Vietnam has been highly successful at mobilizing inward foreign direct investment (FDI) over the past few years, which has played an important role in the nation’s economic development.

Minister of Industry and Trade (MoIT) Vu Huy Hoang recently sat down with a VOV reporter for a wide-ranging interview on his theory of the state of Vietnam’s economy and how it stands coming into the New Year of the Goat.

Following are key excerpts from the interview.

For calendar year 2014, the total exports for Vietnam hit a record high of US$150 billion and the nation enjoyed a trade surplus of in excess of US$2 billion.  The MoIT has estimated that foreign invested enterprises (FIEs) accounted for roughly two-thirds of exports and imports. Do you think it is a problem or not?

Inbound FDI has been the catalyst underpinning Vietnam’s economic reform. While FIEs share of GDP and investment may appear high at first blush, it really hasn’t created a problem.

To the contrary, foreign invested projects are largely conducted in the joint venture form of doing business.  Therefore a portion the profits of FIEs inure to the domestic Vietnamese partner, which is a direct and immediate benefit to the nation.

Foreign investment also spawns technology advances for which currently Vietnam cannot afford.  The evidence on technology spillover to the nation overwhelmingly supports that the government is on the right track with its policy of seeking high levels of FDI.

Advanced technology is a springboard that will drive higher labour productivity, which is so desperately needed if the nation is to be competitive as it integrates more deeply into the regional and global marketplaces.

In addition, increased labour productivity is the key to higher paying jobs for Vietnamese workers in the future and the wealth it brings with it will create a better standard of living for Vietnamese families.

This better standard of living directly will translate to more savings and investment that will be pumped by the Vietnamese people back into the nation’s economy in the future.  The increased knowledge of new technology for Vietnamese workers is an invaluable resource for the nation.

In recent years, FIEs have been the salvation for the country having made huge contributions to Vietnam’s GDP and export growth and will continue to do so for the foreseeable future

Therefore, the MoIT and other relevant ministries have been implementing a series of measures aimed at securing more FDI.  Obviously investment cannot increase indefinitely but for right now the nation needs to attract more foreign investors to do business in Vietnam.

The government has laid out in fairly substantial detail its objectives and orientations to entice and manage FDI for the period 2011-2020. In line with these guiding principles, Vietnam will continue to further advance socio-economic development for the benefit of the Vietnamese people.

Nevertheless, export growth of 100% owned domestic enterprises has shown positive signs. Domestic enterprises’ export growth rose by 1.2% in 2012 and 4% in 2013. The figure then went up again by 11.6% in 2014, with the total volume reaching US$49 billion.

The reality shows that local exporters mainly focused on 10 chief products and several key markets such as the US, EU, and China. In your opinion, is this a "put all eggs in one basket" approach for which Vietnam faces a risk of becoming over dependent on a handful of foreign nations?

In 2014 Vietnam exporters shipped goods to over 200 countries around the globe. Of which, the US was the largest export market accounting for 19.1% of the nation’s total exports.

The US was trailed by the EU at US$27.9 billion, other ASEAN countries at US$19.1 billion, China at US$14.9 billion and Japan at US$14.7 billion.

The Government’s policy has been to keep the export markets as highly diversified as reasonable and to develop all potential markets and avoid becoming highly concentrated on any particular market or markets to ensure sustainable export growth, consistent with goof economic and national defence policy.

In addition, the MoIT has been putting in place many solutions for market expansion and trade. These solutions have created many new lucrative opportunities to access and broaden foreign markets.

Most of Vietnam’s imports come from China. In your opinion, is this a positive or a negative for Vietnamese consumers and is it sound economic policy?

Vietnam’s imports from China accounted for 29.6% of the country’s total imports in 2014 and reached US$43.87 billion.  This represented an 18.8% rise over 2103.

The country principally imported machinery, equipment, and raw material inputs for production and exports to other countries.

These items can also be imported from neighboring markets such as RoK, Taiwan, India and Pakistan. However, thanks to its favourable geographical position, abundant supply of goods and competitive prices, imports from China have been high.

Importing goods from China is necessary and practical. Even though the Vietnam has incurred a trade deficit with China, that deficit has been more than offset by surpluses with other major markets such as the US, EU, and Japan.

However, in the long term, the government’s strategy is to seek to develop a healthy domestic support industry, facilitate domestic production and reduce over dependence on imported raw materials from China.

Along these lines, the MoIT has been finalising negotiations for a number of free trade agreements (FTAs) including regional FTAs, the Trans-Pacific Partnership (TPP), and the FTA Agreement between Vietnam and the EU.

These FTAs will definitely give new impetus to the development of a more robust manufacturing support industry and we should see marked improvement in the upcoming New Lunar year of the Goat.

VOV