Supporting industries welcome new investment wave
Supporting industries welcome new investment wave
Vietnam’s supporting industries for machinery manufacturing, electronics and deep processing are forecast to attract growing foreign investment thanks to a strong investment wave.
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New capital for supporting industries
According to Hua Quoc Hung, Head of the Management Board of the Ho Chi Minh City Export Processing and Industrial Zones Authority (HEPZA), total registered investment capital in the city’s export processing zones and industrial parks has reached more than US$591 million, an increase of seven percent compared to 2019.
In 2020, the supporting industry sector attracted 29 new projects with total investment capital of US$152.94 million, accounting for 31 percent of the total new investment capital, of which seven were foreign direct investment (FDI) projects and 22 domestic ones. Projects in the supporting industry sector focus on fields such as mechanics, electronics, plastic and rubber. In addition to newly registered supporting industry projects, capital in existing projects was also expanded. For example, Nikkiso Viet Nam Limited Company, a subsidiary of Nikkiso Japan, increased its investment capital by US$3 million to expand production activities.
According to the Dong Nai Industrial Zones Authority (DIZA), most newly licensed FDI projects in early 2020 were in the supporting industry sector. Many projects increased their capital, among them Schaffler Vietnam Company Limited (an increase of US$50 million) and Chang Shin Vietnam Company Limited (an increase of US$87 million).
The FDI projects licensed by Binh Duong Province also included supporting industries, such as the aluminum alloy production project of Ever Giant International Private Company Limited (Singapore) with registered capital of US$20 million and a project of Sung Shin Tech Company Limited (Singapore), with registered capital of US$30 million. Up to now, 86 percent of FDI capital invested in Binh Duong Province has been in the fields of processing, manufacturing, and supporting industries.
Japanese investment shift
Supporting industry enterprises must focus on research, development and innovation
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Deputy Head of the Management Board of the Saigon High-Tech Park (SHTP) Le Bich Loan said that the SHTP and the Management Boards of industrial parks and export processing zones of localities in the southern key economic region have formed a connection network between enterprises and domestic and foreign investors to develop and expand domestic and export markets for the supporting industry sector and introduce supporting industry manufacturers into the supply chains of domestic and FDI enterprises.
According to Okada Hideyuki, President of the Japan Business Association in Ho Chi Minh City, the wave of investment shifting from Japanese enterprises to Vietnam will grow in 2021, once the pandemic is controlled. It will focus especially on supporting industry production for machinery manufacturing, electronics and deep processing. Supporting industries favor Japanese companies due to their modern and environmentally friendly technology.
In order to promote domestic supporting industries, the government has set a target for Vietnamese enterprises to produce supporting industry products meeting 45 percent of demand, accounting for about 11 percent of production value of the whole industry sector by 2025. In addition, Vietnam also strives to have about 1,000 enterprises supplying multinational corporations, with domestic enterprises accounting for 30 percent and foreign-invested ones for the rest. The government blueprint calls for supporting industries of domestic enterprises to meet 70 percent of demand for domestic production and consumption by 2030, accounting for about 14 percent of industrial production value.
To accomplish this goal, starting this year, enterprises producing prioritized supporting industry products will be subsidized by the state with interest rates from the central budget, local budgets, Official Development Assistance (ODA) capital, and foreign preferential loans.
Chair of the Ho Chi Minh City Association of Mechanical and Electrical Enterprises Do Phuoc Tong also emphasized that supporting industry businesses face many difficulties, such as lack of information about markets and partners, and especially lack of capital to invest in equipment for development from idea to production. In addition, these companies must ensure compliance with quality management systems such as ISO, 5S, Kaize, and focus on research, development and innovation to meet customer demand.
