At a workshop titled “Creating new growth momentum: strengthening FDI-local enterprise linkages” held late last month, Professor Tran Tho Dat from the National Economic University (NEU) assessed that the economic growth obtained by the country could no longer depend on cheap labor cost, land and natural resources and the country should create a new growth momentum focusing inherent values for faster and more sustainable growth and escape from the mid-income trap.
To this end, higher comparative advantages including local industrial competitiveness, productivity, skilled workers, transferred advanced technologies and purchase power should be promoted. In the field of foreign direct investment (FDI), the linkage between local enterprises and transnational corporations should be strengthened to further enhance the spillover effect of FDI on the national economy in the coming time.
A research group of the NEU suggested five forms of linkage which the country, in seeking a new growth model to avoid the mid-income trap, could implement, namely (i) upstream linkage with suppliers through outsourcing; (ii) downstream linkage with customers, focusing on connection with the distribution network. In this linkage, transnational corporations might be treated as customers of local small- and medium-sized enterprises; (iii) linkage with competitors since competition is the prime motive for technology renewal and transfer; (iv) linkage with technology partners; and (v) other linkages of spillover effect.
According to Professor Kenichi Ohno, a Japanese industrial policy expert, the attempt to promote cooperation between the Government and private sector to create local value should be backed by taking advantage of the large production scale of the FDI sector achieved in Vietnam.
He emphasized the importance of cohesive binding of five policy elements, including FDI marketing strategy, capacity building for local enterprises, building of FDI-local enterprise linkage, provision of effective logistic services, and industrial human resources.
He suggested selecting some localities which are the most appropriate for trial application of the FDI-local enterprise linkage models based on transnational corporations’ criteria and foreign countries’ experience before propagation of these models; launching a high-productivity movement among enterprises nationwide; and effectively combining policy-making vision and targets with action programs and supervision measures.