In innovation, Vietnam said to be losing competitive edge

Le Tien Truong, general director of the Group cited statistics showing that the rate of growth of domestic sector exports from Vietnam to other AEC member economies actually declined significantly in 2016.

Truong said that official statistics indicated that for the period 2006-2010 the country’s ASEAN exports averaged 12.5% annually, slowed slightly to 12% for the five years 20122-1015 but in 2016 following the formation of the AEC in late 2015 tumbled to a 4.8% growth rate.

Products made of leather such as footwear and handbags were particularly hard hit having risen at a snail’s pace of only 1.7% in 2016.

Some of the problems were clearly attributable to bad weather and agriculture, said Truong, but the fundamental deficiency actually went much deeper and was founded in the lack of creativity and innovativeness of domestic sector businesses.

Truong noted that local businesses have found themselves in a perpetual race to the bottom ever since the AEC came into effect. They have constantly been trying to lower their price and their quality standards to, in their minds, better compete with their counterparts in countries like Thailand, Indonesia and Myanmar.

They have chosen this dead end path in lieu of stepping up, facing the challenges head on and learning how to sharpen their competitive and innovative skills. He added that the business community needs to invest more in technology, scientific research and education, which are all drivers of innovation and competitiveness.

The government has often said that in the future, national prosperity will depend on Vietnam becoming an ‘innovation economy.’ But as of yet there has been no coordinated innovation agenda put in operation, Truong averred.

Minister Tran Tuan Anh, of the Ministry of Industry and Trade is in agreement with Truong, noting he has now assembled a task force to specifically target the development of new products and coordinate their introduction into ASEAN.

We are following the lead of countries such as Singapore, Taiwan and Finland that successfully pursued policies explicitly designed to stimulate innovation and nurture a broader ‘ecology of innovation.’

Minister Anh called the task force’s mission ‘a wake-up call.’

Over all, the most innovatively competitive nation in history was Singapore, which embarked on a national innovation strategy many years ago, investing heavily and recruiting leading scientists and technologists from around the globe.

One of our overarching goals is to have government programs in place to attract investment and talent and improve work force skills of local people.

The task force will also research and suggest specific recommendations including incentives for domestic companies to innovate at home, ranging from research tax incentives to work force development tax credits.

The Ministry will also conduct research to identify market demands in the AEC, and analyse competitive ability with products from China and other member economies in order to identify key export items targeted to specific countries.

Agricultural items, consumer goods, timber products, electronics and components, and rubber are considered the goods with the greatest potential for export within the AEC, said Mr Tuan Anh.

Most importantly, the Ministry has set its sights on negotiating with other AEC economies to enhance cooperation mechanisms and complete the free trade region’s legal framework.