09:02 | 03/04/2014 Economy
(VEN) - At a seminar on improving links between foreign and domestic businesses held in Hanoi on March 26, many delegates said that Vietnam has had over 25 years attracting foreign direct investment (FDI) however, until now the links between FDI enterprises and domestic firms has remained loose. To strengthen this coordination, domestic enterprises need to make efforts themselves apart from support policies from the government.
Improving links between foreign and domestic businesses helps Vietnam join the global production chain
According to data from the Foreign Investment Agency (Ministry of Planning and Investment), by February 2014, Vietnam had attracted more than 16,000 FDI projects with total registered capital of US$234.7 billion. These projects were undertaken by over 100 countries and territories, focusing on 18 sectors and fields across 63 cities and provinces in Vietnam.
Many of FDI projects in Vietnam were implemented by global groups such as Toyota, Honda, Samsung, Intel and LG, making a good contribution to Vietnam’s economy and import-export activities over recent years. However, the fact remains that the links between FDI enterprises and domestic businesss remained loose.
Truong Chi Binh, director of the Center for Enterprises Development in Support Industries under the Industrial Policy and Strategy Institute of the Ministry of Industry and Trade said that although FDI capital flows into Vietnam had amounted to US$234.7 billion, until now only several hundred domestic enterprises work in support industries, which is too low compared with the registered FDI capital.
For example, the localization rate of Honda was up to 94 percent and there were now about 100 enterprises in Vietnam providing parts and components to Honda, of those 80 are FDI businesses and 20 are domestically-owned. Similarly, there are 12 enterprises providing parts and components to Toyota, including two Vietnamese businesses, with the remainder FDI-owned.
Truong Chi Binh said some of the reasons for the loose links between the FDI and domestic enterprises were the lack of support policies and mechanisms from the government. Additionally, domestic enterprises have not been active to learn and enhance links with the FDI firms.
Sharing the same view, Professor Kenichi Ohno from Japan’s National Graduate Institute for Policy Studies (GRIPS) said the loose links were not only restricting FDI expansion and influence on Vietnam’s economy but was also pushing Vietnam into the middle-income trap.
With 14 years of experience working in Vietnam, Professor Kenichi Ohno assumed that in a bid to enhance links between FDI and domestic enterprises, the Vietnamese government needed to adopt policies to increase the capacity of domestic enterprises, providing them with opportunities to increase links with the FDI enterprises. Meanwhile, domestic businesses also had to exercise themselves, improve their technology and management skills to fulfill that objective.
In addition, Professor Nguyen Mai, the chairman of the Vietnam Association of Foreign Invested Enterprises said, attracting more investors into the support industries was also a solution to the issue./.
Professor Doctor Tran Tho Dat, the Vice Rector
of the National Economics University:
Enhancing links between the FDI and domestic enterprises will raise internal value to promote Vietnam’s rapid and sustainable development, helping the country join the global value chain and accelerate its industrialization and modernization process.
By Nguyen Hoa