Support industry joins global value chain, but not fast enough

Support industry joins global value chain, but not fast enough

Despite their declining dependence on foreign input materials, foreign-invested enterprises in Vietnam are still reluctant to choose domestic support industry enterprises as their major suppliers.

Domestic enterprises must increase efforts to improve product quality and competitiveness

Reduced dependence on imports

According to the Ministry of Industry and Trade (MoIT), the proportion of foreign-invested enterprises purchasing input materials from enterprises in the country of origin has gradually decreased from 58.7 percent in 2016 to 41.4 percent in 2020. In addition, only 26.8 percent of foreign-invested enterprises reported that they sought a third-party supplier in 2020, compared to 39 percent in 2016.

Vietnam has become a bustling market for the support industry with great potential to attract foreign investment and join the global value chain. However, the road ahead is hard for many Vietnamese enterprises.

According to the Vietnam Industry Agency (VIA) under the MoIT, the implementation of some preferential support industry policies remains inconsistent and unstable. The implementation of policies on prioritized processing and manufacturing industries, like electronics, key mechanics, automobile production and assembly, textiles, footwear, and more, aimed to create a market for support industry products has not achieved expected results. “The main reasons are due to the limited capacity of domestic enterprises, uneven product quality and loose connections between domestic suppliers and foreign-invested enterprises and multinational corporations,” the VIA said.

Improving competitiveness

The MoIT has been implementing many international cooperation programs while foreign-invested enterprises have also adopted certain policies to support domestic suppliers making efforts to improve product quality and competitiveness to join the global value chain.

The ministry has helped establish the Vietnam-Republic of Korea Technological Consultancy and Solution Center (VITASK) and the Molding Technical Center to help Vietnamese enterprises participate in the global supply chain, meet the needs for highly qualified human resources, and become potential suppliers of Korean businesses in Vietnam.

According to the VIA, Vietnam also needs to build a network of technical support centers nationwide to provide comprehensive support activities for industrial production enterprises, and related industrial services. These centers should not only focus on introducing technology, facilitate business access to technology through international cooperation and government policies in general, but also support research and development and create high added value for support industry products.

VietNam Economic News