6 - Regional Economic Development and Perspectives for the Electronics Sector in Vietnam: The Case of Da Nang

Summary

Introduction

Industrial development in Vietnam is concentrated in the two main economic centres of the country, namely Hanoi, the nation's capital in the north, and Ho Chi Minh City, in the south. However, over the last 15 years, Da Nang, situated roughly in the middle of the country, has begun to emerge as an economic hub. A major port city and long a cultural centre, Da Nang has received significant amounts of investment in infrastructure, real estate, and tourism, and its industrial sector has begun to develop rapidly.

This chapter will examine the case of Da Nang and the challenges it has faced in its quest to become an important industrial centre. Following this introduction, the second section will examine how national-level policies regarding foreign direct investment have affected the distribution of industrial activity across the country. The third section will look at the recent development of Da Nang's industrial sector with specific reference to electronics. From there, the chapter will examine the case of Da Nang municipality, seeking to understand how local government authorities have sought to promote its industrialization. The fourth section will conclude.

Background: Regional Industrial Development and FDI in Vietnam

In 1986, the Vietnamese government implemented a series of sweeping reforms to move from a planned economy to one more open to market forces. In 1987, the Foreign Direct Investment (FDI) Law was approved by the National Assembly. This policy change opened up Vietnam to investment and spurred its industrialization process. This was taken further in 2005, with the introduction of the Investment Law that further facilitated foreign investment. And, with Vietnam's accession to the World Trade Organization in 2007, registered FDI increased even more rapidly. Thus, over the period 1988–2008, Vietnam attracted around 11,000 FDI projects with a total registered capital of US$164 billion (GSO 2008).

Presently, around 100 multinational companies have invested in Vietnam. Nearly 70 per cent of FDI is from Asia and over 60 per cent has been in the industrial sector. Overall, FDI in Vietnam's economy plays an important role in terms of contribution to GDP growth, total investment, and job creation. In 2008, the foreign-invested (FIS) sector contributed approximately one-fifth of GDP (Figure 6.1).