Vietnam urged to boost supporting industry

Vietnamese businesses in supporting industries need to become more competitive to enter the global supply chain, a forum heard in HCM City recently.

Truong Thi Chi Binh, director of the Supporting Industry Development Enterprise Centre, told the Nepcon Vietnam Forum that the number of Vietnamese firms in the sector remains modest, with most of them being small or medium-sized enterprises.

Only a few of them are part of the production chain of multinational companies, according to Binh.

Poor production and trading competence and lack of market information are the main factors that prevent domestic firms from entering the global manufacturing chain.

Vietnamese businesses in supporting industries need to become more competitive to enter the global supply chain. Photo: cafef.vn

But with the free trade agreements the country has signed, more and more foreign investors will come to Vietnam, providing them opportunities to do so.

Japanese companies are the largest auto suppliers to the US and Canada, but most of their factories are based in China.

Many people think Japanese auto firms will shift their factories in China to Vietnam or open new factories here to take advantage of the Trans-Pacific Partnership.

"The question is whether Vietnamese firms can capitalize on this opportunity," Binh said.

She urged local firms to improve their technologies, management and foreign language competence and promote their products better.

Pham Tuan Anh, deputy general director of the Division of Heavy Industries, said supporting industries provide the foundation for key industries by supplying components.

“A country’s industrial sector cannot develop if its supporting industries are not developed since the latter determines production cost and value addition for finished products and thus their competitiveness,” he said.

"Though the Government has policies in place to boost the development of supporting industries, the rate of locally sourced parts remains modest at just 10 percent," he said.

Luu Hoang Long, Chairman of the Vietnam Electronic Industries Association (VIEA), said the electronics industry has developed strongly in recent years with exports rising year after year.

"But most of the exports are by foreign-owned firms with a low rate of local sourcing of parts," he said.

According to studies by the Vietnam Development Forum and National Graduate Institute for Policy Studies, raw materials, parts and components are the decisive factors in production costs, generally accounting for 80 percent, while labor only accounts for 2 percent.

"Therefore, the development of supporting industries is an important element in the development and competitiveness of the electronic industry," he pointed out.

Speakers at the forum, which was organized by Thailand-based Reed Tradex, VEIA, and the Vietnam Association of Small and Medium Enterprise, also spoke about the basic contents of the new-generation FTAs and the Government’s support policies for supporting industries.

The forum was held as part of NEPCON Vietnam, an exhibition on SMT, testing technologies, equipment, and supporting industries for electronics manufacturing to be held in October.