The manufacturing industry in general and supporting industry in particular are becoming the subjects of growing concern at industrial and economic forums of Vietnam. At the 11th Congress of the Communist Party of Vietnam in 2011, the accelerating development of manufacturing industry and supporting industry was officially recorded in the Resolution of the Congress as one important direction for Vietnam’s industrial development in the 2011-2020 period. Due to historical characteristics, Vietnam’s economy lacks potential to rapidly and strongly develop its manufacturing industry and supporting industry; thus, its industrial sector places high expectations on Japanese investors - the most trusted partners of Vietnam in the past years.
Manufacturing and supporting industry development policy
The draft plan for Vietnam industrial development to 2020, with a vision to 2030, stated some directions for manufacturing and supporting industries. Specifically, the manufacturing industry will basically shape production and assembling networks and supporting sectors across three regions of the country; focus on fundamental processes like casting, billet forging, annealing, and product quality inspection; promote and cohere research and development (R&D) on new products, with pilot production and experience drawn from practice, and focus on key areas such as testing and inspection product quality based on international standards.
The focus of Vietnam’s manufacturing industries in the next 5-10 years will include manufacturing of oil rigs; diesel engines of 100 horsepower or more; locomotives and carriages for rail transport services; steel billet and forged alloy; oversize machines; equipment for agricultural mechanisation and complete equipment for processing industries; equipment for hydropower and thermal power plants (including complete equipment for thermal power plants with a capacity of up to 600 MW); equipment for oil refining and chemical industries; construction machines and big electric equipment; and precision engineering products.
In 2007, the Vietnam Ministry of Industry and Trade approved the supporting industry development plan until 2010, with a vision to 2020. At present, this plan is being reviewed, supplemented and adjusted to suit development requirements in the next 10 years and comply with Decision 12/2011/QD-TTg of the Prime Minister dated February 24, 2011 on development policies on some supporting industrial sectors. According to this decision, the Ministry of Industry and Trade issued the list of six-sector auxiliary products given development priority, including four manufacturing sectors: mechanical engineering, automotive industry, ICT, and high-tech. The list will be periodically supplemented and adjusted.
In the coming time, Vietnam will step up foreign investment attraction, particularly from industrialised countries, for prioritised projects of manufacturing, supporting and high-tech industries; encourage and facilitate the formation of centralised industrial zones and clusters for the above sectors to provide products for each other inside the production network. Besides, Vietnam will support scientific and technological activities in manufacturing and supporting industrial sectors and accelerate high-tech human resources training for industrial sectors.
Attracting Japanese investment for supporting industry
The Ministry of Industry and Trade highly values the cooperation with Japan in developing manufacturing and supporting industries - the special interest of Japan.
In the signed framework of the Joint Initiative, Vietnam and Japan are executing the WT6-1 Content: Action plan for Vietnam supporting industry development. Its main contents include building deployment mechanisms, building capacity and human resources training, providing credit for supporting industries, enhancing credit-seeking capacity for subcontracting companies, raising capacity for credit institutions, attracting foreign-invested businesses, and creating trade links. Currently, these contents have entered the third phase with specific programmes in selected areas.
In April 2009, Vietnam started the construction of Vietnam - Japan No. 1 Supporting Industry Zone in Que Vo district, Bac Ninh province invested by Kinh Bac Group, aiming to attract Japanese firms involved in supporting industries into Vietnam. Currently, the factory system in the zone has been completed, but only two Japanese firms registered to invest there. Vietnam is calling for Japanese enterprises, especially those in Kansai region, to locate their projects in this industrial zone.
Electronics and manufacturing are two important manufacturing sectors of Vietnam, drawing many big well-performing Japanese corporations like Toyota, Honda, Yamaha, Canon, Panasonic and Fujitsu. These businesses create a huge market for supporting industries for electronic and engineering industries in Vietnam to serve Japanese manufacturing and assembling firms, look for export markets, and approach most advanced technologies.
The Government of Vietnam particularly encourages and appeals to Japanese companies to continue investing much in manufacturing, high-tech and supporting industries. Apart from the supporting industrial zone in Bac Ninh province, Vietnam has cooperated with Japan to build two more supporting industrial zones in Ba Ria - Vung Tau province and Haiphong City which are especially designed for Japanese companies, including those from Kansai region. These two localities have many advantages such as having seaports, plentiful material sources, abundant labour force, investment incentive policies and dynamic business environment.
Vietnam recommends the Kansai Economic Federation and these two localities work together to quickly complete necessary procedures to pave the way for Japanese companies to do business in these two industrial parks. In addition to the above mentioned industrial zones, Vietnam suggests Japanese businesses relocate local production bases to foreign companies to mitigate losses caused by natural disasters that Japan is prone to, and to take advantage of younger human resources and lower production costs than in Japan.
Together with Japan’s support, the Government of Vietnam continues to improve the legal framework and development policies for supporting industry in the future. Particularly, Vietnam focuses on developing supply enterprise system, improving labour quality, and bettering the investment environment.
To implement Decision 12, the Ministry of Industry and Trade set up a council for assessing supporting industrial production projects and enterprises given priority, and recognised contributions to the development of Vietnam’s manufacturing industry. Incentives involve corporate income tax, land rent and others.
In general, Vietnam - Japan economic development cooperation has been established and flourished in the past years. Japan’s contributions to Vietnam’s socioeconomic development are very precious. As for supporting industry, efforts of Japan’s government and businesses have played an especially important role for Vietnam. Apart from policy activities mentioned above, activities of JETRO, JICA, Vietnam - Japan Centre and other entities in human resource training and institutional capacity building support for State officials and business employees in Vietnam have made substantial changes to the face of Vietnam’s supporting industrial firms. This is the fundamental foundation for the two countries to have stronger cooperation in the future.
Le Duong Quang
Deputy Minister of Industry and Trade
Vietnamese
