Vietnam, Japan Enhance Cooperation in Supporting Industry Development

Mr Hirokazu Yamaoka, Chief Representative of the Japan External Trade Organisation (JETRO), said that Vietnam is a very important partner of Japan in supporting industries. In the coming time, more Japanese companies will come to invest in Vietnam as well as reallocate their production facilities from China to Vietnam.

 

Supporting industry development is an important content in the first three phases and this will be continued in the fourth phase of the Japan - Vietnam Joint Initiative. The Government of Vietnam has built master plan for supporting industry development after it brought into force the Decision No. 34/2007/QD-BCN dated July 31, 2011 on the approval of support industry development plan through 2010 and vision to 2020 and the Decision No. 12/2011/QD-TTCP dated February 24, 2011 on development policies for a number of support industries. Accordingly, the Ministry of Industry and Trade will be a general architect. To prop up supporting industry development, the Government has provided best conditions for private companies to develop more strongly. Initially, small and medium-sized enterprises (SMEs) are directed to focus on parts production to acquire technologies and international quality standards before embarking on heavy industries.

 

Mr Tran Tuan Anh, Deputy Minister of Industry and Trade, said Japan has invested nearly 1,500 FDI projects with a total registered value of US$21 billion in Vietnam, of which nearly US$12 billion has been disbursed. These are respectable figures but this rate is in reality low in relation with the Japanese economy, particularly in comparison with other big economies like Singapore, Taiwan and South Korea. Most of Japanese projects have small scales (about US$7 million a project on average).

 

In recent years, many Japanese corporations have focused on building assembly facilities in Vietnam to supply regional and global markets. To date, Vietnam has formed Japanese-focused industrial parks like Thang Long 1 and Thang Long 2 in Hanoi, Nomura in Haiphong City, and Nomura in Ho Chi Minh City. These facilities are operating efficiently but they are mainly involved in assembling.

 

Japan has sent advisors for SME policies, organised commercial training courses at the Vietnam Japan Human Resources Cooperation Centre, dispatched senior volunteers working in other countries to Vietnamese enterprises, provided credits to Vietnamese companies, and hosted trade fairs and trade talks related to the supply of electronic components.

 

Dr Pham Dang Tuat, Director of the Research Institute for Industrial Policy and Strategy under the Ministry of Industry and Trade said: Vietnam is currently facing its own weaknesses in attracting investment for assembly sector: Rapid widening trade deficit caused by offshore assembly, low production added value, and weak human resource training and limited technology transfer. Large-scaled assembly factories which use a large number of low skilled labours are causing labour shortages in many industrial sectors. Meanwhile, Vietnam has not had appropriate policies in support of domestic SMEs. As a result, while many assembly networks have been formed, there are very few local qualified parts suppliers for assembling enterprises. Foreign assemblers still have to rely on foreign sources of inputs.

 

According to the Ministry of Industry and Trade, many industrial companies presently have to import nearly 80 percent of inputs and spare parts. For example, the localisation ratio in automobile industry has reached just 5 - 10 percent while in simpler industries like motorcycle the rate is only about 30 percent. The core issue is Vietnamese enterprises have not be created value chains by linking companies, even using financial and non-financing services to cash in on competitive edges to serve these industries to develop.

 

Mr Tran Tuan Anh said: “Vietnam has met initial basic requirements at suitable scale. In Japan, the shrinking market and stronger yen are forcing Japanese companies to invest overseas. Notably, recent tsunami and earthquake disasters are pushing Japanese corporations to restructure their production and supply systems. If Vietnam is prepared well enough, it may soon receive the third wave of Japanese investment.”

 

To attract Japanese companies operating in supporting industry and manufacturing industry, Vietnam needs to have high-quality human resources and suitable infrastructure systems. It needs to have high-quality human resource schools and teaches Japanese. And, the development of downstream manufacturing industrial parks requires intensive collaboration between the State and private businesses of Japan and Vietnam, a guaranteed supply of industrial premises and infrastructures, and a lowest price to encourage Japanese businesses to do long term business and investment in Vietnam, said Mr Tran Tuan Anh.