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MoIT says supporting industries still struggling to meet international standards

Update: July, 29/2021 - 08:49

Supporting industries have received State investment and development incentives. However, most Vietnamese support enterprises are still limited in their organisation, management, and use of technology.

Deputy Minister of Industry and Trade Đỗ Thắng Hải speaks to the Vietnam News Agency about these issues.

How efficient are the State's current mechanisms and policies of supporting industry development?

The Government has had many development policies for the supporting industries, such as the Government’s Decree 111/2015/NĐ-CP on the development of supporting industries issued in 2015, and Resolution 115/NQ-CP on solutions promoting the development of supporting industries that was promulgated in 2020.

The MoIT has also promoted the implementation of a number of international cooperation programmes and projects in the field of supporting industries to improve the ability of Vietnamese supporting industry enterprises. They have included cooperation projects with Samsung in the framework of the Supplier Development Programme; a training programme on improving production and quality for Vietnamese consultants; and a consulting programme on improving enterprises.

This support has helped enterprises in supporting industries improve productivity and product quality to meet the domestic production needs.

At present, many Vietnamese component manufacturing enterprises are involved in the manufacturing of molds, bicycle and motorcycle components, standard mechanical components, power cable, and technical plastic and rubber components.

Those products have met domestic demand and been exported to many countries. The domestic supporting industry enterprises have also promoted the application of standards and modern management tools in production and manufacturing.

As a result, the localisation rate of some industries in Việt Nam has increased. Specifically, the rate is at 30-35 per cent for components of the home electronics industry and 40 per cent for electronic components in the automobile and motorcycle industries. For the automobile production and assembly industry, some car models have a localisation rate at up to 55 per cent.

In general, the supporting industry development policies have been amended to be suitable with the country's development conditions and requirements.

However, the products of the domestic supporting industries are still mainly simple components with medium and low technology, and a small value in supply chains.

Domestic supporting industries have not really changed. Why?

In fact, Việt Nam does not yet have leading supporting industry enterprises in the regional and international production chains. Those enterprises will also play a leading role in development of the supporting industries.

The supporting industry products have had small capacity to not yet meet the scale of economic production capacity. Meanwhile, they have also faced strong competition on the export market. Việt Nam has almost no key industrial products that are able to compete with imported products, and lacks initiative in the supply of basic materials.

In addition, investment and the State support for prioritised processing and manufacturing industries and supporting industries are not strong or efficient enough.

Many central-run and local State agencies still lack awareness of the important role of the processing and manufacturing industry in national economic development over the long term.

Issuance of the supporting industry development policies is still slow and the policies lack synchronisation. The State management for supporting industries is weak and there is no national standard for supporting industries.

Lacking connections among businesses is also hindering the development of supporting industries. What do you think about this?

Domestic enterprises have been unable to participate deeply in the value chain of leading chain enterprises and foreign enterprises in supporting industries.

According to the statistics, 58.9 per cent of enterprises supplying components for Japanese companies in Việt Nam are foreign direct investment (FDI) companies in Việt Nam. Vietnamese enterprises have accounted for only 13 per cent in the supply chain.

The linkages between domestic private enterprises and foreign companies, and between small and large enterprises, are still limited. For example, Việt Nam has 20 large automobile assembly enterprises, 81 tier-1 suppliers and 145 tier-2 and tier-3 suppliers.

Meanwhile, Thailand has only 16 large car assemblers but it has 690 tier-1 suppliers and 1,700 tier-2 and tier-3 suppliers.

This is because FDI enterprises and large-scale enterprises often have their own supply chains, so they have not actively created opportunities for domestic enterprises to participate in their supply chains.

Meanwhile, Vietnamese enterprises’ products can not yet ensure the standards, quality, cost and delivery time. At the same time, they are mainly small and tiny enterprises with low levels of technology and management, and limited human resources, leading to difficulty in meeting the increasing requirements of their partners.

What processing and manufacturing industries should Việt Nam focus on? What priority policies should be put in place for development?

By 2030, Việt Nam will focus on developing supporting industries for a number of industries, including information technology and telecommunications, electronics, clean energy, renewable energy, processing and manufacturing, and the agriculture sector.

At the same time, it will continue to develop supporting industries for the textile and footwear industry, automobiles, agricultural machines, electrical equipment and medical equipment.

In the period of 2030-45, the nation will focus on developing supporting industries for new generations of information technology and telecommunications industries, digital technology, automation, high-end equipment, new materials and biotechnology.

The Resolution 23-NQ/TW of the Politburo has directed focus on to seven key groups of policies to develop prioritised processing and manufacturing industries.

They include policies on restructuring industrial sectors, policies on creating a favourable business and investment environments for industrial development, policies on industrial enterprise development, and policies on human resource development for industrial sectors.

How are those policies implemented effectively to promote the development of supporting industries?

To improve the ability of enterprises in the industrial sector and the supporting industries, Việt Nam needs to have a developed domestic processing and manufacturing industry. This will open opportunities for domestic supporting industry enterprises to become suppliers and participate in the supply chain of enterprises producing and assembling final products.

In addition, the State needs to actively expand foreign markets for supporting industry enterprises. That will help local enterprises to approach foreign technical processes and production skills to improve productivity.

The State should also have consistent policies in the long term.

Meanwhile, the MoIT will continue to coordinate with related ministries, sectors, localities and organisations to actively accelerate the process of completing mechanisms and policies related to supporting industries. That will create a comprehensive legal framework to boost the development of supporting industries.

The ministry also continues to strengthen cooperation with international organisations and other countries to improve the quality of human resources, speed up technology transfers, and improve the competitiveness of supporting industry enterprises. It will create opportunities for connections between local businesses and foreign partners and promote the process of participating in the global production chain for local enterprises. VNS

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