"Supporting industry stubbornly remains a drawback of the Vietnamese industry; thus, developing supporting industry is becoming a more pressing requirement than ever,” said specialists at a conference on introduction of supporting industry development project in southern Vietnam held in Ho Chi Minh City by the Ho Chi Minh City Branch of the Vietnam Chamber of Commerce and Industry (VCCI-HCM), the Ho Chi Minh City Industrial and Export Processing Zones Authority (HEPZA), and the Japan International Cooperation Agency (JICA). This project is part of a cooperation agreement between the Governments of Vietnam and Japan under which the latter will support the former to develop supporting industries.
Addressing at the conference, HEPZA Deputy Director Le Anh Tuan laid emphasis on economic restructuring and current industrial development, pointing out that developing supporting industries is one of most important conditions. In other words, to reach industrialisation, Vietnam cannot skip supporting industry. Nonetheless, Vietnam’s supporting industry remains undeveloped. Vietnam’s industry is now relatively simple, i.e., outsource processing like apparels, textiles, footwear, etc or just assembly of automobiles, motorcycles, electrical appliances, and electronics devices. The localisation ratio, or the rate of locally sourced components, is low, like 20-30 percent in automotive industry or just above 10 percent in apparel and footwear sectors. Ailing and fledgling supporting industries are now directly weakening investment promotion, and diminishing production competitiveness and added export value.
Sharing with Mr Tuan’s standpoint, Mr Hayashida Takayuki, Senior Advisor to the JICA’s “SME - Supporting Industry Development Cooperation” Project for Vietnam, said: All tariff barriers among ASEAN countries are removed in 2015, Vietnam may witness a sad fact that assemblers will use all foreign parts or they will flock to regional countries like Thailand or Malaysia where supporting industries are relatively developed. At that time, Vietnam will be a consumer of finished products. There are only four years to go for Vietnam to prepare all conditions step into a new play ground where it will face a lot of challenges because of its fledging support industries.
To assist Vietnam to realise the goal of becoming an industrialised country by 2020, the Government of Japan signed an agreement with the Government of Vietnam, pledging to help Vietnam to further develop supporting industries. This programme is one of ODA projects the Japanese Government funds the development of Vietnamese supporting industries. This has the largest number of senior voluntary specialists that the Japanese Government has deployed in the world.
The supporting industry development project in southern Vietnam is part of a cooperation agreement between the Government of Vietnam and the Government of Japan, preparing for Vietnam to join the ASEAN Free Trade Area (AFTA) in 2015 and move towards the status of industrialised country by 2020. Accordingly, the JICA has carried out many projects very practical and essential to Vietnamese enterprises, especially small and medium businesses. Boosting up the capacity of this group of business is an extremely important factor to shore up the development of Vietnamese supporting industries. JICA has funded Vietnamese SMEs with US$350 million to strengthen long-term capital position to invest in technology and modernise equipment. Besides, JICA has sent senior volunteers to guide Vietnamese SMEs to enhance technical capacity and business administration.
Senior volunteer Kudo Yasushi said the drawback of Vietnamese SMEs is they do not know what they are weak at to have solutions to overcome. He said Vietnam has great potential to develop auxiliary industries, especially export-oriented ones. To develop supporting industries, Vietnam needs to build compete infrastructure like water, electricity and telecomm systems, and offer suitable rentals because these are the first elements investors look at when they make investment decisions.
The supporting industry development project in southern Vietnam is carried out in four provinces and cities, namely Ho Chi Minh City, Long An, Dong Nai and Binh Duong, aiming to support Vietnamese SMEs to enhance competitiveness by improving quality, cost and delivery time to become a professional parts supplier for large Japanese companies in Vietnam operating in automobile, motorcycle, electric, electronic, engineering industries.
Beneficiaries include Vietnamese enterprises or joint ventures with foreign partners operating in the fields of manufacturing and processing mechanical parts, precision parts, cast metals, moulds, compression plastics, plating and electronics parts, and supplying Japanese companies involved in manufacturing and assembling automobiles, motorcycles, electric and electronic devices, and mechanical products. Companies expecting to join this project will be checked by JICA and VCCI-HCM to consider the degree of support. In case their requirements for support match the contents and conditions of the project, JICA will send appropriate Japanese experts to directly support them. As this is an ODA-funded project, beneficiaries do not have to pay any cost. The supporting period for each business will last 3 - 6 months.
In 2010, the project supported 100 businesses across the country. In the south, since the start of the year, it completed support for 11 projects, is supporting 13 other ones, and surveying and interviewing 88 candidates for new support.
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