Missing links in accessing global supply chains

14:35 | 22/03/2017 Investment

(VEN) - According to the Japan External Trade Organization (JETRO) in Hanoi, the local content of Japanese enterprises operating in Vietnam has so far reached only slightly more than 30 percent, much lower than in other countries in the region. At the same time, Vietnamese enterprises are only achieving local content of 13 percent.  

Vietnamese enterprises need technological investment
to compete with foreign-invested companies

Joining supply chains

According to a Samsung Group representative, only 200 Vietnamese enterprises supply components and parts to Vietnam-based Samsung factories, accounting for a very small number of the thousands of suppliers serving Samsung Vietnam. Moreover, Vietnamese enterprises are only capable of making simple and low-value products, such as packaging, but not high-tech and high-value products like those supplied by foreign direct investment (FDI) companies in Vietnam.

HTMP Vietnam is one of companies supplying parts and components for many leading foreign corporations in Vietnam, such as Canon and Samsung. Its director, Nguyen Van Hao, points to inadequate infrastructure, including equipment and technology, and lack of skilled workforce, as the two biggest obstacles to Vietnamese participation in global supply chains. Most Vietnamese companies are small to medium in size, with modest human resources and finances that are insufficient to meet the high requirements of leading foreign corporations.

Solutions

According to Hao, objective factors related to policies and the investment environment also have a significant impact on the ability of Vietnamese enterprises to participate in global supply chains. To become a partner of major corporations such as Canon, LG and Samsung, Vietnamese enterprises have to compete not only with foreign investors in Vietnam, but also with the satellite companies of these corporations.

Hao proposed that the government provide assistance in the form of medium-term credit for Vietnamese businesses to enable them to procure advanced equipment and technology, helping them compete with FDI companies.

Pham Thi Thanh Ha, head of sales for Viet Hung Packaging Co., Ltd, agrees with Hao. Although Viet Hung is the first Vietnamese enterprise to supply packaging for the Samsung mobile phone manufacturer in Bac Ninh Province, she said, the company can be driven out of the chain as soon as it stops satisfying Samsung’s requirements. Therefore, the company has to regularly invest in advanced machinery and technologies and improve productivity, quality and design to meet Samsung’s requirements, she added.

Ha suggested the state issue more specific policies to ease competition between Vietnamese enterprises and their FDI counterparts in relation to products so that domestic businesses can meet market demand.

HTMP Vietnam Director Nguyen Van Hao said ensuring product quality and on-time delivery are two of the keys to achieving

access for Vietnamese enterprises into global supply chains.

Nguyen Hoa