Industrial development gains from cross-border investment
Industrial development gains from cross-border investment
Further economic integration has enabled Vietnam to improve the quality of industrial development, with a lion’s share created by foreign investment, helping to ameliorate the nation’s export structure.
According to the latest data released this month by the Ministry of Planning and Investment (MPI), the structure of the industrial sector has witnessed “positive changes” under the Party’s industrial restructuring plan since 2021, with an increase in the ratio of the manufacturing and processing sector, and a decrease in the ratio of the mining sector in GDP. In addition, there has also been a gradual shift from labour-intensive sectors to high-tech ones.
At a forum on Vietnam’s 2021-2024 economic performance organised over a week ago in Hanoi, the MPI reported that under its calculation, the ratio of the manufacturing and processing sector in GDP climbed from 24.62 per cent in 2021 to 24.76 per cent in 2022, and is estimated to continue being maintained stably this year – higher than the 23.95 per cent ratio in the 2016-2020 period.
“The manufacturing and processing sector is continuing to play a crucial role in leading national economic growth, especially in the industries of electronics, garments and textiles, footwear, and furniture,” the MPI stated. “The sector contributed 1.61 percentage points to GDP growth in 2021 and 2.09 percentage points in 2022, which will continue to be maintained in 2023.”
In November, Vietnam’s index for industrial production (IIP) is estimated to expand 3 per cent on-month and 5.8 per cent on-year. In October, the IIP rose 4.1 per cent on-year.
In the first 11 months of this year, the IIP climbed 1 per cent on-year – higher than the on-year 10-month ascension of 0.5 per cent. The manufacturing and processing sector, which creates more than 80 per cent of industrial growth, rose 1.1 per cent on-year.
Under the World Bank’s statistics released last week, the industrial sector has continued to be the biggest magnet to foreign direct investment (FDI), whose performance remained steady amid global uncertainties.
Cumulative FDI commitment for the 11 months of 2023 continued to increase, reaching $28.8 billion, 14.8 per cent higher than the same period in 2022, despite global uncertainties, reflecting investors’ confidence in Vietnam’s economic prospects, the World Bank stated.
“However, this is still about 10 per cent lower than the pre-COVID level in 2019. Manufacturing accounts for more than 60 per cent of newly registered and additional capital contribution commitment. On the other hand, real estate accounts for just 3.5 per cent of registered capital during the first 11 months of 2023 compared with 16.7 per cent in the same period of 2022, reflecting the sluggish domestic real estate market,” the bank said. “As of end of November, FDI disbursement was $20.3 billion, 2.9 per cent higher than a year ago.”
This industrial improvement has helped to continue improving the country’s export structure in a positive direction, in which there has been a reduction of raw exports and a rise in processed products and industrial products, facilitating Vietnamese goods to penetrate deeper into the global production and supply chains, according to the MPI.
Concretely, goods of the manufacturing and processing sector holds the lion’s share – sitting at 88.1 per cent of the economy’s total export turnover in 2021, 87.8 per cent in 2022, and an estimated ratio of 86 per cent in 2023.
What is more, the scale of export items has continued to be expanded, with the number of items with $1 billion or more in export turnover continuing to climb. In 2021, there were 35 items with this revenue – up from 34 in 2020 and accounting for 3.8 per cent of total export value (including eight items with export turnover of more than $10 billion – up by two items against 2020. Last year, there were 36 with export turnover of over $1 billion and eight of more than $10 billion, and this is expected to continue in 2023.
Vietnam’s total export turnover has increased from $215.1 billion in 2017 to 371.7 billion in 2022, and $342 billion in the first 11 months of this year, up 13.6 per cent on-year. This also means an annual average growth rate of 11.6 per cent for the 2018-2022 period (see box 1).
“Export turnover rising has made an important contribution to GDP growth, macroeconomic stability, exchange rate stability, and improvement of payment balance,” said the Foreign Trade Agency under the Ministry of Industry and Trade. “What is more, Vietnam’s export markets have also been expanded extensively.”
According to the agency, the structure of export items has been improved towards modernisation and industrialisation, with a big rise in the ratio of items with high added value and high technology content (see chart).
“The export structure has shifted towards an increase in the ratio of industrial processing items, which are also the group of items with the quickest rise in the structure, and also are the determinant that has created a breakthrough in export turnover,” the agency said.
In 2017, Vietnam was the 20th largest exporter in the world. However, the rank ascended to 18th last year.
