Support industries urge state aid

Support industries urge state aid

Vietnam has opportunities to develop its support industries, but manufacturers need additional incentives to overcome difficulties.

Challenges

To Ngoc Phuong, Director of HANPO VINA, a support industry enterprise, said most support industry companies in Vietnam are small and medium-scaled and or newly established, with relatively weak financial capability and poor market experience, making it hard for them to survive competition and major challenges inflicted by the COVID-19 pandemic, the Russia-Ukraine war, inflation and global economic recession.

Vietnamese support industry enterprises need to overcome challenges if they are to participate in domestic, foreign and global part and component supply chains

Since 2017, China-US trade tensions have resulted in manufacturing shifts from China to third countries, including Vietnam. This trend has opened up new opportunities for Vietnamese support industry enterprises to participate in the global supply chains. Accordingly, Vietnamese support industry enterprises have sought to gradually meet international standards and seized opportunities for cooperation and joint ventures.

However, the country's support industry remains underdeveloped and overly reliant on imports and has been identified as a major weakness, especially in key industries such as electronics, textile, leather and footwear, manufacturing and automobiles.

Vietnamese support industry enterprises need to overcome challenges if they are to participate in domestic, foreign and global part and component supply chains, optimize production to create products competitive in terms of price, quality and delivery, and expand markets.

Part of the problem lies in production technology that does not meet customer requirements, especially those of global corporations operating in Vietnam. In some cases, domestic support industry manufacturers have to pass their orders to foreign-invested manufacturers in Vietnam and other countries (China and Thailand, for example), as they are incapable of implementing them.

The Ministry of Industry and Trade has set a target for the support industry to meet 70 percent of domestic demand by 2030 as part of a 2021-2030 draft project on restructuring the industry and trade sector. The country's immediate target is to develop products with strong international brands, to strengthen its position in the global supply chain, and to bring the product’s local content rate to 45 percent.

Support policies needed

The state has adopted many capital and land-related incentive policies for support industry enterprises in recent years in order to help them respond to major demand from such major manufacturers as Samsung. But according to Nguyen Van Hoi from the Thai Nam Trading and Service Company, a support industry manufacturer in the capital Hanoi, his company is still finding it hard to benefit from these state capital and land policies, and therefore remains incapable of accomplishing contracts with partners.

The state has adopted many capital and land-related incentive policies for support industry enterprises

HANPO VINA Director To Ngoc Phuong said developed industry cannot exist without developed support industries, requiring equipment and technology renovation and incentives and assistance of the state and agencies such as the Ministry of Industry and Trade.

Phuong added that the support industry is only governed by decrees and circulars, instead of which the state needs to promulgate a support industry law and issue more preferential tax, credit and other policies to attract more investment in the sector.

In particular, the state needs to found an investment fund to develop support industry enterprises in the first five years of their operation, and have preferential policies specifically designed for enterprises applying new, competitive technologies and/or highly capable manufacturers.

VietNam Economic News