Duong Thi Kim Lien, deputy director of USAID Vietnam Linkages for Small- and Medium-sized Enterprises (LinkSME) program, said such relations would help lower costs for multinationals in Vietnam to source locally, while representing a huge opportunity to grow the country’s SME sector and build its middle class.
Speaking at a workshop held in HCM City on October 4, Lien said the LinkSME program improves Vietnam’s regional competitiveness by making it a more predictive investment climate.
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Workers produce electronic components at Korean firm Bluecom Vina Co., Ltd. in Hai Phong city. |
Vietnam has had one of the world’s fastest rates of growth over the past 20 years, but its growth rates have been slowing in recent years, raising concerns that Vietnam may be falling into the middle-income trap, according to Lien.
However, Vietnam has made raising productivity and increasing value-added production a high priority as part of its plan to modernize and grow its economy.
One way to do this is by strengthening the linkages between domestic firms and global value chains.
The purpose of the LinkSME program will be to bring about systemic changes in business relationships between Vietnamese SMEs and multinationals in the country.
Nguyen Trong Hieu, an expert with the USAID Governance for Inclusive Growth (GIG) program, said that 70 percent of the value of spare parts to make electronics products still comes from imports.
In addition, more than 20 percent of Vietnamese manufacturers also have financial troubles accessing loans from commercial banks, he said.
Nguyen Thi Xuan Thuy, head of the Industry Department at the Ministry of Industry and Trade, said the ministry would continue to offer preferential policies to foreign investors and encourage domestic supporting industries to help local electronics producers become more involved in global production chains.
Vietnam has moved up in the global value chain, and has become better known as a manufacturer in Asia, with four industrial sectors participating in the world’s production chains, including electronics, automobiles, agriculture and textiles, she said.
The country, especially the electronics sector, is expected to attract more foreign direct investment (FDI) in the near future, creating more jobs for local workers as well as opportunities for suppliers of electronics.
To better integrate into global electronics value chains, Vietnam should call for investment from the private sector, and enhance communication systems, market competition and customs clearance procedures.
According to recent World Bank reports, only 300 Vietnamese firms are fully eligible to join the world’s production chains.
Nguyen Quoc Cuong, director of Hanel Plastics, said that SMEs faced hurdles when joining global supply chains because of the unstable quality of products, a problem cited by Samsung and Canon manufacturers in Vietnam.
Most SMEs do not have a system to ensure quality for all products, he said, adding enterprise leaders lack sufficient commitment and innovation.
“To become a supplier of the first level, enterprises must also ensure standards related to delivery, safety, employee morale, work environment, communications, and technology,” he said.
“The key to success is a long-term strategy with top priority being given to quality of products, skilled human resource, professional management, and the use of cutting-edge technologies.”
In recent years, the electronics industry has grown rapidly and has become one of the most important sectors of Vietnam’s economy. The growth rate rose from 7.4 percent in 2011 to 32.5 percent in 2015.
The development of Vietnam’s electronics industry is attributed to large investments from multinationals, especially from the Republic of Korea and Japan, which manufacture electronic components.
Electronics is the largest export sector in Vietnam, with export turnover growing from USD 22.9 billion in 2012 to more than USD 71 billion in 2017.
It is now 2.5 times and five times greater than the textile and footwear sectors, respectively.
Of the total, 95 percent of the country’s electronics export turnover is due to foreign direct investment (FDI) enterprises.
Organised by the Ministry of Industry and Trade, the workshop was held to help Vietnamese SMEs improve competitiveness and join global value chains.
Source: VNA