Businesses in support industries growing in quantity, quality

In a recent report submitted to the National Assembly Standing Committee and legislators, the Government cited statistics showing that companies in support industries account for nearly 4.5% of all manufacturing and processing businesses and have created more than 600,000 jobs, equivalent to 8% of the workforce in the manufacturing and processing sector. Their net revenue now tops VND900 trillion (US$38.9 billion), or about 11% of the sector’s total.

Some Vietnamese enterprises boast relatively good capacity in producing moulds, bicycle and motorbike components, electrical cables, plastic and rubber components, and tyres, meeting domestic demand and the requirements of foreign importers.

The report noted that support industries play a decisive role in restructuring the economy, improving workplace productivity and skills, and promoting the competitiveness and quality of Vietnamese goods and the economy.

Given this, the Ministry of Industry and Trade has provided advice to the Government and the Prime Minister and issued drastic directions to boost the role and stature of support industries, in line with Politburo Resolution No 23-NQ/TW, dated March 22, 2018, on orientations for building the national industrial development policy to 2030 and vision to 2045.

The ministry is also working to set up three technical centres for supporting industrial development in the northern, central, and southern key economic regions.

These centres will help industrial producers and enterprises in support industries carry out innovation, transfer technology, improve productivity and quality, increase added value in their products, and take part in global supply chains, according to the report.

However, the Government also pointed out that among the 1,800 or so manufacturers of spare parts and components nationwide, only 300 have joined the production networks of multinational corporations.

Production management capacity and technology at most Vietnamese firms in support industries also remains limited, it said, adding that domestic firms have met just 10% of domestic demand for products made by support industries.

There is still a “very large” gap between the needs of multinational corporations and the capacity of domestic businesses, the Government acknowledged.

It said that in order to develop local support industries, it is necessary to overhaul existing mechanisms and introduce more modern versions that better reflect Vietnam’s global integration commitments and create the conditions necessary for enterprises in support industries to grow.

New investment management and attraction policies should also be introduced to ensure that foreign-invested enterprises are connected with and transfer technology to domestic companies, the report suggested.

In addition, there is a need for the continuation of efforts to develop “downstream” industries that turn out or assemble products, for sectors such as energy, precision mechanics, and mechanical engineering.

To do so, the Government must adopt appropriate policies to protect the domestic market and create a healthy business environment to facilitate the manufacturing of industrial products, according to the report.

It added that support policies should focus on certain enterprises in key “downstream” industries, such as automobiles, electrical and electronic appliances, textiles and garments, and footwear, to help them become comparable to the regional competitors so they can fuel the growth of businesses in local support industries.

Flexible and appropriate tariff policies on imported components and spare parts also need to be adopted, to help enterprises cut down on production costs and improve product competitiveness.

“Downstream” industries are important to the development of support industries and in attracting multinational corporations to large-scale projects in Vietnam, the Government noted.