VietNamNet Bridge – Eighteen production
sectors have been admitted to the “billion dollar club”, i.e, the club of
sectors which have the annual export turnover of one billion dollar and more.
However, the success proves to be unsustainable, because the competitiveness of
Vietnamese enterprises remains very low, according to the Central Institute of
Economic Management (CIEM).

What’s behind the halo?

Of the 18
production sectors, textile and garment, footwear and electronics have been
recognized as the most successful industries, as they have always been leading
in terms of the export turnover.

However,
the survey on the competitiveness of enterprises in the three sectors conducted
by CIEM, has pointed out that the competitiveness of the enterprises remains
very low.

Most of the
product items which have been succeeding on the international market over many
of recent years; are the ones which can enjoy the preferences offered by the
State, or can take full advantage of the cheap labor cost and the country’s
natural resources. However, the advantages will no longer exist. As Vietnam has
joined the World Trade Organisation (WTO), the state’s preferences would be
“limited nutrients”, while the advantages of the cheap labor force and the
natural resources will not last for ever.

Since
Vietnamese enterprises are still mostly doing the outsourcing for foreign
partners, they cannot earn much money. Though the export turnover is high
(billions of dollars a year), the value added per product remains low, which
explains why Vietnamese enterprises in the three sectors cannot pocket much
money.

According
to Nguyen Thi Tue Anh, from the Business Environment and Competitiveness
Division under CIEM, up to 70 percent of garment companies are doing the
outsourcing for partners, and 60 percent of enterprises are making products and
exporting products directly, but 100 percent of enterprises have to import
materials for local production.

The problem
is that materials account for a very big proportion in the garment production
costs; therefore, when the material prices increase, Vietnamese enterprises
will lose their competitiveness in the international market.

Garment is
the sector which has the lowest productivity level in the three surveyed
sectors.

Esquel Vietnam, a Taiwanese invested enterprise, now
has to import nearly 100 percent of materials from China,
because it cannot find suitable materials in Vietnam. Though sewing thread now
can be made in Vietnam,
the enterprise still believes that the product cannot meet the quality
requirements. When asked about the productivity, Esquel Vietnam answered that the productivity in Vietnam is lower than that in China.

Nguyen Minh
Thao from CIEM, who was in charge of surveying the competitiveness of the
electronics sector, said that most of the enterprises in the sector are foreign
invested enterprises, and most of them simply do the assembling.

Canon,
which has a factory that makes printers in Vietnam,
said that it still cannot find the screw suppliers in Vietnam, though
it once contacted 20 domestic companies. As for Panasonic and Sanyo, the only
domestically made products are using are carton boxes. Meanwhile, Fujitsu said
it has to import 100 percent of necessary components. Though the electronics
sector has been witnessing high growth rates in the last few years, the growth
proves to be unsustainable.

Seven barriers on the business
environment

Tue Anh
said that there are seven worrying barriers to Vietnamese enterprises. The
biggest problem for them is the lack of capital and technologies. Since
enterprises do not have much capital, they dare not make heavy investment in
technologies. As the result, they cannot make the products with high added
value, which makes their products less competitive.

The quality
of the labor force is also a problem. According to Thao, in 2010, Intel planned
to employ 3000 workers, but it could employ 40 only. Meanwhile, Luu Minh Duc
from CIEM said that less than 50 percent of seacooking companies are satisfactory
about the worker,s skills

Many other
factors have also been cited ase barriers which have hindered the development
of enterprises, including the energy cost increases, the bad quality of the
infrastructure, and the banking services. Especially, the thing that most
worries businesses are the regular electricity cuts.

Pham Huyen