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Vietnam – Industrialization: long-term vision needed
Vietnam has set goals on industrialization. The question is what is an industrialized country and who can realize the goal of industrialization. What does the state do, what do businesses do? What are the characteristics of an industrialized country?
In fact, developed countries did not have goals and plans for an industrialization economy in advance. The industrial development process of Western countries took place sequentially over a long period of time.
In the late 19th century, Japan learned industrial engineering from the West. Within the first half of the 20th century, by 1940, Japan was already a dominant force in Asia and could make planes, tanks, ships and powerful weapons.
In the period 1954-1975, Vietnam developed industry as the way China did. However, China was helped by the Soviet Union and made many items such as cars and the atomic bomb. Meanwhile, Vietnam made machine tools, engines and other machines.
In the period 1975-1986, Vietnam continued to strongly promote locally-made industrial products by giving priority to the development of heavy industry.
For Vietnam, the structure of the industrial sector in GDP is not much different from other countries. For goods that consumers buy, the added value is counted in industrial GDP while agriculture accounts for a small proportion of the final selling price. Costs such as logistics, retail, insurance and financing are charged to the service sector.
Thus, the specific goals of Vietnam must be identified to be considered an industrialized country, as follows:
The first is the size of GDP. As GDP increases, so does industry. The greater the value of industrial production, the deeper the ability to meet demands for industrial goods. If China is considered an industrialized country, its current industrial value per capita is US$4,000, and that of Vietnam is $1,000. If Vietnam’s industrial growth reaches 10% a year, by 2035 the country will be approximately at the current level of China. And if the growth rate is 6%, it will take Vietnam until 2045 to reach the current level of China.
The second factor is the proportion of domestic enterprises contributing to the industrial sector. Currently, foreign-invested firms contribute about 20% of GDP. There are no specific data on the sectors in which these enterprises contribute to GDP. Assuming 70% of GDP of foreign-invested firms is in the industrial field, then they contributed 14% of 33.7% of industrial GDP in 2020.
The target to be set is that domestic enterprises must account for at least 65% (2/3) of industrial value. If Vietnam only focuses on attracting foreign investment, we don’t know when Vietnam will achieve the goal.
The third factor is the local production of basic industry. This is the biggest difficulty to realize the goal of industrialization. Compared to China, Vietnam has almost gone against their way. They developed basic industry, and Vietnam pursued outsourcing.
In short, with these characteristics of an industrialized country, it will be very difficult for Vietnam to achieve its goals without setting specific strategies.
Ngo Van Tuyen
Source: https://vietnamnet.vn/en/business/industrialization-long-term-vision-needed-799922.html