Support industry needs breakthrough policies

Various innovations

Domestic supporting industry enterprises have increasingly been applying modern management tools to production and manufacturing. A number of large economic groups in the fields of basic industry, materials, and mechanical engineering have been established and posted strong growth, including Viettel, Vingroup, Truong Hai, Thanh Cong, Hoa Phat Groups, creating a solid foundation and helping Vietnamese enterprises join the global production network and value chain.

Visitors at Hanoi Industrial Products, Machinery, Equipment and Automation Fair 2023 Photo: Tue Minh

For example, for many years, many types of passenger cars of Truong Hai Group Corporation (THACO) have had the localization rate of 30 to 40 percent, and gradually increased as its sales have been on the rise. Notably, the localization rate of buses is much higher. In 2023, THACO is expected to earn hundreds of millions of US dollars from the export of its mechanical equipment.

Similarly, most of the Toyota Vietnam’s cars have achieved a localization rate of 40 percent, especially the Toyota Vios model even reaching 43 percent according to ASEAN’s value-added formula.

However, Vietnam’s supporting industry has not matched its potential as most enterprises in this field are of small- and medium-sizes; therefore, they have been facing a lot of difficulties in terms of market, technology, human resources, capital, and more. In addition, Vietnam’s supporting industry market size remains small and has not yet attracted investors in the field.

Much room for development

Currently, only about 0.2 percent of the total nearly one million Vietnamese enterprises are engaged in supporting industry production - a very low rate compared to other ASEAN countries. Vietnam’s supporting industry products are mainly in such areas as textiles, footwear, wood processing and mechanics, while high-tech, sophisticated and complex products have not received proper investment to build supporting industry plants that can meet other countries’ requirements. Therefore, Vietnam’s supporting industry is in dire need of both intensive and widespread development and it shows that the domestic supporting industry still has much room for further development.

The Vietnam Industry Agency under the Ministry of Industry and Trade said that the ministry has also established three technical support centers for industrial development in the three northern, central and southern economic regions. These centers aim to help enterprises in the supporting industry accelerate innovation, technology transfer for production and testing, and improve productivity and quality while seeking to participate in the global supply chains.

Pham Van Tai – THACO General Director, said that Vietnam now has three forces to develop supporting industry: The market pull, the technology push and the leverage of policies. Support policies should focus on efficiency, such as tax incentives, investment in specialized and high-value industrial parks, or others to help integrate domestic businesses into the world economy.

In addition, the State needs to devise comprehensive solutions to improve the internal capacity of enterprises in science - technology and finance and enhance support for Vietnamese supporting industry enterprises to join the multinational corporations’ supply chains.