Extra Development Boost to Supporting Industries

10:03:01 AM | 21/8/2020

Developing supporting industries is an important solution to improve economic quality, avoid the middle-income trap, attract more FDI investment, promote technology transfer, and foster domestic SME development, thus enabling local enterprises to deeply enter global supply chains.

Shortcomings

In the past time, Vietnam has been giving investment priority to supporting industries. Vietnamese supporting industry companies substantially increase in number, quality and competence to partly meet growing demands for industrial parts in the domestic market and reach vast global markets.

However, at present, Vietnam's supporting industries are still revealing shortcomings, limitations and new problems. The application of some preference and support policies is still problematic, inconsistent and unstable. Domestic industrial parts are still simple, with medium or low technology content, and low value share in the product value structure.

In addition, industrial manufacturing is still heavily reliant on imported inputs. The localization rate of industries remains low. Moreover, industrial parts producers in Vietnam remain weak in manufacturing capacity and technological prowess, incapable of meeting entry requirements of global production chains.

To deal with these shortcomings, the Government issued Resolution 115/NQ-CP on solutions to foster development of supporting industries. The resolution with many new policies is expected to give a strong boost to supporting, processing and manufacturing industries.

According to the resolution, by 2025, Vietnamese companies will be able to make highly competitive industrial components, meet 45% of essential needs for domestic production and consumption, and account for about 11% of industrial production value. By that time, about 1,000 companies will be capable of supplying industrial components to assemblers and multinational corporations in Vietnam, with local companies accounting for about 30%.

Furthermore, by 2030, industrial components will meet 70% of domestic manufacturing demand, and account for about 14% of industrial production value. About 2,000 companies will be capable of supplying industrial components to assemblers and multinational corporations in Vietnam.

Seven groups of underlying solutions

To accomplish the above objectives, the resolution sets many groups of key solutions.

First, effectively and consistently building, completing and implementing mechanisms and policies on development of supporting industries, prioritizing development of processing and manufacturing industries to ensure favorable conditions for development of supporting industries.

Second, effectively arranging, ensuring and mobilizing resources to carry out policies on prioritized investment and development of supporting industries and processing and manufacturing industries.

With financial and credit solutions, further applying soft loan policies for enterprises engaged in supporting industries, processing and manufacturing industries.

In addition, it is necessary to create opportunities for the formation and development of the domestic value chain by attracting effective investment and promoting business connections, linking Vietnamese enterprises with multinational corporations, increasing high domestic added value, product competitiveness and position of Vietnamese companies in the global value chain.

Moreover, it is important to expand domestic and foreign markets to facilitate the development of supporting industries and prioritize the development of processing and manufacturing industries.

In particular, to improve the capacity of supporting industry enterprises, it is essential to build and effectively operate regional and local technical assistance centers, giving priority to development of innovation, R&D, technology transfer, productivity improvement, product quality and competitiveness to provide opportunities for deep participation in global production chains.

Finally, it is necessary to boost intensive communications on supporting industries and processing and manufacturing industries to attract attention, and raise public awareness of the development of processing, manufacturing and supporting industries.

According to the Ministry of Industry and Trade, Resolution 115 is the foundation and premise for central and local agencies to study and propose specific policies to deal with persistent problems of Vietnam's industries in order to further foster the development of supporting industries in Vietnam in the coming time. Practical, strong and timely policies will promote the development of supporting industries, open up great opportunities for Vietnam to welcome major investment flows amid changing trends of global value chains, and renovate industrial development models.

Last but not least, this resolution, together with the Prime Minister's decision on establishment of the Working Group on Foreign Investment Cooperation in June, is considered one of the Government's timely moves to capture the ongoing shift of investment flows.

By Thu Ha, Vietnam Business Forum