Socialist Republic of Vietnam

At present, Vietnam is carrying out an export-oriented policy in a context which involves both big opportunities and big challenges. Indeed, a major challenge is how to enhance the endogenous strength of export industries and formulate a market strategy.

1. Garments

Garments and footwear will continue to be the core of Vietnam's processed and manufactured products in the forthcoming decades. Therefore, it is necessary to increase their export capacity. The essential problem is how Vietnam's export garments could achieve higher economic efficiency and increase their value added by 30-40% per product unit. In this regard, raising the endogenous capacity of the enterprises and the competitiveness of their products would play the most important, even decisive role in ensuring the sustainable growth of export garments. Various studies have shown that the production of garments in Vietnam mostly involves foreign raw materials and additives, and only about 15-20% of domestic raw materials and additives, and that the cost price of Vietnamese garments is higher than their Chinese counterparts by 15-20%.

Therefore, right now we must have a coherent development strategy for Vietnamese garment, which involves the following:

- In-depth investment, which means improving the machinery, equipment and technology of the textile industry, with a new investment policy that would enable it to provide the garment industry with appropriate cloth and additives. At the same time, it is essential to invest in technologies used in stages that produce the value added, such as the finalization stage. A recent study shows that the finalization stage produces the biggest amount of value added in the whole technological process, that is, about 40% of the whole value added. Therefore, investing in technology and equipment for this stage is a "must" in our development strategy.

- It should be our policy to develop fashion designing which involves, among other things, a good knowledge of product patterns and the tastes of consumers. So far, foreign companies only import Vietnamese garments produced on a sub-contracting basis because of Vietnam's lack of prestige in the field of designing and its fashion industry is still in its infancy. (This subject was dealt with by "Vietnam Economic Review" in an special issue entitled "Fashion economy", No. 9 and 10 of 1998).
We should note that in the new millennium, due to supply exceeding demand, the volume of garments consumed in developing countries would be greater than in developed ones. This would provide new opportunities for the world community, including Vietnam, for penetrating into the developing countries' markets. But in doing so, cheap labour no longer constitutes an important competitive advantage while differences in pattern and type of goods and their relevance to the taste of consumers would play a much more important role.

2. Handicraft and arts handicraft goods

This group of products creates a big value added and other socio-economic impact. They are produced mainly with raw materials available in the country, while imported raw materials and additives only account for 3-5% of their value. As different from many other goods, the real earnings in foreign exchange of handicraft and arts handicrafts exports are quite big. (95-97%) Garments and footwear have a big turnover, but their real export earnings only account for about 25% of their export value because they mainly use imported raw materials and additives. Therefore, we can regard handicraft and arts handicraft goods as export items with the highest value added (estimated at 70-80%). Thus, taking full advantage of the existing domestic potentials to promote production and export of handicraft and arts handicraft goods is a task that must be performed efficiently in the forthcoming years.
In addition, handicraft production and export provides employment and income to millions of specialized artisans and peasants who are engaged in this trade in off-farming days, and help to solve unemployment and underemployment in rural areas, an acute problem for the Vietnamese society nowadays. Experience shows that handicraft and arts handicrafts export worth 1 million USD usually provide employment and income for 3000-4000 labourers of trade villages, while cashew nuts processing can only provide 400 jobs with export worth 1 million USD. Over recent years, handicraft and arts handicraft exports have provided jobs and fairly good income to 500,000-600,000 labourers and even 1 million if are included peasants who are engaged in this trade in their off-farming time. If their production and export level could increase by 5-10 times, that would have tremendous social significance.

One can affirm that intensified production and export of handicraft and arts handicraft goods would have great economic and social impact as these export items have a very high value added. Therefore, the Vietnamese Government should, in terms of policies, encourage and support this trade with preferential treatment in terms of capital supply to the producers, exemption and/or reduction of export tax and value added tax with respect to some of these goods, support to the handicraft villages and the artisans, and job training to the labourers.

3. Electronics and computer exports

This group of goods has a low value added although it has a big export turnover (about 700 million USD in 2000), mainly because of Vietnam's poor infrastructure, material and technical facilities, lack of investment fund, and because this is an assembly industry, with a low localization ratio. In view of the world trend of in-depth division of labour, Vietnam should, in terms of specific policy, focus investment on this industry with steps designed to make sure that the products would have a high content in technology and knowledge. These goods should comprise computer software (both system and application), electronics components, spare parts... In the present situation, the Government should work out a development strategy for this industry, give priority to it in terms of support and investment, which is all the more necessary as the world is now heading toward knowledge-based industries. The support policies should focus on:

- Development of human resources. As estimated by experts, if it is our objective to export computer software worth 500 million USD, Vietnam must first of all invest 300 million USD in the training of human resources that would comprise 40,000 software technicians and workers. Also the question of teachers is a difficult issue that must be solved as Vietnam does not have as yet a contingent of teachers who are capable to meet the demands of training in this field.

- Policies designed to encourage the increase of the localization ratio, to absorb technological transfer in the production of components, because: