Refreshing supporting industries in Vietnam

	Supporting industries secure more orders following Chinese supply disruptions
	Difficulties in implementing policies on supporting industries
	Stagnant supporting industries hamper apparel export

Vietnam aims to have about 2,000 enterprises by 2030 capable of directly supplying assembly enterprises and multinational corporations in the territory of Vietnam. Photo: N.Thanh

Long term restrictions

According to the Ministry of Industry and Trade, the number of operating enterprises in the supporting industry accounts for nearly 4.5% of the number total of enterprises in the manufacturing and processing industry. Some Vietnamese component manufacturers have good capacity in a number of fields such as: manufacture of various molds; bicycle and motorbike components; standard mechanical components.The production capacity of supporting products in the country has been raised, the localization rate of some industries has been improved.

However, the Ministry of Industry and Trade also pointed out that the size and capacity of SI enterprises isstill limited: lack of resources and technology to improve productivity; financial capacity of enterprises is weak, equity is low.

Regarding the cause of these limitations, the Ministry of Industry and Trade said that the mechanism for preferential credit, taxes, land rent, especially resource allocation to implement policies on supporting industries, has not been concretized,making it difficult for SI enterprises to access support and incentives.

Ms. Truong Thi Chi Binh, Vice Chairman of the Vietnam Association of Industry and Technology, said that the financial support policies for enterprises are difficult to access.

"Accessingcheap credit in Vietnam is difficult, it is difficult to access support funds because the procedures areextremely complicated andrequire collateral. While in other countries, businesses only need to have orders from Samsung, Canon they can mortgage, but in Vietnam this is not possible. Enterprises must "fight" by themselves,” Ms. Binh said.

Focusing on science and technology

From the perspective of FDI enterprises, Ms. Dao Thi Thu Huyen, Deputy Director of the Office of General Director, Canon Vietnam Ltd. Co., said that Canon always looks for Vietnamese suppliers. Currently, Canon has 59 component groups that need localization and are always posted on the website of the company.

"In Vietnam what do the suppliers provide us? Plastics,packaging,printing components, while a printer has nearly 400 components and many different types. I am looking for a new one which is a supplier of plastic components,” Ms. Huyen said.

Assessing the determination of the supplier is still weak, Ms. Huyen analyzed, if suppliers want to enter the chain, the requirements are very high. Canonproducts are global products that provide the most demanding customers in the world, so there is a need for quality. Canon has 59 groups of products, onegroupofscrews has dozens of types of screws, plastic also has dozens of different plastic components, there are many "yards" for Vietnamese enterprises, but enterprises do not pay attention tothem.

The representative of Samsung Vietnam also said that Samsung produces 180 million phones a year. Canon produces printers as larger devices, but Samsung produces phones and components that are increasingly sophisticated, changing every six months. Meanwhile, changing technology and lines with Vietnamese enterprises is extremely difficult, unless there is a lot of capital.

Samsung encourages and recommends businesses to make efforts in other areas, especially research and development (R&D). R&D costs of Vietnamese enterprises are very low, averaging about 0.2-0.3% of revenue. Samsung pays special attention to this issue. For example, with the same screw, now the enterprise sells for one dong, next year only sells for 0.8 dong or better quality but at the same price. Without R&D, it can never be done.

From the perspective of state management agencies, to promote the development of the supporting industry in the future, the Ministry of Industry and Trade clearly states that the direction is to review and develop new mechanisms and policies in line with integration commitments to support industrial enterprises to develop; at the same time having new policies in management and investment attraction to ensure FDI enterprises have the connection and technology transfer as well as create spillovers for domestic supporting enterprises.