14:20 | 01/07/2018 Industry
(VEN) - Despite the many incentives and other policy tools adopted by the government to boost support industries over the past decade, domestic enterprises have met only10-15 percent of the demand for parts and components for Vietnam’s manufacturers.
Support industry manufacturers serving the engineering industry have to import 70 percent of materials they need. According to the Vietnam Association of Mechanical Industry (VAMI), there are about 3,100 engineering enterprises with 53,000 manufacturing facilities nationwide, but they are unable to meet the domestic market need. Although Vietnam annually spends tens of billions of dollars on importing machinery and equipment, domestically made mechanical products have reached a domestic market share of only seven percent.
In 2007, the Ministry of Industry (now the Ministry of Industry and Trade) approved a master plan for support industry development to 2010 with a vision to 2020 (Decision 34/2007/QD-BCN). It was followed in 2011 by Prime Ministerial Decision 12/2011/QD-TTg; Government Decree 111/ND-CP dated November 3, 2015; and Prime Ministerial Decision 68/QD-TTg approving a program for support industry development from 2016-2025.
Decision 68 sets out a target for domestic support industry enterprises to meet 45 and 65 percent of domestic manufacturing demand by 2020 and 2025, respectively. According to the decision, Vietnam will focus on developing support industries serving part/component, textile-garment, leather-footwear and high-technology industries from now to 2025.
Although the local content of the domestic assembly industry has increased thanks to the above-mentioned policies, Vietnamese support industry is hobbled by poor quality and design, and high cost compared to imported products of the same kind.
Pham Tuan Anh, Deputy Director of the Ministry of Industry and Trade’s Department of Industry, said Government Decree 111/ND-CP provides many preferences for support industry enterprises, including income tax exemption for the first four years, a 50 percent income tax reduction in the following nine years, and a 10 percent enterprise income tax in the subsequent 15 years. Enterprises can import goods to create fixed assets and implement investment projects without paying import tax, and have half of their research and development-related trial production cost and up to 75 percent of their technology transfer cost supported by the government. The 75 percent rate assistance is for projects with 85 percent of their raw materials deriving from deep processing of minerals inside Vietnam.
In addition, the Ministry of Finance recently issued Circular 29/2018/TT-BTC providing guidelines for establishment, management and use of support industry development program funding.
The state should formulate policies to assist support industry enterprises in market access and initial investment. It
should also require enterprises to adopt a post-assistance development roadmap and contribute to the country’s
support industry development.