THE INDUSTRIAL POLICY Content: 1. VIETNAM GROWTH PATTERN 2. THE - - PowerPoint PPT Presentation

THE L2C VIETNAM SCOPING PAPER:

THE INDUSTRIAL POLICY

Content:

1. VIETNAM GROWTH PATTERN 2. THE INDUSTRIAL POLICY 3. MAJOR RESULTS AND ISSUES OF THE INDUSTRIAL POLICY 4. LESSONS LEARNT FROM VIETNAM

Nguyen Thi Tue Anh Helsinki, 24-25 June, 2013

• 1. GROWTH PATTERN

Source: GSO.

0.00 2.00 4.00 6.00 8.00 10.00 12.00 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

GDP growth rate (%)

Source: GSO.

0.00 2.00 4.00 6.00 8.00 10.00 12.00 14.00 16.00 19901991199219931994199519961997199819992000200120022003200420052006200720082009201020112012

Growth rate by sector (%) Agriculture Industry and construction Service

The growth of the Industry and construction experienced the highest rate from 1992 to 2007 when Vietnam jointed the WTO, but went down afterwards.

Contribution of each sector to GDP (at constant price 1994)

Source: GSO.

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Agriculture Industry and construction Service

Source: GSO.

Contribution of each sector to GDP growth rate

11.9 13.8 10.1 14.3 6.0 6.9 11.2 8.7 33.4 41.2 53.4 37.6 43.0 47.2 39.4 37.6 54.7 45.0 36.5 48.2 50.9 45.9 49.4 53.7 1991 1995 2001 2008 2009 2010 2011 2012 Agriculture Industry and Construction Service

• 2. THE INDUSTRIAL POLICY

The institutional and regulatory framework for the industrial policy are governed and implemented in the three levels:

• Ten- year socio-economic development strategy

(SEDS: 1991-2000; 2001-2010 and 2011-2020) approved by the National Party Congress.

• Five- year socio-economic development plan (SEDP),

approved by the National Assembly.

• Sectoral strategies and master plans approved by the

Government.

Vietnam Industrial Policy from 1991- now Objectives of the Industrial policy 1991-1995: Development of the key sectors, including: + Heavy industry (cement, steel, automobile), mainly for domestic consumption and natural resource –based industries (oil exploitation and mining). + Foodstuff industries, mainly for domestic consumption. + Gradually encouraging export of manufactured labour- intensive products. 1996-2000: continued the objectives in the previous period, but more export-oriented: + Expanding the manufacturing and processing labour- intensive industries, mostly for export (textiles and garments, shoes and leather products, and seafood etc).

Objectives of the Industrial policy

2001-2005: Following the objectives in the previous period, but more export-oriented and with an expansion of manufacturing sector towards high-tech industries such as electronics etc. while still maintaining the labour-intensive sectors. 2006-2010: continued by the previous, but with the

prioritty of boosting the economic structural change towards industrialisation and modernisation; more

export-oriented to take advantage of the WTO accession in 2007.

Key instruments of the industrial policy

1991-1995: + Protectionism for the key industries through import/export duties and export subsidies. + Implementation of the Law on Foreign Investment enacted in 1988 to attract FDI and the Law on company and private enterprises enacted in 1992. 1996-2000: + 5 years Public Investment Program to attract investment for development of physical infrastructure; + Equitization of State-owned enterprises (SOEs) and building of State General Corporations to enhance the competitiveness of the SOE sector which were the main beneficiaries of the protectionism policy. + Development of IZs, EPZs; ..to provide production estates and simplify investment-related administration procedures for doing business; attract FDI and private investment for industrial and export production. + Loosening conditions for export activities after entering ASEAN and implementing AFTA commitments.

2001-2005: Following the same instruments in the previous period, but: + Stronger trade liberalisation, mostly driven by Vietnam-USA BTA since 2001. + Specify many manufacturing key industries + Acceleration of equitization of State-owned enterprises (SOEs) to cope with the WTO accession. 2006-2010: + Trade liberalisation, mostly driven by the accession to WTO and stronger Investment liberalisation, mostly driven by the unified Law on Investment and Law on Enterprise passed in 2005. + Building of State Economic Groups to enhance the competitiveness of the SOE sector. + Build high-Tech zones; Economic Zones/open ecoconomic zones to provide more prioritized incentives to attract investment; + Provide tax Incentives, Investment allowance etc. for technology renovation, developement of high technologies, promotion of technology transfer via foreign investment (Law on Technology transfer; Law on high technology).

