Industrial production struggles to achieve growth target
Industrial production struggles to achieve growth target
The Ministry of Industry and Trade has identified a number of development priorities for the manufacturing and processing sector that is falling short of achieving its 2021 growth targets.
Enterprises face difficulties due to high raw material prices |
Concerns over late delivery
The manufacturing and processing sector, which is the main driver of the country’s economic growth, is expected to see unsatisfactory results in 2021 due to lower growth in most key products.
The Ministry of Industry and Trade attributed the decline to the impact of the Covid-19 pandemic, which has reduced consumer demand. In addition, a series of internal difficulties, such as labor shortages due to social distancing and travel restrictions, increasing costs of raw materials and insufficient supplies of components, have greatly affected manufacturing and exports. Many businesses have signed orders until the end of the year, but cannot guarantee production, raising concerns about late delivery and penalties.
The coal mining sector is also affected by the pandemic. Commercial coal production and consumption in 2021 are expected to equal 80.57 percent and 97.45 percent compared to last year, respectively.
More positive results are predicted for the electricity production and distribution sector, with an increase of 7.8 percent compared to last year in keeping with the target set out by the government.
The manufacturing and processing sector remains the main growth engine of Vietnam’s economy |
Support for industrial production recovery
Although the government, the Ministry of Industry and Trade, other ministries and departments have been making efforts to ease difficulties and maintain production, short and medium-term prospects remain challenging. The level of production and business recovery depends heavily on pandemic control and mass vaccinations. The country is unlikely to reach community immunity in the short term. In addition, many industries depend on imported raw materials, incurring increasing costs.
To expand the index of industrial production by 6-7 percent in 2022, the Ministry of Industry and Trade will continue to promote restructuring in order to increase the proportion of the manufacturing and processing sector and decrease the proportion of outsourcing and assembly for industrial products manufactured in Vietnam. The ministry will also review mechanisms and policies affecting each sector in order to help businesses increase their competitiveness.
The ministry will implement separate solutions for each sector, with a focus on developing key industries, particularly internationally competitive ones participating in global value chains; developing support industries; perfecting mechanisms and policies, developing human resources and accelerating digital transformation.
According to experts, preferential policies are needed to attract more foreign direct investment (FDI) and accelerate digital transformation, as well as a strategic development plan to strengthen connection with potential foreign investors. Experts also recommend that the Ministry of Industry and Trade promote in-depth development of industrial production in order to create national brands with competitive advantages in regional and global markets; focus on adjusting the industrial growth model from being mainly based on quantity to productivity, quality and efficiency; and boost the development of industries and industrial products with high added value and large export value.
| The index of industrial production in the first eight months of the year expanded by 5.6 percent compared to a year ago. |
