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According to the Ministry of Planning and Investment, the FDI sector accounted for 72 percent of total export turnover of US$88.58 billion while Vietnamese firms account for just 26.3 percent
Nguyen Duc Thuan, Chairman of the Vietnam Leather, Footwear and Handbag Association, said that in the field of exporting leather, shoes and handbags, there is also a very clear difference in the ratio of export turnover between domestic and foreign enterprises. Five years ago, this rate was 65 percent -35 percent for foreign and domestic enterprises respectively, now this rate has been pushed further towards 75 percent and 25 percent respectively.
According to Nguyen Duc Thuan, from 2019 to now, in order to reduce supply chain dependence on a single country namely China, FDI enterprises have flocked to Vietnam. This makes the process of export turnover difference between domestic and foreign investors even further. For example, the total foreign investment capital registered in Vietnam in 2021 will reach $31.15 billion, up 9.2 percent compared to 2020. From the beginning of 2022 until now, this figure is estimated at $4.42 billion, up 7.8 percent year-on-year, the highest level of the first quarter in the past five years.
The trend of investment priorities of FDI enterprises is also quite clear. FDI enterprises in the processing and manufacturing industry are leading, followed by the production and distribution of electricity, gas, hot water, steam and air conditioners, raw materials and auxiliary materials, real estate activities, retail, and e-commerce. Companies from the United States, Canada, the European Union, Japan, Korea, Singapore, and China have been increasing their presence in Vietnam.
Many businesses affirmed that the landing of foreign enterprises in Vietnam is creating positive changes for the overall economic face of the country. However, on the opposite side, it has negatively affected the direct and indirect export activities of domestic enterprises.
Pham Xuan Hong, chairman of the HCMC Association of Garments, Textiles, Embroidery and Knitting, affirmed that in the direct export market, FDI or pure Vietnamese enterprises are considered ‘made in Vietnam’. Therefore, the group of goods with the same origin of production will have to compete with each other in the international market. Worse, pure Vietnamese enterprises are weaker because of their limited internal capital, small production scale and mainly manufacturing single-part products or outsourcing.
Moreover, foreign partners tend to place the quantity for a large order that requires the enterprise to have a larger scale of production. Sometimes, partners have placed small orders with multi-details, a high technicality that require enterprises to have modern production technology to meet the condition that the delivery time is shorter and the models must be changed frequently. Regardless of order types, it is difficult for domestic enterprises to satisfy their partners without transforming the current production situation
Not only that, due to their weak internal production capacity, domestic enterprises’ indirect export capabilities will reduce because they have not been able to penetrate deeply into the global supply chain. Ms. Le Bich Loan, Deputy Manager of Ho Chi Minh City Hi-Tech Park, said that terminal FDI enterprises such as Samsung, Intel, Nidec Sankyo have been always looking for suppliers of supporting industrial products, but a few Vietnamese enterprises can take part in these foreign-invested companies.
With the same point of view, a representative of the Organization for the Promotion of Japan's Foreign Trade (Jetro) in Ho Chi Minh City, said that despite their great efforts to search for domestic raw material suppliers for Japanese enterprises in Vietnam, only around 37 percent of local firms have been able to meet Japanese companies’ requirements so far. Foreign enterprises have had no choice but to use imported supplies instead.
As domestic firms have been facing difficulties in both direct and indirect exports, the gap in export turnover between domestic and foreign investors has been wide. Mr. Vu Duc Giang, Chairman of the Vietnam Textile and Apparel Association, said that this disparity rate is very worrying.
In the long term, if the above ratio does not improve in the direction of increasing domestic export turnover, Vietnamese enterprises will face the risk of narrowing their market share by FDI enterprises exporting from the country. Gradually, domestic enterprises will switch to outsourcing for FDI enterprises.
Many domestic enterprises believed that it is necessary to effectively support investment capital so that enterprises can convert production technology in combination with reinvesting in modern equipment and production lines. In which, it is necessary to reach the conditions of automating the production line combined with the digitalization of management.
More importantly, on the Government side, it is necessary to drastically select foreign investors. Accordingly, priority is given to only foreign enterprises investing in the production of raw materials and accessories for Vietnam's key export industries such as fibers, raw fabrics, plastic beads, starches of all kinds, auxiliary textiles materials, and flavoring ingredients for food processing, steel billets, and metals.
Along with that, sanctions on FDI enterprises to fulfill their commitment to transfer production technology to domestic enterprises should be taken into account. This approach is to strengthen the internal resources of Vietnamese enterprises in particular as well as to improve the competitiveness of the country's economy in general, to stand firm in the current global playing field.
Deputy Director of the Ministry of Industry and Trade's Vietnam Trade Promotion Agency Le Hoang Tai said in order to increase competitiveness in the international arena, domestic enterprises should diversify export markets, both looking for markets with suitable capacity, and at the same time have opportunities for strong development.
In the past time, in addition to Vietnam’s old market, the Ministry of Industry and Trade has supported domestic enterprises to access the Indian market.
Bilateral trade cooperation between Vietnam and India increased rapidly from $200 million in 2000 to more than $13 billion in 2021. Especially, in just five years after becoming a comprehensive strategic partner in 2016, the two countries' trade turnover has doubled and the target of 2022 is $15 billion.
Some Vietnamese exported products to India have very strong growth rates in 2021; for instance, plastic raw materials up 231 percent, chemicals up 162 percent, rubber up 138 percent, and coal up 128 percent. In particular, mobile phones and components continued to have the largest export turnover, reaching more than $1.28 billion - accounting for about 21 percent of the total export value of goods from Vietnam to India.
On April 12, Mr. Vu Hoang Duc, Chairman of the Vietnamese Business Association in Japan, said that the Japanese market has a great demand for importing and consuming agricultural and aquatic products, food, including fish and products processed from fish, shrimp, eel, meat and meat products, soybeans, cereal products, fresh and processed vegetables, coffee from Vietnam. The number of people from Asian countries living and working in Japan has reached 10 million, including nearly 500,000 Vietnamese.
This pushed up the demand for agricultural and aquatic products and food imported from Vietnam and is increasingly popular in the Japanese market. This will pave the way for exports of Vietnam's agricultural and aquatic products to Japan in the coming time.
Japan is a promising export market for Vietnamese enterprises. In 2021, Vietnam's export turnover to Japan will reach US$20.1 billion, up 4.4 percent. From the beginning of the year until now, the export turnover of Vietnamese goods to the Japanese market has reached $5.3 billion.
