Localization rate remains low

According to a report by the Vietnam Industry Agency (VIA) under the Ministry of Industry and Trade (MoIT), the underdeveloped supporting industry makes Vietnam unable to be self-sufficient in production inputs, resulting in a heavy dependence on imported spare parts and raw materials. This problem has persisted for many years, reducing the added value of domestic industries. In recent years, manufacturing and processing industries accounted for a high proportion of nearly 40 percent of the total net production and business revenue of the economy, but only contributed about 14 percent to the total GDP, which is very low compared to other industries.

Production of supporting industry products at Machine Spare Parts No.1 Joint Stock Company - Photo: C.D

Data from the Organization for Economic Cooperation and Development (OECD) show that, in the past five years, in the added value structure of Vietnam's export products, foreign countries still accounted for a large proportion, while the rate of domestic value added was still low and has not changed significantly. For example, Vietnam's two main export products, textiles and electronics, have the rates of domestic value added of only 50 percent and 37 percent, respectively.

Therefore, developing the supporting industry and gradually becoming self-reliant on domestic raw materials and spare parts is one of the core issues for the sustainable development of Vietnam's industrial sector in the long term.

Sustainable industrial development

A representative of the VIA said that first of all, it is necessary to improve the capacity of supporting industry enterprises; opening up market opportunities for supporting industry enterprises to become suppliers and participate in the supply chain of enterprises manufacturing and assembling final products. In addition, it is necessary to speed up the construction progress of concentrated supporting industrial parks to create industrial clusters.

General Secretary of the Vietnam Association of Supporting Industries (VASI) Truong Thi Chi Binh proposed that in the long term, the Government promulgate the Law on Supporting Industries and the Law on Development of Key Industries to affirm the importance of this type of industry, then developing specialized policies to promote industrial development, welcome investment flows and shift production from other countries.

Dr. Nguyen Van Hoi, Director of the MoIT’s Institute of Industrial Strategy and Policy Research, proposed attracting investment and developing production in the fields of processing and manufacturing, especially high-tech application fields, improving the autonomy of the industrial sector through the development of the supporting industry. Accordingly, it is necessary to encourage all economic sectors to invest in the supporting industry; continuously improve mechanisms and policies, improve investment procedures to be more and more open to encourage investors, and at the same time have priority and incentive policies to attract projects producing supporting industry products with applications of modern technologies.