Foreign manufacturers import 90 percent or more of their needs

Large market volume

The Government has set a goal for the support industry to meet 45 percent of domestic production needs by 2020 and 70 percent of domestic production needs by 2030.

According to the Vietnam Institute of Industrial and Trade Policy and Strategy under the Ministry of Industry and Trade (MoIT), as of 2017, Vietnam had 1,383 enterprises, accounting for only 0.3 percent of the total number of enterprises in the country. They are divided into three groups: mechanical engineering, electronics, and plastic-rubber.

Institute official Nguyen Thi Xuan Thuy said the market volume for support industries in Vietnam was large, especially with the automobile and electricity-electronics industries, but at present, most parts and accessories of these two industries are imported since the domestic products have not met manufacturers’ standards.

Vietnam has more than 20 automobile assembly enterprises, but only 84 enterprises supply support products at level 1 and 145 at level 2 and 3. Meanwhile, Thailand has only 16 assembly enterprises but they have 690 suppliers at level 1 and 1,700 others at level 2 and 3. “These numbers show a shortage of support industry enterprises in the Vietnamese auto industry,” Thuy commented.

More specifically, Truong Thi Chi Binh, Secretary General of the Vietnam Association for Support Industry (VASI) cited a VASI survey on the supply capabilities of support parts for the plastics, rubber, electric and electronic industries. The results showed that the proportion of imports ranged from 90 to even 100 percent.

Capability enhancement required

Nguyen Duong Hieu, General Director of the Lidovit Industry and Trade Joint Stock Company, said that the capability of domestic enterprises has not met requirements in terms of equipment, management, human resources and control systems. In addition, foreign manufacturers usually buy products from suppliers of their production chains due to their stable quality and competitive prices, rather than commissioning them from Vietnamese manufacturers.

Truong Thi Chi Binh added that foreign manufacturers, especially Samsung, have strict criteria on quality standards, prices, delivery, environment, finance, technology, responsibility and law in selecting suppliers, and only few Vietnamese enterprises meet them.

Therefore, if Vietnamese support industry enterprises want to become suppliers for foreign groups, Nguyen Duong Hieu noted, “They have to learn about the demand and quality required by Foreign Direct Investment (FDI) enterprises. To do this, the State needs to create a favorable legal corridor, map out development orientation, and make product information and standards transparent so that domestic enterprises can fulfill the requirements and join in the supply chains.”

Domestic support industry enterprises also need to plan a long-term vision and their own development strategies by choosing suitable products/product groups in line with market trends.

To focus on the development of support industries, experts in this field have suggested a number of solutions. One of those is linking strong financial organizations with support industry enterprises to improve their competitiveness. More importantly, domestic enterprises could learn high-tech industrial production and modern management methods.