15:14 | 27/08/2016 Industry
(VEN) - The government has created favorable conditions to encourage businesses to invest in support industries. However it must change its growth paradigm from extensive to intensive development to improve the economic quality.
Low local content
Vietnam currently has 1,383 support industry companies, accounting for 0.3 percent of total 500,000 businesses, which is hard to rapidly develop support industries. Low localization ratio and great dependence on imported materials are the key challenges.
Japan External Trade Organization (JETRO) Hanoi Chief Representative Atsusuke Kawada said that the localization ratio of Vietnamese businesses remains low. The overall local rate stood at 32.1 percent in 2015, higher than that of 22.4 percent in 2010 and down slightly against 2014.
“The rate is much lower than China’s 64.7 percent, Thailand’s 55.5 percent, Indonesia’s 40.5 percent and Malaysia’s 36 percent,” he added.
Hanoi Supporting Industry Business Association (HANSIBA) Chairman Nguyen Hoang affirmed that although the export of industrial products has recorded strong growth, it has not yet brought efficiency as Vietnam mainly exports goods with low technology content.
Many support industry businesses have short-term leasing production premises, which prevents them from a long-term investment and development, Tri Cuong Industrial Co., Ltd. Director Le Thanh Thuy said. Therefore, the development of industrial zones and clusters in different locations is needed.
The Government Office announced the conclusion of Deputy Prime Minister Trinh Dinh Dung on developing support industries with a focus on the automotive sector and engineering in late July 2016.
Determining an important role of support industries, the government issued Decree 111/2015/ND-CP dated November 3, 2015 on developing support industries with priorities to support research and development, technology transfer and market development as well as preferential tariffs to encourage businesses to further increase investment in support industries.
However, current policies need to be improved to create favorable conditions for businesses. The deputy prime minister has assigned the Ministry of Industry and Trade to cooperate with relevant ministries and agencies to consolidate the steering committee.
According to Dr. Duong Dinh Giam, Former Director of the Institute for Industrial Policy and Strategy Studies of the Ministry of Industry and Trade, support industries need to focus on its competitive advantage in garments and textiles, leather and footwear to enjoy the benefits of Trans-Pacific Partnership.
The development of support industries in agricultural product processing is also mentioned as necessary.