Only 2% of enterprises have high technology

Exporting seafoods still dependent on on global market. Photo: Hà Phương

This information was provided at the conference of Vietnam trade development for 2016 – 2025.

Lack of technology, poor competitiveness

Vietnam is integrating more and more deeply into into the world economy and also achieving a certain number of achievements. Along with market expansion, Vietnam has a business relationship with many countries such as USA, Japan, and the EU , hence, Vietnam has significant growth in imports and exports.

Mr. Tran Thanh Hai, Deputy Director of Export (Ministry of Industry and Trade) said that, in the period 2006-2015, export turnover increased by an annual average of 17.5%/year. In 2011 and 2008, was the highest growth rate of 34.2% and 29.1% respectively. During this period, export turnover increased by 4 times from $US 39.8 billion in 2006 to $US 162 billion in 2015.

The structure of exported goods also shifted towards increasing the proportion of processed goods, which accounted for over 78% of export turnover, declining in the commodity groups of fuel and minerals.

However, exports still have many limitations. Many main items such as textiles, and footwear are mainly outsourced, while agricultural commodities which are the strength of Vietnam, are exported in crude form, collecting little added value.

The most notable point is that the competitiveness of commodities is weak. The manufacturing industries of Vietnam still have some shortcomings that need to improve as well as face many challenges and difficulties. Small-scale enterprises are dispersed have backward production technology, limited management and business capability, and are less competitive compared with international competitors. Thus it hasn’t created added value for export products.

Additionally, Mr. Pham Tat Thang, Senior Advisor Research Institute of Trade (Ministry of Industry and Trade), said that Vietnam has 95% of enterprises which are small and medium enterprises, so the concentration of technology is limited.

"Many Vietnamese enterprises are doing non-technology business, 45% of enterprises have low average technology, 8% is the average level of technology, and only about 2% are high tech. That’s reduces Vietnam’s competitiveness." Mr Thang said,

5 factors that help enterprises integration

In the upcoming time, Vietnam will integrate deeply when joining the new generation of free trade agreements, including the free trade agreement Vietnam-EU (EVFTA).

In fact, the TPP agreement would be comprehensive with the participation of many strong economies. However, until the present time, the likelihood is that TPP will not be a reality.

Mr. Nguyen Xuan Quang, National Economics University recognized, we are in the mind happy, then suddenly "broken strings". It means that we are preparing to sign the TPP, then the new US president-elect Donald Trump announced they would leave TPP the day after taking office next January.

However, experts say that with TPP or not, it is still a model for Vietnam enterprises to strive and improve their competitiveness. The reason is that in the new context, the pressure of integration will be even greater for enterprises.

Mr.Thang suggested 5 tips for enterprises. Firstly, abandon the thinking of cheating in doing business, even operating illegally, the type of purchasing document or backyard for large enterprises.

ASEAN is a market, a production space for every country so enterprises need to act now in order to adapt to this situation. If not, big enterprises with full experience from Thailand, Singapore and Philippines will dominate the market by their strategy.

"Recently, the penetration of Thai enterprises in the Vietnam market is a warning to us," Mr Thang said.

Secondly, the decisive factor in improving competitiveness is the application of scientific and modern technology in order to improve the quality of goods and services, reduce costs and improve the competitive advance of products and enterprises. Therefore, by many ways, the enterprises have to access and own new techniques, modern technologies to apply in production and business processes.

Thirdly, the more deeply integrated, the chance of removal of tariff barriers is increasingly, moving from 0-5% gradually, whereas the non-tariff barriers such as trade defense measures, regulations on environmental preservation, food safety, will be erected.

Therefore, enterprises need to understand the barriers for each type of goods or services in each market which is their target; preparing conditions for information, legal knowledge ... to face any legal conflicts in the process of production and business in the market.

Fourthly, there needs to be cooperation relationships between local firms and foreign enterprises, especially with the Vietnamese community from abroad to be able to stand on the global market. One of the weaknesses of Vietnam's enterprises is weak collaboration, so it needs to be improved.

Fifthly, human resources of enterprises need to take special concern in order to improve international business operations. On the scope of the ASEAN Economic Community, high quality human resources are free to move, this is a big challenge for Vietnamese enterprises, especially small and medium enterprises.