Vietnam-Japan ties in support industry development

Support industries remain weak

The Ministry of Planning and Investment’s Central Institute of Economic Management recently got together with Japan’s Mitsubishi Research Institute (MRI) to launch a support industries promotion workshop where Japanese experts provided an overview of support industries in Vietnam in recent years and shared their experience in this field.

According to Dr Yoichi Sakurada from the MRI, Vietnam can develop support industries better than other countries in Southeast Asia such as Myanmar, Laos and Cambodia. However, when compared with developed countries in the region, Vietnam fell a long way behind. This is why the sector remains undeveloped and does not play a good role in the economy.

Like many other Asian countries, Vietnam is attractive to foreign investors. By the end of September, Vietnam had attracted a huge US$290 billion worth of foreign direct investment (FDI) from 115 countries and territories worldwide. However, the country has not yet made the most of FDI flows, partially due to the underdevelopment of support industries.

Statistics show that there are 1,383 support industry businesses nationwide accounting for 0.3 percent of total businesses. Underdeveloped support industries have also caused increased trade deficit and low competitiveness.

Many Japanese companies in Vietnam said they have faced problems with support industries. For example, Canon Vietnam has to spend a large amount of money on import of accessories and component parts each year. The company expected to buy component parts from Vietnamese enterprises, rather than imports.

Aware of the important role of support industries, Vietnamese authorities have raised their attention to the development of this sector via a series of legal documents, including a prime ministerial decision on policies for support industries development and Decree 111/2015/ND-CP dated January 1, 2016, which together opened up major opportunities for support industries.

However, Dr Yoichi Sakurada said that the Vietnamese support industries are still in the early stage of development, despite increased efforts.

SMEs are the core

Japan is one of the world’s top countries in terms of support industries. According to Dr Yoichi Sakurada, for this to happen, the Japanese government has put in place a full array of policies, of which some have succeeded and some have failed. However, patience and support for small and medium-sized enterprises (SMEs) have brought success to the country.

Specifically, the Japanese government has provided transparent description of support industries including five segments, including materials, machinery and molds, accessories and component parts, assembly, and support services.

To boost support industries, the Japanese government has set up local public technology centers (LPTCs), which have provided policies for each locality and support for enterprises in order for them to develop support industries. To contribute to that development, the government, ministries, localities and businesses in Japan have seriously implemented their set policies.

Japanese experts said that developing support industries is the key for Vietnam to deepen its global economic integration and make the most of opportunities from new-generation free trade agreements (FTAs). They also said that the Japanese government is willing to help Vietnam develop support industries. In doing so, they will not only help Vietnam boost support industries but also help Japanese companies operate better in Vietnam.

Central Institute of Economic Management Deputy Director Nguyen Thi Tue Anh said that many new-generation FTAs that Vietnam has signed or is preparing to sign provide strict regulations on the country of origin, or the local content of products subject to tariff preferences given by FTA member countries. As an example, Vietnam will not achieve benefits from the Trans Pacific Partnership (TPP) or the EU-Vietnam FTA in the event that support industries are not developed and the local content of products does not meet requirements. As a consequence, Vietnam will continue facing difficulties in entering the global economy.

Also according to Nguyen Thi Tue Anh, Vietnam needs to learn from Japan by considering SMEs as the core of support industries and strongly supporting them in order to give them an easy access to credit, technology and opportunities to connect with major foreign groups currently investing in Vietnam.

Nguyen Hoa