• Thursday, March 28, 2024
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Here is what Nigeria can learn from Vietnams $245n non oil export success

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If Nigerian policymakers are desirous of changing the narrative of a mono economy , they may need to look in the direction of Vietnam, a Southeast Asian country that has emerged from the ashes of oblivion to become a manufacturing giant.

Between January and December 2018, Vietnam earned $244.72 billion from export of finished products from garments and shoes to smart phones, according to General Department of Vietnam Customs.
Nigeria, on the other hand, scratched only $3.3 billion in 2018 from more than 25 commodities from cocoa powder to cashew nuts.

The big difference in non-oil export earnings between the two countries exposes the failing state of industrial policies in Africa’s most populous country, as domestic challenges continue to hinder local production.

Today, giant phone makers such as Samsung, Intel and LG produce smartphones in Vietnam and export from there.
In 2018, the country fetched over $50 billion from export of phones and their components— the biggest turnover among export items— according to the country’s General Statistics Office. It has earned $27.3 billion from phones between January and July 2019.

The Southeast Asian country attracted Foreign Direct Investment of $16.74 billion between January and July 2019, according to the country’s Foreign Investment Agency. In the whole of 2018, Nigeria’s FDI was $2.2 billion, from $3.5 billion the previous year, according to the United Nations Conference on Trade and Development.

“The Nigerian economy is in dire need of private investments to move the economy forward,” Babatunde Ruwase, president, Lagos Chamber of Commerce and Industry (LCCI), said in Lagos on Wednesday.

“If economic recovery is to be sustained, there must be added drive for domestic and foreign direct investments, promotion of non-oil exports and continued efforts at improving the ease of doing business in Nigeria,” he said.
Key to Vietnam’s growth was market reforms, said Vo Tri Thanh, a Vietnamese economist.

The country worked on private business right, macroeconomic and social stability, while opening and integrating its economy into the regional and world economy, especially in the areas of trade and FDI.

Vietnam sees trade as the most important part of its manufacturing sector. In an article entitled ‘Vietnam’s manufacturing miracle: Lessons for developing countries’, three economists Sebastian Eckardt, Deepak Mishra, and Viet Tuan Dinh said Vietnam has numerous bilateral and multilateral free trade agreements, which dramatically cut tariffs, anchor difficult domestic reforms, and open up the economy to foreign investment.

Vietnam likewise reduced its cost of doing business for enterprises.

The World Bank said in its 2019 Doing Business report that the country made paying taxes less costly for companies by reducing the corporate income and value added tax rates while eliminating the surtax on income from the transfer of land use rights.

Taxes in Nigeria (state, federal and local governments) today are 54 and are increasing as states go increasingly cash-strapped, experts say.

As a serious country open to business, Vietnam made starting a business easier by publishing the notice of incorporation online and by reducing the cost of business registration. It equally made enforcing contracts easier by making judgments rendered at all levels in commercial cases available to the public online, the World Bank said.
It made exporting and importing easier by upgrading the automated cargo clearance system and extending the operating hours of the customs department.

Scanners at the Customs in Nigeria are barely working, with roads to Apapa and Tin Can ports in Lagos nightmares.
“Of particular concern and importance to us (MAN) are the challenges we face in moving our raw materials and goods to and from the ports,” Seleem Adegunwa, chairman, Manufacturers Association of Nigeria (MAN), Ogun State chapter, said at a recent CEOs business luncheon at Agbara, Ogun State, when referring to challenges faced by

Nigeria’s manufacturers at the ports.
Nigeria is yet to initiate reforms at all levels, with statist policies trumping market reforms. The country still pays over $1 billion on fuel subsidies and is yet to reform its outdated gas policies. Manufacturers self-generate over 13,000 megawatts of energy, according to MAN.

President Muhammadu Buhari has shut borders to halt smuggling of fuel and rice, but exporters can’t ship out their goods or import inputs through land borders.

Ede Dafinone, chairman, Manufacturers Association of Nigeria Export Group (MANEG), said the losses incurred by genuine exporters will further cut Nigeria’s non-oil export projections.

“I am sure the government would not be closing all banks because of the discovery of bank fraud and similarly should not close all land borders to catch those that are smuggling,” he reasoned.

The list of items barred from accessing foreign exchange is getting longer with essential industrial inputs being added from time to time by the central bank.

The Export Expansion Grant has been suspended since 2013, and industries can’t sell because 49 percent of the population is multi-dimensionally poor.

Nigeria and Vietnam have things in common. One is that half of the population in both is less than 35, which provides ready labour force for industries and firms. But unlike Nigeria, Vietnam has well-trained skilled labour who fit into its industrial dream. This began with reforming the education system, paying attention to sciences which are important for industrial growth.

Two, agriculture employs more than half of the population in both Nigeria and Vietnam. Rice is the most important crop in both countries.

Furthermore, both countries have comparative advantage in leather/shoes and have enormous raw materials in food and agro-allied sector.

But Vietnam strengthened access to credit by adopting a new civil code that broadens the scope of assets that can be used as collateral.

Most banks in Vietnam, including VietcapitalBank, NamABank and ABBank, lend at between 8 percent and 8.6 percent, but almost all Nigerian banks lend at above 20 percent, and even up to 30 percent.

Vietnam likewise increased the reliability of power supply by rolling out a Supervisory Control and Data Acquisition (SCADA) automatic energy management system for the monitoring of outages and the restoration of service. According to energypedia.info, 100 percent of Vietnamese have access to electricity.

However, things are different in Nigeria, with over half of Nigeria’s population without access to energy, and firms resorting to diesel or gas to fuel their generating sets.

“Vietnam invested in infrastructure, especially in the power sector and connectivity. To keep pace with rapidly growing container trade (which expanded at a staggering average annual rate of 12.4 percent between 2008 and 2016), Vietnam also developed its connective infrastructure, including seaports and marine terminals,” said economists Eckardt, Mishra and Dinh.

“Vietnam has leveraged its demographic dividend through effective investment in its people. In the latest 2015 OECD Programme for International Student Assessment (PISA)—which tests high school students in math, science, and other disciplines—Vietnam ranked 8th out of 72 participating countries, ahead of OECD countries such as Germany and Netherlands,” they added.

 

ODINAKA ANUDU