Last updated: Tuesday, February 19, 2019


Opportunity for Vietnamese Businesses to Enter Supply Chains of Supporting Industries

Posted: Monday, July 02, 2018

Investing to build automotive parts production factories is considered a new direction of South Korean companies, whilst the world market demand for this industry has been gradually saturated.

Opportunity to join supply chains
The drop was attributed to stiff competition from global brands. In addition, South Korea's auto parts exports dipped 6.5 per cent to US$1.83 billion in January on dismal sales in North America and Asia. Experts forecast that the competition in this industry will escalate as South Korea's auto industry seems not to catch up with major shifts in the world's automobile industry - to green technology.

Thus, these figures showed the rising competition among major automakers when market demand is tending to saturate and the choice of investment in Vietnam by Pyeong Hwa Automotive, a big auto parts maker in South Korea, is also understandable.

Specifically, Pyeong Hwa Automotive invested US$16.6 million to build a manufacturing factory in DEEP C 2A Industrial Zone, Dinh Vu - Cat Hai Economic Zone, Hai Phong City. This investment decision is a sweet fruit after a year of market survey in seven Southeast Asian countries. And, Vietnam became the location for the first production factory of the South Korean firm in Southeast Asia.

Giving explanations to the choice of Vietnam, Mr Lee Jae Seung, President of Pyeong Hwa Automotive, said, “Geographical location and young human resources” are decisive to the company’s decision to place the first production facilities in Vietnam.

In addition, South Korean vendors of Pyeong Hwa Automotive are expected to also be present in Vietnam soon. Besides, the ambition of this South Korean investor is to purchase locally made products when Vietnamese supporting industries develop to meet standards.

An immediate solution needed
However, foreign parts investors from South Korea, Japan and major markets remain unknown when Vietnamese supporting industries are developed enough to enter their supply chains.

For that reason, foreign specialists usually explained that Vietnamese workers lack technical and professional expertise to undertake advanced technologies. Therefore, more time is needed.

However, Vietnamese specialists pointed out that some foreign investors in supply chains just assemble their products in Vietnam, although this industry requires so-called high technology.

Dr Vu Tien Loc, President of the Vietnam Chamber of Commerce and Industry (VCCI), said that, in a supply chain, FDI firms are like the “eldest brother” in a family.

The eldest brother is responsible for helping, supporting, and sparing certain resources for juniors - Vietnamese businesses - to participate in the value chain. To draw Vietnamese small and medium enterprises (SMEs) into the value chain with very high quality standards, including labour relations, FDI enterprises and multinational corporations need to support Vietnamese companies more.

Dr Loc said FDI enterprises and multinational corporations can use part of resources and technical support to train and assist Vietnamese SMEs. This is also the way for FDI enterprises and multinational corporations to develop sustainable supply chains in Vietnam, meaning that they will create sustainable jobs in the future.


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