Businesses keep pessimistic about supporting industry development

Despite the encouragement by the government and the investment incentives, Vietnam still cannot develop supporting industries, the thing which is believed to play a key role in the national economic development.

The Japan External Trade Organization (Jetro) plans to organize a trade fair in Hanoi specifically designed for the enterprises in supporting industries.

The information has been released by Ho Duc Lam, Deputy Chair of the Vietnam Plastics Association (VPA), who said that this would be an opportunity for Vietnamese manufacturers, especially plastics producers to seek partners. It is obvious that the goal of the trade fair is to look for the Vietnamese producers which can supply the parts and accessories meeting the requirements set by Japanese manufacturers.

However, Lam himself admitted that he cannot see the high possibility of Vietnamese plastics producers becoming the sub-contractors of Japanese enterprises. To date, Vietnamese enterprises have been mostly making consumer plastics at the medium level quality.

“Though hi-tech plastics always bring high profitability, these products just account for 8-10 percent of the total output of the plastics industry,” Lam said. “The key problem behind this is the limited competitiveness of the enterprises. However, it is also because of the way of doing business of Vietnamese enterprises which do not organize production chains.”

This explains why the Minh Dat Plastic Prototype Company has made heavy investment to make hi-tech plastic products in order to get the orders from foreign manufacturers; it still cannot sign big contracts.

“A lot of foreign partners have come to place orders, but we still cannot sign contracts,” the representative of the Binh Minh Plastics Company said. “Technical plastic products require the printing, galvanizing techniques as well. Foreign partners always require the products which can be made only with the involvement of the whole production chains.

“The problem is that it is difficult for Vietnamese enterprises to seek enough partners for the chains,” the executive said.

In fact, this is not for the first time JETRO organizes the trade fair to bridge the suppliers and buyers. Many such trade fairs were organized in the past, but Japanese manufacturers still could not find many Vietnamese enterprises which could make and supply parts and accessories meeting the manufacturers’ requirements.

Hirokazu Yamaoka from JETRO, when talking with local press agencies, also said that Japanese manufacturers really want to buy products, parts and accessories from Vietnamese enterprises. However, Vietnamese products’ quality is 50 percent lower than that made in China or Thailand.

Dr Le Dang Doanh, a well known economist, said that the lack of production clusters and cooperation chains proves to be the biggest barrier, which makes it unable for Vietnamese enterprises to obtain big contracts on providing parts and accessories to big manufacturers.

The Vietnam Plastics Association is building up the program on developing plastics industry, under which the enterprises in supporting industries would enjoy financial support. However, the association well understands that if plastics producers cannot join forces in networks, they would not have the opportunities to become sub-contractors of big foreign manufacturers.

The Ministry of Finance has released the circular No 96 stipulating the policies on developing some supporting industries, which offer a lot of incentives in import tariff and land leasing fees. The release of the legal document, once again, has shown the strong determination of Vietnam to develop supporting industries.

While analysts and businesses keep pessimistic about the development of Vietnamese supporting industries, state officials believe in a bright prospect of the industries

Duong Tu Anh, a senior official from the Heavy Industry Department under the Ministry of Industry and Trade, has affirmed that the supporting industries have made big leaps recently.

“In the field of electronics and motorbike manufacturing, the enterprises in supporting industries have obtained higher-than-expected achievements, which can be reflected in the high localization ratio of products,” Anh said.

He also said that a lot of enterprises have succeeded in developing supporting industries. Toyota Vietnam, for example, when setting up the car part export center capitalized at 5.7 million dollars, hoped that the center would have the car part export turnover of 20 million dollars a year. However, the center has got 100 million dollars already after three years of operation. – Vietnamnet

Tags: Vietnam supporting industry