Vietnam favoured destination for export-processing production, says Asean-Japan centre


  • Vietnam
  • Monday, 18 May 2020

A vendor sells durian along a street in Hanoi on Monday (May 18). Massive foreign direct investment (FDI), in particular export-processing FDI in Vietnam means that the country has become a favoured destination for export-processing production. - AFP

KUALA LUMPUR: Vietnam has created little value added from exports (US$69 billion in 2019), that is equivalent to only one quarter of nominal value of exports of goods and services (US$260 billion), posing many strategic challenges to its development.

This is according to the recently released study by the Asean-Japan Centre on Global Value Chains in Asean: Vietnam.

Massive foreign direct investment (FDI), in particular export-processing FDI in Vietnam means that the country has become a favoured destination for export-processing production.

Although gross exports of Viet Nam are growing, the contribution of domestic value added exports to the national economy is small, accounting for only 12 per cent of GDP, compared with the Asean average of 33%.

The effects of FDI on the economy as well as exports depend on the value added structure of the Vietnamese economy, in which the secondary sector (manufacturing), in particular the industry of foods and beverages, exhibits a large multiplier effect.

Global value chains (GVCs) of Viet Nam indicate the extent to which the country is involved in world and regional production networks.

During the period of nearly three decades, the share of contribution of foreign countries to value added exports from Viet Nam fluctuated from 23 to 42 per cent before stabilising at 32% to 33%.

There is a relationship between the increasing level of FDI and the growth of participation of Vietnam in GVC, and both of these create benefits for the economy.

In order to capitalise on this, Viet Nam should improve its legal framework and administrative procedures to help the domestic sector tackle its current challenges, and keep track of the economic reforms under Doi Moi to attract FDI, along with promoting the development of high technology and modern infrastructure. - Bernama
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