Extending the dream of modernization

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The goal of industrialization and modernization of the country to 2020 was set at the 8th National Party Congress in 1996 and it has gone through to the 13th National Party Congress in 2021.

The Central Economic Commission recently held a series of events related to the country’s industrialization program. On this occasion, VietNamNet introduces perspectives on the advantages and challenges for realizing Vietnam’s industrialization goals from now to 2045.

Talking numbers

According to the World Bank (WB), among enterprises in the manufacturing industry in Vietnam, 70% use machines controlled by humans, 20% work manually, 9% use machines controlled by computers and less than 1% use more advanced technology such as robots. More than 75% of small and medium enterprises (SMEs), and two thirds of large enterprises surveyed are skeptical about the economic benefits of investing in new technology.

A report published in November by the Commonwealth Scientific and Industrial Research Organization (CSIRO) of Australia and the Vietnamese Ministry of Science and Technology shows that the percentage of Vietnamese with research and development activities in manufacturing industries is very low: electrical equipment manufacturing 17%, chemical manufacturing 15%, food processing 9%, rubber and plastic products 7%, leather and related products 6%, and textile and garment 5%.

Dr. Nguyen Duc Hien, Deputy Head of the Central Economic Commission, quoted these reports at the third Industry 4.0 Summit and commented: “These facts show that development of smart production in the process of industrialization and modernization to 2030, with a vision to 2045, will face many difficulties and challenges.”

The goal of industrialization and modernization of the country to 2020 was set at the 8th National Party Congress in 1996 and it has gone through to the 13th National Party Congress in 2021.

Kéo dài giấc mơ hiện đại hóa

The structure of Vietnam’s industry has changed positively.

Three-decade target

Through more than 25 years of implementing this goal, industry has obtained certain achievements. According to the Ministry of Industry and Trade, the manufacturing industry’s contribution to Vietnam’s GDP rose from 13% in 2010 to 16.7% in 2020.

The industrial structure has changed positively in the direction of industrialization and modernization, gradually reducing the proportion of resource-intensive industries and low-tech industries, and increasing the proportion of medium- and high-tech industries.

Industrial competitiveness has improved significantly. The Industrial Competition Report of the United Nations Industrial Development Organization (UNIDO) has brought Vietnam from the group of “developing economies” to the group of ” emerging industrial economies”.

However, the process of industrialization and modernization is still slow, the capacity and technological level of the economy is still poor, the creation of a foundation to basically become a modern industrialized country by 2020 “has not yet reached the goal”.

“Moreover, we have not been able to narrow the development gap and catch up with other countries in the region,” said Dr. Nguyen Duc Hien, Deputy Head of the Central Economic Commission.

Awareness of the process of industrialization and modernization is inadequate. Industrial development has not met the requirements of industrialization.

The growth model is not yet based on science, technology and innovation; the autonomy of the economy is still low; the economy is still heavily dependent on outsiders; Vietnam has not paid due attention to the value chain and domestic supply… in order to improve labor productivity and competitiveness of the economy.

The quality of human resources, especially high-quality human resources, has not yet met the requirements. Science, technology and innovation have not become the driving force for development.

Dr. Hien’s comments are not new, but these are all thorny issues in the foundation of the economy.

Barriers to overcome

Deputy Minister of Industry and Trade Do Thang Hai said that the process of industrialization and modernization faces obstacles that need to be removed.

The internal strength of the industry is still weak, the competitiveness of domestic industrial enterprises is not high, the added value created in the country is still low, the local industry mainly depends on external resources such as foreign direct investment capital, imported spare parts and components, and imported raw materials.

In addition, industrial human resources are still weak, the percentage of trained workers is low, there is a lack of linkage between enterprises and training institutions, and managers of industrial enterprises are still inexperienced for competition in the global market. There is a lack of scientific theoretical background on production management, with no opportunity to access effective production management methods.

A survey by the Ministry of Industry and Trade on the readiness of Vietnam’s industries before the 4th Industrial Revolution shows that the majority of Vietnamese enterprises are still standing outside this revolution, and industrial enterprises have low access to all the pillars of a smart manufacturing platform.

Kéo dài giấc mơ hiện đại hóa

The new context poses requirement to implement industrialization and modernization with a new mindset and new approach. Photo: Le Anh Dung

He said that industrial production faces difficulties in accessing capital, and the nature of the manufacturing sector requires a large amount of long-term investment capital, while social resources invested in production are very limited due to slow capital recovery and profit margins that are less attractive compared to investment in other fields such as real estate and finance.

The Ministry of Industry and Trade said the cause of these bottlenecks is first of all the lack of a complete and attractive legal framework and policies to support domestic industrial enterprises to improve their competitiveness, to perform technological innovation, and to grow to become an important driving force for the development of the country.

Moreover, the domestic sector lacks linkages with the FDI sector and the world market to be able to take advantage of technology transfer, and modern and effective production management methods. The lack of orientation in the allocation of social resources from the central to local levels and the private sector prevents investment flows from entering the production sector to create material wealth and prosperity for country.

Long-term goals

The Resolution of the 13th National Party Congress sets the goal that by 2025 the manufacturing industry will account for 25% of Vietnam’s GDP and the task of “Continuing to promote industrialization and modernization based on the foundation of science and technology, innovation and technological achievements of the fourth industrial revolution”, and “Restructuring industry, raising technology levels, accelerating the transformation to digital technology, improving the self-control of the economy to be capable of deeply and effectively participating in global value chains”.

Deputy Minister Hai said the target set for 2025 is quite challenging for Vietnam, which will require great effort and the participation of all stakeholders, as well as breakthroughs in policies to strongly promote the growth of the manufacturing industry, so that in 5 years, the contribution of the manufacturing industry to GDP will increase from 16.7% in 2020 to 25% in 2025.

In the next strategic period, Vietnam’s industrialization and modernization process will be placed in a new context. It is the rise of protectionism, shifting investment flows, restructuring of the global supply chain, and the 4th Industrial Revolution that have changed production methods around the world.

Domestically, there exists a changing population structure with a dynamic market of 100 million people, an expanding middle class, and a ‘golden’ population structure that will remain for the next two decades. Meanwhile, Vietnam’s labor and land costs are increasingly less competitive compared to emerging countries, and competition at home is increasing as the Vietnamese economy deeply integrates with the world.

“This new context requires Vietnam to carry out industrialization and modernization with a new mindset and new approach,” Hai said.

Lan Anh

At the talks “Why Vietnam” held recently by the Ministry of Information and Communications, experts affirmed the significant role and position of Vietnam in the technology industry as well as global supply chains.

To develop the processing and manufacturing industry, the State needs to have stronger policies that focus on domestic enterprises. To have strong policies, it needs strong resources.

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