Industries unable to source locally-made components

Industries unable to source locally-made components

Viet Nam's support industries are unable to meet market demand despite their recent growth, with the use of local components in industrial products being no more than 20 per cent, and a mere 10 per cent in high-technology industrial products.

Demand for components from companies in the HCM City High-Tech park is diversified, ranging from electronic parts, moulds to make plastic parts, and high-quality screws and bolts to gloves, masks, and others.

But local supply source is very limited.

Speaking to Thoi bao Kinh te Viet Nam (Viet Nam Economic Times) newspaper, Tran Tien Phat, managing director of Viet Nam Datalogic, which produces bar-code reading machines, said the ratio of locally made materials used by his company is very small, at 3.2 per cent in 2012 and 3.69 per cent in 2014.

"The proportion of local parts has increased a little but [they are of] low value, like packaging and plastic parts," he said.

Local manufacturers cannot meet quality, technology, quality management system, and price requirements, he said.

"If local enterprises import new machines, depreciation accounts for a very large proportion of the price and reduces their competitiveness, but they face difficulty in importing used machines."

To meet the target of increasing use of local parts from the present 4 per cent to 10 per cent by 2017, his company plans to focus on chipset, aluminium, and plastic spare parts, he revealed.

A spokesperson for Intel agreed that greater use of local parts would benefit both the US chip maker and local suppliers, but said local support industries in Viet Nam are very inexperienced.

Last year Intel bought from 94 domestic vendors products and services worth US$11 million including packaging, chemicals, and maintenance, he said.

Meanwhile, Japanese firms increased their local sourcing from 27.9 per cent of the total cost of parts in 2012 to 32.2 per cent last year, but the figure was still low in comparison with neighbouring countries like Thailand 52.7 per cent and Indonesia 40.8 per cent.

"Japanese enterprises always want to increase local parts purchase to reduce production costs and increase competitiveness," Osato Kazuhiko, director of the Japan External Trade Organisation (JETRO) in HCM City, said.

HCM City plans

To promote support industries, Kazuhiko suggested, the Government should adopt a low-interest-rate policy (of 2-3 per cent) for them, help train and identify human resources, offer tax breaks, and focus on technology transfer.

Phat suggested that the Government should reduce import tax for support industries, help them invest in technology, and offer tax breaks to foreign firms buying machinery required to produce all their components.

Last year export of high-tech products from the city was worth US$2.93 billion, an increase of 15 per cent and accounting for 14.6 per cent (without crude oil) of its GDP.

"Of this, the HCM City High-Tech Park contributed $2.7 billion, or 90 per cent," Le Bich Loan, deputy head of the park, said.

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