Processing – major contributor to Vietnam’s economy

With certain advantages, Vietnam has been the destination for many multinational businesses to seek processors, and processing in turn have become a major growth engine of the economy.
Processing – major contributor to Vietnam’s economy ảnh 1With certain advantages, Vietnam has been the destination for many multinational businesses to seek processors, and processing in turn have become a major growth engine of the economy (Illustrative photo: VNA)
Hanoi (VNA) – With certainadvantages, Vietnam has been the destination for many multinational businessesto seek processors, and processing in turn have become a major growth engine ofthe economy.

Nguyen Trung Tien, Director of the Trade andService Statistics Department at the General Statistics Office (GSO), saidaccording to the 2017 economic census, there were 1,740 businesses processinggoods for foreign companies in Vietnam in 2016. 

The value of materials imported for theseprocessing and assembly processes accounted for 12 percent of the country’stotal import turnover. Vietnam-based firms were paid 8.6 billion USD inprocessing fees by foreign businesses in 2016, including 7 billion USD for FDIbusinesses, 1.5 billion USD for non-State companies and 77 million USD forState-owned firms.

This activity has greatly contributed toVietnam’s export and import, he noted, elaborating that the trade turnover ofprocessed goods at these companies made up over 18 percent, equivalent to 32.4billion USD, of the country’s total trade turnover. Their imports of materialsfrom foreign partners accounted for 11.5 percent, or 20.2 billion USD, of totalimport revenue.

Tien said the domestic processing industrycurrently focuses on textile-garment and footwear. Textile-garment brought home4.1 billion USD or 48 percent of total processing costs, followed by footwearwith 2.7 billion USD (32 percent). Meanwhile, the assembly of electronicproducts and computers raked in 63 million USD (0.7 percent), and the mobilephone assembly earned 268 million USD (3.1 percent) in 2016.

The official noted that processing contractorsin Vietnam have brought about social effects when they provided more than 1million jobs in 2016, thus helping to reduce the unemployment rate and improveworkers’ income.

Additionally, serving as contractors for foreignenterprises has also helped local firms learn management experience fromdeveloped countries to improve their operation.

However, he noted as most of the materials forprocessing and assembly are supplied by foreign partners, it is difficult forVietnamese companies to stay active in the production process or masterproduction technologies. As a result, the added value generated by thisactivity remains modest.

Data show that in 2016, the revenue Vietnamesefirms earned from the processing activity accounted for only 26.4 percent ofthe total value of processed goods.

Director Tien said to make processing moreprofitable, local enterprises should better capitalise on opportunities fromprocessing contracts to access advanced governance experience and technologiesof foreign partners coming from developed nations.

Additionally, they should connect with oneanother to form value chains to supply materials for processing and assembly,thus raising the rate of locally made components in products.

The Government also needs to issue appropriatepolicies to create optimal conditions for Vietnamese suppliers, he added. –VNA
VNA

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