Connecting local enterprises to Global Market: Vietnam Nguyen Tu Anh At Geneva, 8 October 2014
Outline The openness of the economy Where to connect The dominant player in connecting Recent moves Policy instruments
1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 The openness of Vietnam economy 100 90 80 70 60 50 40 30 20 10 0 Share of exports and imports to GDP Exports of goods and services (% of GDP) Imports of goods and services (% of GDP)
120.00 Share of export markets 100.00 80.00 60.00 40.00 20.00 0.00 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 China Japan USA EU ASEAN East Asia (excl. Japan) Middle East Africa South America Other
Capacity of native firms 70.00 60.00 50.00 40.00 30.00 20.00 10.00 0.00 domestic demand for domestic products/domestic demand
120.00 Share of import market 100.00 80.00 60.00 40.00 20.00 0.00 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 China Japan USA EU ASEAN East Asia (excl. Japan) Middle East Africa South America Other
Jan-08 Mar-08 May-08 Jul-08 Sep-08 Nov-08 Jan-09 Mar-09 May-09 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Jul-13 Sep-13 Native firms looses momentum: growth rate of export 80 60 40 20 0-20 -40 Native firm export non-oil FIEs Export
Feb-03 Aug-03 Feb-04 Aug-04 Feb-05 Aug-05 Feb-06 Aug-06 Feb-07 Aug-07 Feb-08 Aug-08 Feb-09 Aug-09 Feb-10 Aug-10 Feb-11 Aug-11 Feb-12 Aug-12 Feb-13 Aug-13 Feb-14 Aug-14 Native firms loose momentum 70.00 Share of exports: native and FIEs 60.00 50.00 40.00 30.00 20.00 10.00 0.00 Native firms FIE non-oil
Investment share in GDP 50.0 45.0 40.0 35.0 30.0 25.0 20.0 15.0 10.0 5.0 0.0 11.3 5.8 6.1 6.7 6.2 10.9 6.5 12.8 10.8 6.2 6.2 8.9 7.8 6.7 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013/e State Non-state FIEs Total
Issues Local firms are well connected to global markets in terms of exports and imports However, the foreign invested firms surpassed native firms in exports and imports Range of export products by native firms is narrow: garment, footwear, Seafood, wood, rice and other agricultural products Other high tech field dominated by FIEs: electronics, mobile phone, transport equipment,
Consequences Low local contents in exports China and Thailand: 50-60% Vietnam 27.8% Low Value added Garment 35-40% Footwear 30% Electronic products 30% but mostly supplied bu FIEs in Vietnam Weak linkage between native enterprises and FIEs
Cause: Supporting industries? Unclear policy to promote supporting industries missing economy of scale Lack of targeted policy to connect local enterprises with FIEs in Vietnam Models of vertical and horizontal linkages have not been formed to improve the competitiveness of national products
Recent moves A trend of FIEs moving out of China to ASEAN countries including Vietnam Some very high-tech TNCs are moving their factories from abroad to Vietnam: Intel, Nokia (Microsoft), Samsung, LG, Foxxcon, Huge projects oil refinery factories are building: Dung Quất (3 bil $, Russia and VN), Nghi Sơn (9 bil. $ Kuwait, Japan and VN), Long Sơn (4.5 bil.$), Nhơn Hội (22 bil. $, Saudi Arabia, Japan, Thailand), Vũng Rô (3.18 bil, UK) New cooperation protocols TPP Vietnam - EU FTA Vietnam Russia- Belarus
Recent moves Three breakthroughs Human capital; institutions; infrastructure Prioritizing on TNC in attracting FDI Supporting industry Establish a fund for the development of industry Amended the policy for priority development of supporting industry Provinces are now more concerned on development of SI FIEs, especially TNCs are now looking for local suppliers for their production chain Native firms are more active to be suppliers for TNC
Policy instruments Macroeconomic stability, sound competition environments, three bottle-necks Development industrial clusters Attracting high-tech TNCs TPP Supporting firms in adapting new technology to meet FIEs requirements