Article by Mr. Dinh Hong Ky, published in Investment Newspaper on February 10, 2012. Information from Vietnam Textile and Garment Group shows that Vietnam’s textile and garment exports are processed garments and almost 100% of raw materials and accessories must be imported. The question is, with the largest export industry, what does our country gain? Surely the answer is simply, solving the problem of creating jobs for hundreds of thousands of workers.
Information from the Vietnam Textile and Garment Group shows that Vietnam’s textile and garment exports are processed garments and almost 100% of raw materials and accessories must be imported. The question is, with the largest export industry, what does our country gain? Surely the answer is simply, creating jobs for hundreds of thousands of workers.
Tax revenue from corporate income tax is probably not worth much when the “difference” between output and input is insignificant. Not to mention the “transfer pricing” situation of some foreign enterprises to evade taxes, as many newspapers have recently mentioned.
I wonder, should we continue to convert hundreds of thousands of hectares of agricultural land to build more industrial zones so that millions of farmers who have lost their land have to go to the city to work? In addition, we have to provide investment incentives, exempt all kinds of land rent, taxes, build infrastructure for them… Is that price worth paying to get the above results? Or are we falling deeper into the “low productivity trap”, “middle income trap” as Professor Kenichi Ohno (Institute for Policy Studies, Japan) warned: “We cannot continue to rely on simple assembly with unskilled labor. Industries will withdraw from Vietnam when wages increase and integration becomes deeper. Without creating domestic values, Vietnam will certainly encounter the middle income trap”.
The reality is that a country that wants to develop a high-tech manufacturing industry needs two basic factors: quality human resources and good infrastructure.
Compared to neighboring countries that compete directly with Vietnam, such as China, Thailand, Singapore, etc., our infrastructure is 25-40 years behind. The quality of human resources is also much lower. So do we have the ability to compete with them in high-tech industry in the medium or even long term? In a flat, globalized world with increasingly deep integration, and with tariff barriers being gradually eliminated, it is unrealistic to expect that we will build Vietnamese brands for automobiles, electronics, or steel, etc. to compete with neighboring countries.
When I witnessed Chinese factories producing on a huge scale, not only for 1.3 billion Chinese people, but also for the rest of the world, with the motto of “economics through scale”, I realized why the selling price of their similar products when brought to Vietnam is much cheaper than the production cost of Vietnamese enterprises. For example, a 20-foot container of Secoin tiles produced by us transported from Hanoi to Ho Chi Minh City costs 15 million VND (equivalent to more than 700 USD), while buying tiles from China, the transportation cost from Xiamen port to Saigon port (twice as far) is only 150 USD/20-foot container. How can we compete right from the production cost to transportation? On the other hand, Vietnam’s supporting industry is very weak, even non-existent, so nearly 100% of textile and garment accessories materials must be imported. Meanwhile, in China, nearly 100% of raw materials for textile, footwear and leather accessories are produced domestically. The same is true for the automobile manufacturing and assembly industries and electronics.
Not to mention the investment situation following a “trend” style, leading to heartbreaking outcomes such as a miserable stock market, a “frozen” real estate market leaving many consequences, then 90% of cement and ceramic factories are losing money and many factories are expected to go bankrupt, many steel enterprises are expected to go bankrupt in 2012.
Here, it is necessary to review which industries to focus on developing and consider them as national competitive advantages and a foundation for national development.
(*) Chairman of the Board of Directors, General Director of Secoin
