Manufacturing and processing are expected to continue being the key drivers of economic growth

The Ministry of Planning and Investment (MPI) reported to the government that given the growth rate of 6.76% in the first half of the year, including 6.82% in the first quarter and 6.71% in the second, the second half 2019 should see a growth rate of about 6.91%.

“If there are no abnormal developments impacting the economy, GDP for the whole year will reach 6.8%,” said the MPI report.

According to the ministry, one of the key growth factors will be attention paid to the development of manufacturing and processing, and featuring many large-scale investment projects.

“Efforts are to be made to focus on the development of major new projects that have become operational such as Nghi Son Petrochemical Refinery, Formosa Ha Tinh, Hoa Phat Dung Quat steel complex, and VinFast auto plant,” stated the report. “In addition, it is necessary to boost construction of newly-registered foreign-invested projects in manufacturing and processing, which held 73.4% of total foreign direct investment (FDI) registered in the first half of this year.”

For the first time, the VinFast venture, invested by local conglomerate Vingroup, has been listed as a major driver of the manufacturing sector in the country. Inaugurated last month, the factory has a designed capacity of 250,000 automobiles per year for the first stage and 500,000 automobiles annually for the second stage.

As of late March 2019, Vingroup invested US$1.35 billion into the factory. Currently, Vinfast is already marketing its products, and it is expected that the firm will market 12 assorted types of automobiles and electric motorbikes moving into next year.

Meanwhile, according to the People’s Committee of north-central Thanh Hoa province, in the first six months of 2019, the industrial production value there soared 42.6% on-year, largely thanks to the Nghi Son Petrochemical Refinery coming into operation in the province last December.

Considered a key national project with the total investment capital of over US$9 billion, the refinery is developed by a consortium consisting of Kuwait Petroleum International, Idemitsui Kosan, Mitsui Chemicals, and Vietnam’s state-run Vietnam National Oil and Gas Group.
In recent years, the manufacturing and processing sector, which creates 80% of the economy’s industrial growth, has been considered one of the key propellants of national economic growth.

It is expected that over the next few days, the Politburo will issue a resolution detailing a new strategy on attracting more FDI. Under the new strategy a more favourable business climate will be created to lure more FDI into processing and manufacturing, and advanced technologies as one of the key impetuses for the economy. The government will enact more policies to enhance these propellants.

The sector’s structure has remarkably changed in recent times, with electronics taking the lead with 25% of the total national export turnover. In the first six months of 2019, the export turnover of mobile phones and their spare parts hit US$23.5 billion, up 4% on-year and accounting for 19.2% of the total national export turnover. That of electronics, computers, and their spare parts reached US$15.5 billion, up 14.3% on-year.

Key electronics makers in Vietnam include Samsung, LG, Intel, Panasonic, and Canon. Canon Vietnam said, “We hope to reach and even exceed our export target this year. We expect Vietnam’s government to continue reducing and removing road tolls and seaport fees costs for enterprises.”

According to the General Statistics Office, the manufacturing and processing sector has continued to be the biggest highlight in the economy’s six-month growth. It grew 11.18% on-year, lower than the 12.87% in the same period last year, but higher than the corresponding periods of 2017 (10.52%), 2016 (10.5%), 2015 (10%), 2014 (6.61%), and 2013 (5.61%).

The MPI reported that in the first half of 2019, Vietnam attracted 605 foreign-invested projects in manufacturing and processing, with a total registered capital of US$5.44 billion. If foreign-related stake acquisitions and added capital from operational projects are included, the total registered capital in the sector hit US$13.15 billion.

Just over a week ago, Fitch Solutions, Inc. under Fitch Ratings, one of the biggest rating firms in the world, forecast that Vietnam’s economy will “slow to 6.5% in 2019 from 7.1% in 2018” but that the country “will remain an overperformer within Asia.”

“We expect the manufacturing sector to remain a key contributor to growth over the coming quarters. Other key drivers of growth will likely be the construction sector and the service sector,” Fitch Solutions stated.