Ecosystem for local supporting industry enterprises needed: industry insider
Ecosystem for local supporting industry enterprises needed: industry insider
Domestic supporting industry enterprises should develop an ecosystem so that they can support each other to become suppliers for multinational industrial manufacturers, said Chau Ba Long, general director of Minh Nguyen Industrial Support JSC, the first-tier supplier for Samsung factories.
The fact is that Samsung and other multinational industrial manufacturers tend to choose their own suppliers to ensure smooth operations in the countries where they make investments.
Asked why Minh Nguyen, which has only been established in the local market for three years, decided to engage in the supporting industry, Long said that Vietnamese enterprises have high potential to become suppliers for international giants. Many international groups have visited Vietnam to study the local human resources and suppliers’ capabilities as they want to utilize local supplies.
However, many domestic enterprises have yet to connect with others.
"After significant consideration, we decided to penetrate the supporting industry sphere with heavy investment in production lines, especially during the initial stage," Long said, adding that the company has sought the assistance of large groups and State management agencies.
The greatest difficulty for supporting industry companies is the lack of capital, Long said.
He also urged supporting industry firms to prepare for all possible situations. If they do, it is not so hard, even for small enterprises, to become the first-, second- or third-tier suppliers for large groups.
Additionally, they should ensure consistent quality across all their products and improve their production lines, Long said.
He also proposed the Government issue more preferential policies to facilitate local supporting industry enterprises to access bank loans and encourage them to issue corporate bonds.
He added that the HCMC government has allowed Minh Nguyen to borrow VND237 billion from banks with a preferential interest rate, in line with the city’s plan to develop supporting industries between 2016 and 2023. The company will use this capital to invest in infrastructure and technologies to manufacture high-quality products with competitive prices.
The Government has set a target that local supporting industry products would account for 11% of the value of industrial products, and some 1,000 domestic firms can serve as suppliers for multinational groups operating in Vietnam.
However, the target seems unachievable due to unfavorable institutional mechanism, especially the Government’s Decree 111 on the development of supporting industries and the Law on Small and Medium Enterprises.
Nevertheless, some groups, including Samsung, have assisted local SMEs to boost their development, through technology transfer and human resource training.
