Govn’t incentives, business initiatives boost support industries

Government policies

To boost manufacturing and support industries, the Ministry of Industry and Trade has suggested that the government apply a number of mechanisms and policies to promote support industries. These include Governmental Decree 111/2015/ND-CP providing incentives in corporate income tax, import tariffs, added value tax, investment credit and land rent for businesses in the support industry.

In addition, via Governmental Decision 68/QD-TTg dated January 18, 2017, Prime Minister Nguyen Xuan Phuc adopted the Ministry of Industry and Trade’s Program for Development of Support Industries from 2016 to 2025 at a total cost of about VND1 trillion.

According to Phan Huu Thang, former head of the Ministry of Planning and Investment’s Foreign Investment Agency, Vietnamese support industry development policies are fairly comprehensive, reflecting the government’s recognition of their importance in the development of the industrial sector and accelerating the pace of industrialization and modernization. The implementation of these decrees has paved the way for support industry businesses to have access to governmental preferences in order to build and expand capacity.

Business initiatives

Vietnamese businesses have a hard time becoming suppliers of such giants as Samsung, Canon and LG and entering the supply chains of global groups. For this reason, apart from the government’s preferential policies, businesses need to take the initiative in renewing their development model, considering in-depth investment and technological innovation as a measurement of their development.

The general director of 4P Company Ltd. Hoang Minh Tri said his company is currently the number-one supplier of LG and Samsung, providing an average of more than three million products such as chips for 3D televisions, printers and cameras. 4P’s success is largely due to wise investment in technology, training of managers and operators, and setting up a standard management system. “We realized that the world’s technologies are developing fast, and the level of professionalism is also increasing. This is why, instead of making complete products, we have begun producing small accessories which meet international standards,” he said.

According to Dao Duy Luan, deputy director of the Systech Technology & Trading JSC, his company has provided parts for about 300 foreign direct investment (FDI) businesses from Japan and the Republic of Korea, including big-name groups like Samsung, Brother and Canon. The company turned over about US$9.3 million per year. Before 2015 the company was mostly engaged in trading services, but it has recently partnered with small to medium-sized businesses from Malaysia, the Republic of Korea and Japan for production of component parts in Vietnam.

Le Nguyen Anh Tuan, director of the Loriot Company Ltd., said his company achieved revenues of about VND120 billion in 2017, mostly from providing spare parts and technical services for foreign groups like Samsung. He underscored the great need to invest in new production lines in order to be able to make products for FDI businesses.