More support industries needed

Policymakers and foreign investors are urging faster development of support industry in Viet Nam.

“Foreign-invested enterprises assembling final products here in Viet Nam may leave due to the difficulty in finding locally-sourced spare parts, components or supply sources, particularly now that labour costs are rising,” warned former trade minister Truong Dinh Tuyen at a workshop here on Tuesday on industrial policy that gathered over 70 top experts from Viet Nam and Japan.

“We are facing an excess of imports over exports due to a lack of support industry,” said Tuyen. “Many industries, especially producers of products for export, continue to rely on imported materials or spare parts.”

Workshop participants generally agreed that stronger support industries would improve domestic competitive capacity, add value to local products, and be essential for strengthening Viet Nam’s competitiveness during global economic integration.

Panasonic Viet Nam General Director Shinya Abe said, “Products made by Panasonic Viet Nam have been well-received in world markets because of high quality and proper price criteria…. However, we have to import electric and electronic spare parts from China, Malaysia and Thailand. It would be easier if local companies could produce those spare parts here in Viet Nam.”

The nation’s automotive industry has a localisation strategy that requires the development of local support industries. So far, the strategy has been a failure, as localisation rate in the industry remains low. Domestic content of vehicles made by Honda Viet Nam is only 10 per cent and those of Toyota Viet Nam, only 7 per cent. Remaining automakers average 2-4 per cent with domestic content.

The picture in the garment and shoemaking industries was little better, with over 80 per cent of raw materials imported.

The development of support industries should focus on three major industries, suggested Tuyen, including mechanical, electrical and electronic spare parts.

“The Government should develop support industries as soon as possible with a detailed decree and national action plan,” he added.

But Hideji Sugiyama, a former deputy minister of Commerce, Trade and Industry of Japan, said, “It isn’t the Government but Vietnamese enterprises which will develop support industries. Policymakers should find out what enterprises think and give them what they need because they will decide the success of policies.”

“We need foreign investment during the initial period of industrialisation. We should learn from the experience of and seek support from countries like Japan and South Korea in developing support industries,” said the director of the Ministry of Industry and Trade’s Industrial Policy Research Institute, Phan Dang Tuat

“The Ministry of Industry and Trade only has a trade promotion department but not a production department,” said Tuat. “A support industries department needs to be established.”

Other participants in the workshop urged Viet Nam to change its growth model from a reliance on cheap labour to attract foreign investors towards a model that enhances the productivity and efficiency of the domestic economy.

The workshop was held within a co-operative framework agreed upon in March of this year between the Viet Nam Academy for Social Sciences and the Japan International Co-operation Agency (JICA). The result of the seminar will be reflected in industrial development policies currently being drafted.-Vietnamnews

Tags: Vietnam industries, Vietnam industry