Covid-19 provides opportunities for Vietnam’s support industries

06:00 | 30/09/2020 Industry

(VEN) - The Covid-19 pandemic is creating an opportunity for supporting industry enterprises to enter the global supply chain.

covid 19 provides opportunities for vietnams support industries

Unexpected opportunity

Data from the Vietnam Industry Agency (VIA) under the Ministry of Industry and Trade (MoIT) show that Vietnam currently has about 1,800 supporting industry enterprises, accounting for about 4.5 percent of the total number of enterprises in the manufacturing and processing industry, of which 300 are participating in the supply chain of multinational companies.

Despite concerted efforts, Vietnam’s supporting industries have not developed as expected. Consequently, Vietnamese enterprises’ participation in the global value chain has been slow and ineffective. With the Covid-19 outbreak, many businesses found themselves crippled by lack of input materials for production.

VIA General Director Truong Thanh Hoai assessed that production, business management level and production capacity of domestic supporting enterprises are still low, while supplies for FDI enterprises remain limited. Most of them manufacture products under small contracts and therefore FDI enterprises often seek imports of materials and accessories from foreign partners.

However, apart from negative impacts, the Covid-19 pandemic also created a new path for domestic supporting industry enterprises. “After China, the Republic of Korea and Japan halted production due to the pandemic, the FDI enterprises in Vietnam are considering domestic partners. Therefore, domestic enterprises need to grasp this opportunity to enter the global supply chain and affirm their positions in the chain,” Hoai said.

VIA said the MoIT has completed cooperation programs with FDI enterprises, especially leading enterprises with large-scale projects like Samsung Group.

covid 19 provides opportunities for vietnams support industries

Targets set

In order to participate in the supply chain of multinational companies, Vietnamese enterprises must overcome their inherent limitations including the lack of strategy; poor manufacturing practices; lack of production technology, managerial and production plans; and human resources to support real production.

In addition, the state needs to adopt more transparent and synchronous policies for businesses and introduce effective solutions to connect domestic supporting industry enterprises with FDI enterprises. To realize this goal, the MoIT will continue to build and complete policies, ensure a favorable business environment with low market entry costs to facilitate the development of supporting industry enterprises, especially the small and medium-sized ones.

It will also propose policies to encourage localities in allocating budgets for development of supporting industries; promote market development for downstream industries, focusing on automotive, electronics, textiles, footwear, and materials industries. Apart from the state’s support, economists say enterprises themselves need to proactively grasp and make good use of new opportunities for further development.

A recent resolution issued by Prime Minister Nguyen Xuan Phuc (115/NQ-CP) on development of support industries is expected to create a major boost for support industries as well as for manufacturing and processing industries.

The resolution sets out a target for Vietnamese enterprises to produce highly competitive supporting industrial products, meeting 45 percent of the essential needs for domestic production and consumption, and accounting for about 11 percent of industrial production value by 2025. About 1,000 enterprises are expected to be capable of supplying directly to assembly enterprises and multinational corporations, of which domestic enterprises will account for about 30 percent by 2025.

Vietnam has set a target for supporting industry products to meet 70 percent of domestic demand, accounting for about 14 percent of industrial production value, by 2030. Under this scenario, about 2,000 enterprises will be capable of supplying directly to assemblers and multinational corporations in the country.

Viet Anh