Vietnam hurries to prepare support industries to satisfy big technology groups

Vietnam hurries to prepare support industries to satisfy big technology groups

The Ministry of Industry and Trade (MOIT) has submitted to the government a draft decree suggesting new approaches to develop support industries.

Samsung and Nokia plan to make their plants in Vietnam as main production bases of their value chains, which will bring more opportunities and jobs to Vietnamese enterprises as part and accessory suppliers.

However, it is unclear if Vietnam can take advantage of the opportunities as it remains very weak in support industries.

Truong Thanh Hoai, deputy director of the MOIT’s Heavy Industry Department, noted that except motorbikes made of 85-90 percent of parts sourced from Vietnam, other products all have low locally-made content due to weak domestic support industries.

Samsung has given a list of 170 parts and accessories it hopes Vietnamese enterprises can provide to make Galaxy S4 and Tab7.

However, Vietnamese enterprises, including electronics manufacturers that have been in business 40 or 50 years, said they cannot satisfy Samsung’s requirements in technology and price.

The parts and accessories Samsung require include very simple products such as travel adapters, USB cables, plastic covers and headphones.

Also according to Hoai, Samsung alone needs 400 million travel adapters every year. If noting every travel adapter can bring profit of $0.5, then Vietnamese enterprises would be able to earn $200 million a year, a relatively big sum of money.

The profit would be even bigger if Vietnam can make other products as well.

Hoai said Vietnam needs to gear up to develop support industries right now, or it will be too late.

In fact, Vietnam has been trying to develop support industries for many years. However, no progress has been made.

“Developing support industries is an urgent requirement,” Hoai said. “By 2018, the tariffs will be cut to zero percent under AFTA (ASEAN Free Trade Agreement). If we do not do it right now, we will never have the opportunities to develop support industries”.

When asked about the “new way of thinking and approaches to help develop support industries” in a MOIT draft decree submitted to the government, Hoai said the new mechanism will not only offer incentives to enterprises in the industries, but will also help them improve capabilities to make high-quality products.

The low design capability is believed to be the biggest problem of Vietnamese enterprises. This is the most important skill they need to have, because accessories need to be changed regularly to fit main products.

Therefore, MOIT plans to set up support industries centers in some key economic zones. The centers would support enterprises with specialists, design, and product quality verification. They would also help enterprises connect with consumers.

The centers would undertake the most difficult jobs to help enterprises cut production costs.

MOIT has also proposed to set up a fund to help develop support industries. The fund is expected to have chartered capital of VND2 trillion to be provided by the State.

vietnamnet