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Support industries need plan for development

Update: September, 18/2014 - 08:48

After 14 years, support industries in Viet Nam remain underde-veloped and have so far been relegated to the role of assembling low value-added products.

The manufacture of high-technology support industry products remains largely in the hands of foreign direct invested enterprises.

Nguyen Mai, president of the Viet Nam Association of Foreign Invested Enterprises (VAFIE), talked to reporters about the development needs of domestic support industries.

Nguyen Mai

What is your assessment of the current situation of support industries in Viet Nam? How large is their contribution to the country's industrial demand?

After 14 years, the country has yet to shape key support products on which it could focus on a national scale. The added value of products is quite low. A wide range of products such as cars, cell phones and electronics equipment, as well as footwear and textiles and garments, are merely assembled.

Our support industries only meet 25 per cent of the country's spare parts demand. In contrast, industries in China meet 50 per cent while those in Thailand meet 60 per cent of demand. This means that we have remained at a very low level of development.

Samsung Electronics Viet Nam (SEV) has had concerns about the backward electronics support industries in Viet Nam. Domestic companies were able to provide printing and packaging products to SEV but not high-technology equipment.

Do you mean that support industries in Viet Nam have remained at a low level of development compared with that of other countries in the region? What are the reasons for this situation?

Yes. Currently, we do not have a real strategy to develop support industries, as wel as an investment strategy that gives priority to some products for large-scale production.

We have not had clear policies for the industries though we've had orientations and discussions for their development since 2011.

On the other hand, we have not created a link between FDI and domestic enterprises, especially small- and medium-sized enterprises (SMEs). This is why there is no support industry system in Viet Nam in spite of the number of leading global transnational corporations (TNCs) in the country such as Toyota, Honda and Samsung, as well as Intel and Canon.

We have not established a vertical model linking product value chains to input suppliers and product distributors, as well as a horizontal model linking manufacturers of the same products, to create competitiveness in domestic and international markets.

In addition, Viet Nam still faces several barriers, including the investment environment, especially law and its enforcement, as well as cumbersome administrative procedures and the extended time of competing projects, resulting in limited investment. The solutions, policies and preferential credit for the industry at central and local levels have not been effective in practice.

How would you evaluate the possibility of Vietnamese enterprises taking part in the supply chain of support industries?

I am referring to a particular field of electronics components as an example. In this field, Vietnamese businesses must invest between US$15 million to $20 million to import modern equipment for the support industries. I think a lot of Vietnamese enterprises are able and willing to invest in such equipment.

However, their weakness is that they are slow in information gathering.

Companies that do not have enough capital could apply for loans from the VND2-trillion package that the Prime Minister has prepared for this purpose, with preferential interest rates.

Another important issue is that the ability of companies depends on the Government's policies. For example, in the auto industry, if there is only limited production of a few thousand units a year, it will be impossible for support industries for that sector to meet demand. None of the businesses want to make huge investments in equipment while the orders remain small. If the sector's scale is more than one million units, then the support industries will be developed.

In contrast, Samsung has made 200 million mobile phones and hundreds of millions of tablets every year. It is clearly possible for the market to develop the needed support industries.

n This means that the support industries for Samsung should have been developed, but Vietnamese enterprises failed to supply its orders for components such as battery chargers, headsets and plastic. What are the reasons for this situation?

We have specific proposals for SEV to define what equipment they need. They can make a list of the needed components and specify the required quantity and quality. I believe that if they do so, many Vietnamese enterprises will be ready to act as suppliers.

Of course, the role of domestic companies is decisive. They must rise, get involved in high-technology research and manufacture the products which Samsung needs. However, at this early stage, the companies need support.

n Our country has received orientation on the development of industrial parks (IPs) for support industries. However, the IPs have not been developed as expected. What are your thoughts on this matter?

From the beginning, I personally do not approve of the establishment of the IPs. Support industries make products that don't need such IPs. Currently, the huge shortcoming in Viet Nam is that there is no specialised IP.

We propose that there should be a specialised IP in which enterprises would co-operate and associate with each other and are assigned to a certain product with a common infrastructure, environmental management system, general partner and consumption pattern. — VNS

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