While supporting industry is the driving force to promote the industrial development in many countries, it is still relatively fledging in Vietnam. The weakness of supporting industries will be a big challenge for Vietnam to join the ASEAN Free Trade Area (AFTA) in 2015 and realise its goal of becoming an industrialised country by 2020.
Dr Vu Tien Loc, President of the Vietnam Chamber of Commerce and Industry (VCCI), said: Developing the supporting industry will uplift the level and creativity of workers, attract more foreign direct investment, and maximise the investment capacity of all economic sectors, particularly strategic partners. In addition to creating jobs and attracting unemployed workers, supporting industry also plays an important role in strengthening the competitiveness of industrial products and accelerating the process of deep industrialisation.
The underdevelopment of supporting industry will weaken the competitiveness of the general industry and limit the scope of industry. It is very important though, supporting industry remains a weak point of the Vietnamese industrial sector as it mainly focuses on simple products with low value. Besides, it exists a wide gap between the capacity of domestic companies with the demand of global manufacturing corporations. Poor management and technology are also resulted small-scale investment.
A typical evidence for the flaw of Vietnamese supporting industry is the very failure of the automobile localisation strategy. After more than 10 years, the localisation ratio of automotive industry is very low. Honda Vietnam reports the highest ratio of just 10 percent, followed by Toyota Vietnam with just 7 percent and other carmakers with merely 2 - 4 percent. The similar case also happens to the garment textile industry. Vietnam targets to bring the localisation ratio in this sector to 60 percent in 2015. However, Ms Dang Phuong Dung, General Secretary of the Vietnam Textile and Apparel Association (Vitas), said this objective is not just as simple as saying. Vietnam has to plan and build industrial complexes for fabric and fibre production and dyeing, she noted.
According to experts, Vietnam’s supporting industry is currently weak mainly because it is churning out poor-quality but high-price products. Thus, such products are only sellable to State-owned enterprises. Furthermore, Vietnamese companies can only deal with final stages of production. Currently, Japanese companies are top parts suppliers in Vietnam, followed by Taiwanese and then Vietnamese.
Vietnam will fully join the ASEAN Free Trade Area in 2015 when it has to bring tariffs on products from ASEAN member states to zero. . Without strong international competitiveness, Vietnam’s manufacturing industry will degrade as industrial product importation will increase and foreign assemblers will leave Vietnam. According to specialists, to make major changes and develop supporting industries, manufacturing entities and the State need to have concerted cooperation and take comprehensive solutions.
As most parts producers in Vietnam have small scales, they need to compete and coordinate each other for mutual development. Their cooperation will make equipment and personnel utilization more effective. In addition, they also join hands with foreign companies, particularly those with advanced technical levels and rich experience from countries with developed supporting industries. This is the necessary policy to compete on the market in the coming time. Only by diversifying joint venture and investment cooperation, Vietnamese enterprises can be an element of global production chains.
Hoang Nguyen
Vietnamese
