Vietnam is continuing to transform into high-value industries

Vietnam's manufacturing industry is changing in the group of key export industries. Photo: Nhật Nam

Shift in key export industries

Vietnam's export indices are witnessing growth despite the pandemic. Total export turnover of goods from the beginning of the year to December 15 reached US$317,446 billion.

From the beginning of the year to December 15, there were six groups of goods with a turnover of US$10 billion. The largest commodity group is computers, electronic products and components (reaching US$71.9 billion). The next commodity groups are machinery, equipment, tools and spare parts (reaching US$44.3 billion); phones and components (US$20.3 billion); fabric (US$13.63 billion); plastic materials (reaching US$11 billion); iron and steel (reaching US$11 billion).

In terms of growth rate, the electronics, computer and components industries still maintained growth momentum from last year. Notably, the export value of this industry group recorded a breakthrough when it surpassed textiles from 2019.

After phones and components, the main export industry group is gradually shifting from low value-added items such as clothing and footwear to products with higher value such as electronics and components. In other words, Vietnam's production-export ratio shows a change in the direction of the industry.

In terms of foreign direct investment, the manufacturing and manufacturing sector recorded a value in 2021, accounting for 53.4% ​​of total capital, up 16.45% over the same period. FDI capital reached US$11.83 billion with 402 newly approved projects.

According to an expert from Savills, in terms of the FDI picture of the industry over the past decade, Vietnam is developing along a value chain. In which, the electronics industry accounted for the highest proportion at 19.29% of total capital, followed by electronics and computers with 17.14%. Paper, plastic and rubber accounted for 14.66% and 13.54% respectively. Meanwhile, the textile, garment and food products only recorded less than 4% investment capital for each industry.

Explaining this shift, John Campbell, Manager of Industrial Real Estate Division, Savills Vietnam, said that over the past 20 years, thanks to the stable growth rate, the economy has moved towards export, with the growth of Free Trade Agreements (FTAs), a young workforce, preferential investment policies and a strategic geographical location, Vietnam has become one of the most attractive manufacturing centers in the Asia region.

“Despite a challenging year, Vietnam is continuing to transition from labor-intensive industries to high-value industries. Low-value industries are gradually forming in other parts of Southeast Asia, because Vietnam no longer applies the same preferential policies as before, so the search for labor and land is not enough. Investors in high-value industries abroad are still optimistic about Vietnam's long-term growth," said John Campbell.

Need to integrate new technologies

Enterprises are now focusing on improving technology and promoting production along the value chain, switching to clean production models and high-tech products to adapt to the needs of customers.

“Therefore, real estate developers need to pay attention to provide industrial parks that can meet this requirement,” said Matthew Powell, Director of Savills Hanoi.

The development of industries in the value chain will accelerate the modernization of Vietnam's industry. The Central Institute for Economic Management (CIEM) points out that the manufacturing sector could see a 16% growth in the 4.0 strategies by 2030 if SMEs start implementing mid-tier technologies. In addition, new technology can help this sector increase by US$7-14 billion in the future.

To increase production capacity, enterprises are integrating emerging technologies at factories such as artificial intelligence or 3D model printing. For example, Vingroup has now started using 1,200 ABB robots in some of its welding processes. KTG Industry Joint Stock Company, a developer of prefabricated workshops in Vietnam, has started construction of 4.0 ready-made workshops in Dong Nai province.

Their “Industry 4.0” will integrate pre-built industrial real estate with 4.0 technology to provide smarter, more creative and optimal solutions for tenants' development vision.