How will industrial production be changed?

Labor productivity is a less competitive factor of many Vietnamese footwear companies. Picture: Nguyen Hue.

​Growth of 9.4%

According to the Ministry of Industry and Trade, in 2017, Vietnam's industrial production grew strongly with a 9.4% increase of production index, much higher than the 7.4% in 2016 and exceeded the target that was set out at the beginning of the year (increasing by 7.1 - 8%). Particularly, the manufacturing industry has overcome the difficulties by exceeding the growth rate of the whole trade industry by 14.5%, confirming its support role as the most important driving force for the overall growth of trade and industry. Minister of The Ministry of Trade and Industry, Mr Tran Tuan Anh commented: "This result not only contributes directly to the achievement of the whole industry in 2017 but more importantly has shown the process of restructuring in the industry is moving in the right direction and there are positive changes. In particular, many industries have high and stable growth over the quarters in the context of difficult markets such as electronic products, computers up 32.7%; metal production increased by 17.6%; Textile industry increased by 10.2% ... ".

In addition, Minister Tran Tuan Anh said: Inventory of industrial products continued to be lower than the level of 2016. Inventory index of the whole manufacturing industry at the date of 1/12/2017 increased 8% (the same period increased 8.3%). This is the reasonable level of inventory and suitable to the production and consumption situation of the industry and the inventory level as planned to prepare for consumption in the near future.

Regarding industrial production development in 2017, The Prime Minister Nguyen Xuan Phuc said that industrial production is an important motivation for economic growth in general. The representative in the industrial sector is the manufacturing industry with a growth rate of 14.5%. This is the highest growth rate in recent years. In addition, the model of industrial growth has been markedly improved, positive, and only decreasing depending on importer.

In fact, besides the outstanding results, there are some disadvantages in industrial production, such as industrial production continues to be affected by the declining mining sector (down 7.1% over the same period in 2016). The supply of electricity for domestic production and daily use was guaranteed at an annualized rate of 9.4% but lower than the 10% - 10.5% as expected in early 2017 and lower than an increase of 11.5% in 2016. According to the Ministry of Industry and Trade, restructuring in some industrial sectors is not really sustainable. The added value of products in some sectors increased but slowly (textiles, leathers, electronics ...). The industrial production has not yet engaged much in the global production and value chain.

"The production index of intermediate product is lower than the production index of final product, which shows that intermediate products in our country's industrial production are highly dependent on import sources. It also shows that the supporting industry has not really met the target requirements. In addition, investment in production is still inclined to do new construction rather than intensive investment for available facilities, do not make good use of resources. The investments capital in the industrial sector is mainly focused on sectors with a short payback period such as consumer goods and food processing industry, and the number of investment projects in high technology is not high" Mr Tran Tuan Anh said.

Needing more intensive development

In 2018, the Ministry of Industry and Trade identified one of the important tasks to promote the development of industrial production is: restructuring the state-owned enterprises urgently and actively, especially the groups in the key areas of the economy which have opened up resources and raised the efficiency of production and business activities in key national industries. In addition, the ministry will continue to monitor market developments in order to have flexible and timely management and support enterprises in implementing optimal plans of production and business in order to contribute better to growth of Gross Domestic Product from industries; Promoting the development of the offshore market, exploiting the advantages of FTAs and responding positively and effectively to protectionist tendencies and technical barriers in global markets.

Recognizing the achievements of the industry in 2017, especially in the field of industrial production in 2018, the Prime Minister Nguyen Xuan Phuc directed: Development of industrial production, the activity of import - export and domestic trade needing more intensive development including industrial restructuring, boosting the processing industry, processing industry for agriculture ... "Industrial innovation, the application of advanced science and technology, improve labor productivity ... are issues that needed attention in the industry" the Prime Minister emphasized.

Representing enterprises directly involved in production and export, Mr Nguyen Duc Thuan, Chairman of Vietnam Leather and Footwear Association, said: Labor productivity is a very concerning issue in the production of leather shoes, bags in particular and other industrial production areas in general. At present, many countries around the world are increasing labor productivity per hour. The average productivity of Vietnamese leather and footwear companies are $ 0.6 to $ 0.70 per hour, while many foreign-invested companies, which have applied scientific and advanced technology, reached a productivity rate of $ 1.2 per hour. This is a big challenge for Vietnamese companies. "Recently, most businesses in the industry are quite worried. I propose to establish a professional statistical panel on the labor productivity of each manufacturing sector that will show where Vietnamese industry can locate and find the measures to improve the capacity of each sector. If we can not reach the horizontal level, we must reach at least 90% of foreign companies," Mr Thuan said.