regions such as the European Union, Japan, and South Korea.

From 2021 to 2030, export growth is expected to reach 9% to 10% per year, and by this time Vietnam is envisioned to have highly competitive firms under each export product category.

A combination of new production method, efforts from enterprises and new legal frameworks are expected to play a vital role for Vietnam towards sustainable exports, Hai concluded.
Hai Yen
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