Vietnamese businesses must improve their capacity

VCN - Mr. Truong Thanh Hoai (pictured), Director of the Department of Industry (Ministry of Industry and Trade) said that besides the negative effects, the Covid-19 epidemic also brings many opportunities for Vietnam, especially in attracting invest in industrial production. However, Vietnamese businesses must improve their capacity to make the best use of these opportunities.
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vietnamese businesses must improve their capacity

How do you assess the impact of the Covid-19 epidemic on industrial production in the world in general and especially in Vietnam?

Currently,disease is the challenge forthe global production chain. A country that develops strong domestic production chains will minimize the impact of incidents during the production process, especially natural disasters and epidemics. However, I think that it can only be minimized but is unavoidable because at present, countries and manufacturing industries depend on each other very much, no other country can organize an independent production chain.

In Vietnam, typical impacts that can be mentioned are electronics and the automotive sector. Currently with these two industries, parts and products have ahigh technology content, which is typical of firms and multinational corporations. For industries with structures of complex supply chains, such as the automotive or electronics industries, each multinational corporation has a supply system with suppliers that meet its specific technical standards. It is difficult to replace supply chains.

For other industries with simpler supply chains, such as textiles and footwear, other sources of supply can be replaced. Depending on the characteristics of the manufacturing enterprise, if the company merely processes the production materials as directed by the buyer, the material can be replaced. As for businesses that produce complete products, manufactured on the basis of their brands, it will be more difficult to find and replace the supply.

Besides the negative effects, does the Covid-19 epidemic offer any opportunities for Vietnam's industrial production, sir?

There are many opportunities. In the context of the China-American trade war plus the Covid-19 epidemic, multinational corporations have clearly seen the "China plus 1" strategy. All in a "basket" of China is a huge risk for multinational corporations.

For example, there are about 100 enterprises in the world's top 500 enterprises located in Wuhan (China), the epidemic has greatly affected the production chains of corporations. Avoiding risks, they will have to relocate their supply systems to surrounding areas. China is the world's factory, but China is also the world's leading consumer center, andpotential consumer market in the future.

In the near future, China will develop in a service-oriented manner as the income per capita gets higher and higher. The factory will gradually move out of China. Meanwhile, Vietnam has a very favorable geographical position close to China, a young population, stable politics and friendly investment attraction policies.If Vietnam thoroughly implements procedural reforms, improving the business investment environment, I think there will be great opportunities in attracting investment.

In order to take advantage of the opportunity to shift investment into industrial production of Vietnam as well as in the long term to avoid the passive situation of the current supply of raw materials and accelerate the development of supporting industries, it is identified asan important solution. Could you tell us about the Ministry of Industry and Trade’sstrategy to promote this field?

The development of supporting industries is a consistent policy of the Party and Government as well as the Ministry of Industry and Trade in the process of economic development.

However, supporting industries are capital and technology intensive, not ordinary processing industries. Meanwhile, Vietnamese enterprises have low starting points, very low production capacity, and are unable to meet the requirements of domestic production chains as well as global production chains.

In terms of attracting investment as mentioned, it must be said that, in parallel with investment attraction, it is necessary to improve the capacity of domestic enterprises to take advantage of the spread of investment attraction. If we want to do this, the effort of the enterprise itself is the most important and indispensable "support" hand of the Government. The Ministry of Industry and Trade is also designing policies to help businesses improve their capacity.

Has the Ministry of Industry and Trade developed production recovery scenarios after the disease is controlled?

Currently, the production chain is globally dependent. The epidemic mayend in one placebut break outin another place. For example, the import ofone hundred components with only one imported component in the affected market is also interrupted. Today, the most volatile factor is not knowningwhenthe epidemic will end. An indeterminate input is difficult to identify subsequent scenarios.

At the present time, it is important that what we can support businesses on measures and resources. During this time, businesses must maintain factories and workers, costly but absolutely no revenue. The support measures need to be implemented urgently, especially for labor-intensive industries such as textiles, footwear, and the total of employees is over six million. If we do not help businesses overcome difficulties, it will have a great impact on social security.

Thank you, Sir!

By Thanh Nguyen/ Quynh Lan

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