Review of Vietnam Industrial Production in year 2003
Industrial production growth rate in 2003 is estimated to surpass the 16% benchmark, much higher than the targeted growth set forth by the National Assembly, between 14% and 14.5%. The growth in 2003 is much higher than that of 2002 (14.8%) and 2001 (14.6%). The industrial production growth is high for all economic sectors, with the State owned getting 12.3%, up 0.2% compared to that of 2002.
The State-owned industrial production at the central level achieved a growth rate of 12.5%. The growth of this sector is not very high yet, since the sector accounts for 36% of total industrial production, producing major products of the economy, including electricity (95.6%), coal (97%), fertilizer (99.6%) and cement (67%), its sustainable growth rate maintains the driving force for the economy.
The non-State sector accounts for more than 26% of the total industrial production and has a growth rate of 18.6% in 2003.
The foreign invested sector accounts for 38% of the total production and has a growth rate of 18.5% in 2003. This sector's growth rate in 2002 was 15.1% and in 2001, 12.6%. The major driving force behind this impressive growth is the recovery of crude oil production, with 2003's production equals to 20.7 million tonnes, much higher than previously anticipated.
The reasons for high industrial production growth rate in 2003 are attributed to increased investment from the State and businesses to improve production capacity and reduce production cost. The other reason is fast implementation of major industrial projects and foreign invested projects. From 1998 to 2003, Vietnam has licensed more than 3,700 projects with total investment capital of more than US $46 billion, of which US $23 billion has been implemented. The foreign invested sector accounts for 25% of total investment of the country in the period and it is estimated that the sector contributes up to 38% of total industrial production of the country in 2003, creating jobs for more than half a million people.
The expanding of export market in 2003 also helps boost local industrial production. Export of crude oil and textiles and garment in 2003 makes up 36% of the total export of the country, earning US $7billion. The industrial proportion in total GDP has increased to 40% in 2003 from 38.555 in 2002.
However, despite impressive growth rate, industrial production still experiences shortcomings, including high production cost, especially intermediary expenses. The textiles and garment sector has a very high production cost and despite impressive growth rate, the sector only accounts for 3.1% in the total GDP growth rate of 7.24%. Other shortcoming to mention is the high rate of dependence on exploitation of natural resources, including coal and oil and this exploitation production accounts for a major share of the growth in total industrial production in 2003. Imbalanced growth among sectors is also found in 2003 with many products seeing slow growth rate including pharmaceuticals, detergents and tool machinery, which account for the majority of industrial products in the national economic leading localities, including Ho Chi Minh City, Ba Ria – Vung Tau and Phu Tho. The shortcomings are due to poor production facilities, lower qualification of the workforce and a high dependency rate on foreign market as well as slow equitisation of State-owned enterprises. The changing world market is also responsible for these shortcomings.
The shortcomings mentioned above indicate the low rate of sustainability in the growth of industrial production and the economy. Any sustainable growth in the future depends on sustainable growth of industrial production since it occupies the bigger share of the economy. A gradual shifting towards production of goods using a lot of local materials will help cut production cost, especially intermediary cost, and in turn will increase competitiveness of Vietnamese products. This shifting, accompanied by increased investment into production facilities and supply of quality materials locally will ensure reliability of local material supply. Acceleration of equitisation, expansion of export market and improvement of local market penetration are also suggested for quality growth in the coming year.
(Source: Report from Ministry of Trade - Mr. TranNGUYEN)
Sources: Ministry of Trade, General Department of Statistic, Ministry of Finance, Vietnam News, Vietnam Economic Times
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