Light Manufacturing in Vietnam makes the case that, if the country
is to continue along a rapid economic growth path and create jobs,
it must undertake a structural transformation that can lift workers
from low-productivity agriculture and the mere assembly of imported
inputs to higher-productivity activities. Vietnam needs to address
fundamental issues in the manufacturing sector that, until now,
have been masked by economic growth. The book shows that there is a
dichotomy between domestic enterprises and enterprises supported by
foreign direct investment. The dominant state-owned enterprises and
foreign-invested firms are often not integrated with smaller,
domestic firms through backward or forward links in the use of
domestically produced inputs or intermediate products. Growth in
the domestic light manufacturing sector has arisen from the sheer
number of micro and small enterprises rather than from expansion in
the number of medium and large firms. As a consequence, final
products have little value added; technology and expertise are not
shared; and the economy has failed to move up the structural
transformation ladder. This structure of production is one of the
reasons Vietnam's rapid process of industrialization over the last
three decades has not been accompanied by a favorable trade
balance. Policy measures to address problems in competitiveness in
Vietnam must confront the dual structure of the light manufacturing
sector, while raising the value added in the industry. To that end,
measures must be taken to nurture the expansion of small domestic
firms, while helping these firms to achieve greater productivity
through trade integration. This will require improvements in labor
skills and technology and in the quality and variety of products
able to compete with imports. Policies to reduce the role of the
state-owned sector, promote trading companies, encourage clustering
and subcontracting, and raise foreign and social networking are
important in this respect. To boost the value added of its goods,
Vietnam needs to integrate the supply chain in assembly activities
by investing in the upstream production of the goods in which it
has a comparative advantage in production and in which it has
already established a market share, such as agribusiness, garments,
and wood. Unlike downstream activities, however, the production of
the associated raw materials and intermediate goods is capital
intensive and technology driven, and it requires skilled labor.
Inviting foreign direct investment into these areas and reforming
education and vocational systems are the best means to reach this
goal. For this reason, the government should launch a complete
review of the incentives for foreign direct investment to focus on
upstream production and on bringing in capital and technical
expertise, while improving labor and entrepreneurial skills. Based
on this analysis, Light Manufacturing in Vietnam proposes concrete
policy measures to increase employment and spur job creation by
addressing sector-specific constraints. The book presents a set of
practical recommendations for policy makers to identify,
prioritize, and remove the most serious constraints in each sector.
This book will be valuable for policy makers, entrepreneurs,
workers, professional economists, and anyone interested in economic
development, industrialization, and the structural transformation
of Vietnam and of developing countries.
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