Improving capital access for support industries

12:35 | 13/11/2016 Industry

(VEN) - Weak development and limited capacity are main reasons leading to difficulties for support industry businesses in participating the global supply chain of multinational corporations.

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improving capital access for support industries

Difficulties in accessing capital

According to the Ministry of Industry and Trade’s statistics, there are nearly 1,400 businesses in support industries, accounting for 0.3 percent of total numbers nationwide. As investment in support industries remains limited, businesses have faced many difficulties in accessing capital to purchase new machinery and equipment as well as conduct technology transfer.

Trinh Thi Ngan from the Hanoi Association of Small and Medium Enterprises said that businesses have mainly asked for loans from commercial banks as the state’s supports remain few. In particular, small and medium-sized enterprises have seen more difficulties in accessing capital.

“Support industries require a large source of capital, while the payback time is slow. Therefore, accessing capital is seen as the largest barrier for support industry businesses,” Ngan said.

The Ministry of Science and Technology’s Department of Local Science and Technology Development Deputy Director Tran Van Quang said that 25 percent of capital for support industry businesses is sourced from the securities market, bonds and investment funds, while the remaining is from commercial banks. Therefore, a specialized financial regulation to earmark capital for support industry businesses from investment funds is needed.

Most of support industry businesses are small and medium-sized enterprises, even micro ones. Therefore, assessing technology capacity and business development strategies in a sustainable manner are still missing.

Expanding opportunities

To be able to manufacture complex components and spare parts for multinational corporations, it requires a comprehensive policy system with specific plans to encourage economic sectors to invest in support industries.

The Ministry of Industry and Trade’s Heavy Industry Department Deputy Director Pham Tuan Anh said that the government has issued many preferential mechanisms and policies for support industry businesses such as corporate income tax exemptions for the first four years, a 50 percent reduction for the next nine years, or tax exemptions for imported goods to create fixed assets and materials and equipment to implement investment projects. In particular, Decree 111/2015/ND-CP has allowed investors to enjoy 50 percent of pilot production budget in research and development activities.

In addition, to encourage the development of support industries, Tran Van Quang proposed to build support funds, creating favorable conditions for businesses in accessing incentives.

In addition to overall measures, it requires strong financial organizations to accompany with businesses in support industries.
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