Concerns over domestic support industry development

According to a survey of the Support Industry Enterprises Development Center, affiliated to Ministry of Industry and Trade’s Institute for Industry Policy and Strategy, there were nearly 500 support industry enterprises (SIEs) in 2011 producing components and spare parts for assemblers, especially FDI companies. Of which, 94 enterprises were relatively large with more than 300 workers, 69 medium enterprises and 182 small enterprises.

Dr. Truong Thi Chi Binh from the Institute for Industry Policy and Strategy said, “Vietnam is facing a lack of qualified providers to act as the middleman between small businesses and manufacturer and assemblers.”

With more than 40 year experience in working in Japan and several other foreign countries, The Japan International Cooperation Agency (JICA) volunteering senior Fukurohata Yoshihisa said, “A majority of Vietnam’s SIEs face problems as they can’t afford the equipment to meet the requirements for high accuracy processing set by Japanese enterprises. In addition, domestic SIEs are also encountering procedural problems related to investment and legal issues.”

General Director of Xuan Kien Automobile Corporation Bui Ngoc Huyen said, “high-tech investment in automobile spare parts is hardly possible due to the current management mechanism and high-interest rates as SIEs don’t dare to borrow money or pool their investment.”

Speaking at a recent seminar on SIEs in the Northern Key Economic Zone, Deputy Minister of Industry and Trade Le Duong Quang also pointed out a few shortcomings in the domestic support industries such as a weak supply capacity in terms of the localization ratio for industries including the auto, electronics and shipbuilding sector at an average 10-15 percent; low value added to domestic products and components; imported raw materials for manufacturing sectors; a domestic labor force incapable of meeting employer requirements; and small number of SI-engaged manufacturing enterprises compared to the total number of the whole economy. Meanwhile, AFTA integration challenges by 2018 put an increasingly heavy pressure on most SI sectors.

Suggested ways to develop domestic SI

Dr Truong Thi Chi Binh said, “The domestic SI sector can develop in some areas as Vietnam has participated in the global supply chain, i.e. something that can be localized can also be exported. For example, some Vietnamese SIEs have provided items for Toyota globally, such as antenna, wires, air bags, seats, and compartment lids worth US$200 million, much higher in value compared with the supply to Toyota Vietnam last year.”

Fukurohata Yoshihisa said, “Vietnamese SIEs are very young and will mature over the next five years. The two points to note are their increased cooperation with foreign partners and improved management capacity even at workshop level.”

According to Dr. Truong Thi Chi Binh, Vietnamese SIEs should immediately take a hand in business association development, technology selection and priority products, and vocational training. According to Deputy Minister Le Duong Quang, SI development is a matter of special concern. The SI development framework policy has been formed and is slowly being improved via Prime Ministerial Decision 12/QD-TTg on support industry development prioritization and Decision 1483/QD-TTg on the list of prioritized SI product development. Most recently, the Ministry of Industry and Trade submitted and received Prime Ministerial approval in the Decision 1556 dated October 2012 on assistance for SI small and medium enterprise development. The ministry is also urgently implemented the SI development master plan to 2020 with vision towards 2030, with Government directions to the establishment of intensive industrial zones in the cities of Haiphong and Ba Ria.

In the coming time, the Ministry of Industry and Trade will hold SI conferences and exhibitions in domestic key economic zones, offering domestic SIEs with opportunities to access business information, establish partnership, and participate in discussion about regional SI policy development. These SIE policy recommendations will be recorded to propose to the Government and related ministries for further consideration./.