Low localization rate

According to the Hanoi Department of Industry and Trade, as of the end of 2022, the capital had about 900 supporting industry companies. Of these, nearly 300 companies have created products meeting international standards and participated in global value chains, helping increase the contribution of the processing and manufacturing industries to the economy.

MBT Electrical Equipment Joint Stock Company has to import most of the input materials and manufacturing equipment - Photo: Can Dung

However, Hanoi’s supporting industries still reveal some problems. Specifically, products remain simple with low to medium technological content and low values. The current localization rate of the automotive industry ranges from 5-20 percent; electronics industry from 5-10 percent; textile and garment industry 30 percent; and manufacturing engineering from 15-20 percent.

Due to the low localization rate, Vietnam has to spend tens of billions of US dollars on component and accessory imports each year. The electronics and automotive industries have to import US$35-50 billion worth of components annually. Moreover, supporting industry companies still lack resources for innovation. They remain incapable to supply components and spare parts of high technological content - this hinders their participation in global production chains.

Tran Van Nam, Chairman of the Board at the MBT Electrical Equipment Joint Stock Company, said that the company has invested US$15 million in upgrading machinery. MBT has to import most of the input materials and manufacturing equipment because the quality of domestic products does not meet requirements. For example, while a made-in-Vietnam screw costs VND1,000, MBT has to spend US$1.5 to buy a foreign-made one of the same category to ensure international standards.

Hanoi expects to have 950 supporting industry companies in 2023 - Photo: Can Dung

Targeting 950 companies

Hanoi has issued a program on supporting industry development in 2023, under which the capital expects to have 950 companies operating in this field this year. Among those, from 300 to 350 companies are expected to have production facilities and products meeting international standards and be capable of participating in the global manufacturing networks of multinational groups in Vietnam.

To achieve the set target, Hanoi will hire technical consultants for supporting industry companies in prioritized fields and sectors, helping them apply management systems meeting the requirements of global production chains.

The capital will also help supporting industry companies access advanced technologies, copyright, patent, and software, as well as in research and development, and technological innovation in manufacturing components and spare parts.

According to the Hanoi Department of Industry and Trade, supporting industry companies in the capital have grown in terms of both quantity and quality, focusing on three groups of sectors: 1) manufacturing components and spare parts; 2) products catering for textile, garment, leather and footwear industries; and 3) products catering for high-tech industries, especially manufacturing.

Under the orientation for supporting industry development in the 2021-2025 period, with a vision to 2030, Hanoi is promoting modern, high-tech and green industries. The municipal government has provided guidance for the Department of Industry and Trade and related units and associations to enhance the competitiveness of supporting industry companies.