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Policies needed to boost growth of support industries

Update: February, 20/2012 - 10:13

HCM CITY — Experts have called for focusing tax breaks, financial backing and support policies on support industries that enjoy natural advantages to spur the sector's growth.

Speaking at a seminar held recently by the Financial Policies and Strategy Institute and the Institute for Industry Policy and Strategy, they said the Government offered favourable conditions for investment in support by both foreign and domestic investors.

Support industry manufacturing projects were advertised for free on the Ministry of Trade and Industry's website and received financial assistance, provided with opportunities to join supply networks, recruit labourers, and use facilities at industrial parks, they said.

Firms in support industries did not have to pay import duties on feedstock and other raw materials meant for production and scientific research, they said.

Dr Nguyen Thi Lan of the Institute of Finance said however that in spite of all this, Viet Nam's support industries remained weak.

The consequence was that around 80 per cent of parts and accessories used in manufacturing must be imported.

This was a drag on the economy and forced the country to spend billions of dollars on imports, Lan said.

Since Viet Nam's support industries were backward, many foreign companies were unable to easily source parts and accessories, and had moved out to other countries or planned to do so, she said.

Domestic assemblers were forced to import.

In 2010 the electronics industry exported products worth US$3.4 billion but its imports cost $4.6 billion.

The textile and garment industry's exports in the first half of 2011 were worth $6.16 billion, but its imports, mainly of raw materials and accessories, were worth $5.76 billion. Thus the industry's net exports were a mere $400 million.

Despite getting incentives related to land, taxation and financing from the Government for years, the automobile industry's domestic production rate is only 5-10 per cent. Even the items produced here are very basic – such as electric wires and chair frames.

Experts said though the Government offered the supporting industry many incentives, they did not focus on key industries.

Duong Thi Nhi of the Ministry of Finance said the focus should be on industries that enjoyed certain advantages – such as electronic and electrical parts, textile and garment, motorbike, and automobile.

Support industries should also be divided into different groups. The Government support would be given to them at different levels and different times so that they would receive adequate assistance for a comprehensive development, Nhi said.

The Government should have special financial policies to encourage newly-established firms, set up a fund for development of the support industry, and offer them more tax breaks,she said.

Lan called for Government encouragement to private investors in support industries.

For this, the Government should to create a fair, free and stable business environment and cut red tape to ensure that businesses could be set up easily and their products easily sold.

Vu Tien Loc, chairman of the Viet Nam Chamber of Commerce and Industry, said when support industries developed, they would help reduce the trade deficit, attract more international companies, and catch up with new business trends.

Many foreign manufacturers, especially Japanese, were looking for Vietnamese parts suppliers, he said.

This offered huge opportunities for local parts producers to participate in the global production chain, he said.

If Vietnamese parts manufacturers could supply foreign companies in the country, they could also supply others outside the country, he added. — VNS

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