Development engine for support industries needed

11:28 | 13/05/2016 Industry

(VEN) - The signing of the Trans-Pacific Partnership (TPP) will offer opportunities as well as pose difficulties for the development of Vietnam’s support industries due to the application of rules of origin to enjoy tax incentives.

Development engine for support industries needed

Many policies were put in place to encourage the development of support industries

According to experts, Vietnam’s support industries remained limited due to lack of clear market-driven policies. In particular, domestic manufacturers have not yet produced simple products such as buttons, screws and phone jacks.

The signing of the TPP will create strict legal commitments and promote links following production chains. To enjoy tax incentives by TPP member countries, Vietnamese support industry businesses must ensure the local content of at least 60 percent.

However in a context where Vietnam’s support industries do not have a solid foundation, while support industry businesses remain weak, the risks of market withdrawal are huge. Vietnam cannot make most of advantages due to the missing of support industries. If Vietnam does not develop support industries to help small and medium-sized enterprises enter supply and production chains, the country will not be able to enjoy tax incentives from TPP member countries.

The effects of the TPP have attracted the engage of businesses that are likely to invest in support industries, while promoting domestic manufacturers to strengthen investment in the supply chain to make most of opportunities. It has also changed the perception of policy makers. Many policies encouraging the development of support industries have been issued to optimize all kinds of resources.

Governmental Decree 111/2015/ND-CP on the development of support industries was issued in late 2015 and took effect on January 1, 2016. According to the decree, the development of support industries included activities supported by state management agencies, organizations and inpiduals in its sector, training of human resources, research and development, technology transfer, international cooperation, market development, investment in support industry products and service supplying. The Vietnamese government considered the VND1.72 trillion investment plan in support industries in the next 10 years. Of which, around VND890 billion will be used for research and development activities.

In order to realize the policy, the Ministry of Finance issued Circular 21/2016 took effect on April 1, 2016 guiding on preferential corporate income tax for support industry projects. The State Bank of Vietnam also issued Circular 01/2016/TT-NHNN guiding on loans for the development of support industries. In addition, the Ministry of Industry and Trade is drafting the program on developing support industries during the 2016-2025 period in order to support organizations and inpiduals to improve capacity.   


Hai Minh