Investment urged in Vietnam’s downstream industries
Investment urged in Vietnam’s downstream industries
A government report recommends investment in Vietnam’s downstream industry in order to boost the capabilities of the country’s supporting industry that manufactures components, spare parts and raw material.
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Fundamental industry
The report submitted in October to the Standing Committee of the National Assembly (NA) and to NA deputies pointed out that supporting industry plays a fundamental role in economic restructuring, improving productivity and labor skills as well as increasing products’ added values and competitiveness and the quality of the Vietnamese economy.
In recent years, the Ministry of Industry and Trade (MoIT) has worked to enhance the role and position of the supporting industry according to Politburo resolutions on industrial development policy.
The MoIT is also establishing three technical centers to support industrial development in northern, central and southern economic regions. “These centers will support industrial production enterprises in creative innovations, technology transfers, helping them create added values and participate in global supply chains,” the report said.
Supporting industrial enterprises have developed in both quantity and quality in recent years, with their number accounting for nearly 4.5 percent of the total number of enterprises in the processing and manufacturing industry and creating 600,000 jobs. Their net production and business revenue in 2019 was estimated at more than VND900 trillion, about 11 percent of the processing and manufacturing industry’s total.
Some Vietnamese manufacturers do meet domestic and export demands, especially in manufacturing molds; bicycle and motorbike components; standard mechanical components; power cables; plastic and rubber components; tires and tubes. However, the report also stated that only about 300 domestic enterprises out of 1,800 spare parts and components producers nationwide participate in production networks of multinational corporations.
Domestic enterprises only provide about 10 percent of the domestic demand for supporting industry products, while the gap between the requirements of multinational corporations and the capacity of domestic enterprises remains large.
Downstream industry is the key
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The report recommended devising new mechanisms and policies in line with integration commitments in order to develop Vietnam’s supporting industry, continued adoption of new policies in management and investment attraction to ensure FDI enterprises have the connections for technology transfer, and creating spillovers for domestic supporting industrial enterprises.
Specific measures include formulating consistent policies and solutions to support a number of targeted Vietnamese enterprises in key downstream industries, such as the automobile, electricity, electronics, textiles and footwear industries to become large regional corporations, creating a spillover effect and leading domestic supporting industrial enterprises to develop.
The state also needs to formulate flexible tax policies for imported components and spare parts to reduce product prices, improve the competitiveness of local manufacturers compared to imported goods and target export markets.
| Downstream industries play an important role in developing support industries and attracting multinational corporation investments in large-scale projects in Vietnam. |