The current Industrial Policy

• Context:

– Full implementation of AFTA in 2018; After WTO accession: much smaller room for administrative policy intervention. – SEDS 2011-2020: aims to develop a modern industrialized economy by 2020 with some targets: + Industry and services shall account for 85% GDP; + Hi-tech products and those using high-tech products account for 45% GDP; + Manuf. shall contribute 40% to industrial output.

• Objectives: Improving the industrial competitiveness towards expanding

high – tech industries and high – value added products ; improving the competitiveness of the domestic firms, incl. SOEs and private ones. + Export-oriented towards products with higher value-added

• Key Instruments:

+ Restructuring industrial production towards increasing technology and local content; creating linkages in regional and global production network. + Restructuring SOEs, focusing on State economic Groups, started since 2011. + Give more incentives to build supporting industries; + Adjustment of FDI policy to attract investment with more technological content and to develop environment friendly industries. + Financial incentives; tax incentives etc.

• Results: on-going process; some are not yet approved.

• 3. Major Results of the industrial policy

+ High growth rate of the industrial value added; + Rapid expansion of the manufacturing sector; + Important role in attracting FDI. + Important contribution to export performance. + Promote the shift of industrial production towards the non-state sector (FDI and private). + Promote the shift in export structure towards the manufactured goods.

Foreign Direct Investment in the period 1988-2012 (in Million USD)

Source: GSO.

Source: GSO.

Export and Import (Bill. USD)

32,4 36,8

• 4,4

39,8 44,9

• 5,1

48,6 62,8

• 14,2

62,7 80,7

• 18,0

51,7 69,9

• 12,8

72,2 84,8

• 12,6
• 20,0

0,0 20,0 40,0 60,0 80,0 100,0 2005 2006 2007 2008 2009 2010 Export Import Balance

Shift in industrial output structure by ownership

41.1 40.3 38.6 37.0 33.9 30.7 27.6 24.9 23.5 22.1 23.6 24.3 25.7 26.9 28.8 31.1 33.2 34.9 35.7 35.9 35.3 35.4 35.8 36.0 37.3 38.3 39.2 40.3 40.9 42.0

0% 20% 40% 60% 80% 100% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 State Non-State FIEs

Source: GSO.

Shift in export structure towards processed products

0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Primary or semi- processed products Processed Others

Source: GSO.

Shift in export structure

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Others Sea food Agricultural Light industries and handy craft Heavy and mining products

Source: GSO.

Major Issues

• The industry sector tends to grow with a declining rate since 2008,

mostly due to the slowdown of the manufacturing sector.

• The Industrial production depends increasingly on the Foreign

Investment sector.

• The shift into industries with higher technological content and

product with higher value added has been in stagnation.

• Export performance depends increasingly on the Foreign

Investment sector. Key export products were still labour-intensive

• r natural resource- intensive (electronics and computer; textile;

coal; crude oil; electric wire and cable..).

• Inefficient SOE sector, incl. State Economic Groups in industrial

production: currently under restructuring plan. Similarly, unclear improvement of the private sector is observed in terms of technology renovation, business scale and productivity.

• 4. Lessons learnt from Vietnam Industrial Policy
• Ambitious objectives; too many leading/key industries

picked up for the period 2010-2020; many sector specific strategies and master plans; but with unclear vision, insufficient instruments and lack of realizable action plans.

• Lacks a well-coordinated framework for industrial policy

(trade policy, investment incentives; monetary and fiscal policy, technology-related policies etc.).

• Lacks of a well-coordinated implementation between

central and provincial level, leading to the late adjustment

• f the objectives and instruments of the IP (many IZs with

low coverage rate; competition for FDI among provinces…).

THANK YOU FOR YOUR ATTENTION!