5,000 firms from the supporting industry have entered the global value chain

DNHN - Currently, there are over 5,000 processing firms in Vietnam that provide replacement parts for the automotive and mechanical sectors. In which 70% of firms participate in providing domestic manufacturers, 8% supply exports and 17% provide both. As a result, approximately 30% of supporting industry businesses have entered the global supply and value chains.

Mr Pham Tuan Anh, Deputy Director of the Department of Industry, Ministry of Industry and Trade, provided the following information at the seminar "Developing Vietnam's Industry's Position in the Global Value Chain," which was recently conducted by Industry and Trade Newspaper.

Mr Pham Tuan Anh stated that in the textile, garment, and footwear industries, 64% of supporting industry enterprises supply the domestic market (of which 3% are supplied to FDI enterprises), 9% export, and 27% supply to both markets; in the rubber, plastic, and chemical industries, 52% of enterprises supply the domestic market, 4% export, and the remaining 44% supply to both markets. In the electronics sector, 44% of firms supply the domestic market (of which 22% provide totally for FDI), 16% supply the export market, and 40% supply the industry for both domestic and export markets.

In the mechanical and automobile sectors, 83% of firms only provide the domestic market, 3% of enterprises only supply the export market, and 14% of enterprises supply both markets.

Although the government has collaborated with organizations and firms to conduct actions to develop links between FDI enterprises and domestic enterprises in Vietnam, this relationship is still shaky, owing to the industry's weak internal strength.

Objectively, Vietnam's industry evolved 2-3 generations behind that of other regional nations; nonetheless, the small market size does not ensure the capacity scale for industrial products to compete on price with the market. Meanwhile, due to international commitments, there is little room for official involvement in industrial growth.

Global enterprise business practices frequently use enterprises that have provided supporting industry products in their production chains or enterprises of the same nationality, creating less favourable conditions for Vietnamese enterprises to participate in the value chain of multinational corporations in the future.

Furthermore, social resources have not been concentrated on production investment. The nature of the manufacturing industry necessitates a significant amount of long-term capital investment, whereas social resources spent in production are highly restricted due to the long payback time and lower profit margins compared to investment in other industries such as real estate and banking.

Subjectively, from the standpoint of business and industry, Vietnam now lacks firms that play a significant role in the industry.

The quality of human resources and the degree of enterprise remain restricted. R&D (research and development), new product development, and a lack of investment money have all been neglected.

In terms of state management, due to the overlapping conflicts of other sectoral regulations, the promulgation and allocation of resources for the execution of policies to assist the growth of the supporting industry is still ineffective.

According to the Deputy Director of the Department of Industry, the Ministry of Industry and Trade has been actively cooperating with government agencies from other countries (Korea, Japan, Sweden, Switzerland, UK...), international organizations, and several large multinational corporations (typically Samsung) to improve domestic supporting industry enterprise.

Long-term, the recommended approach is to help domestic industrial businesses strengthen their competitiveness (focusing on the development of human resources for industry and science and technology, innovation associated with the practice, and with needs of domestic industrial enterprises).

Furthermore, strengthening ties between domestic enterprises and the FDI sector and the global market to capitalize on opportunities from free trade agreements and the fourth industrial revolution to bring businesses into the global domestic industry and participate more deeply in the global value chain.

Commenting on the fact that Vietnam's industry is still in the process of establishment and growth. It is necessary to renew the national industrial development policy in such a way that, rather than focusing on management, it is necessary to focus on resources to promote the domestic processing and manufacturing industry, which is qualified to participate in the global production chain, thereby creating a foundation for the country's industrialization and modernization.

PV