Emergence of TNCs to help develop supporting industries

The emergence of transnational corporations (TNCs) is viewed as an excellent opportunity for Vietnam to develop supporting industries. However, there is a question on how domestic firms would take advantage of those opportunities.

Four years ago, when US Intel Corporation decided to invest in Vietnam, commentators said Intel’s presence was like a boost, which led a series of other large corporations, particularly those operating in high technology area to also come to Vietnam. The presence of Foxconn and Compal were also given many expectations.

Not only the participation of satellites enterprises of those corporations were expected, high hopes were also given to Vietnamese firms in taking full advantage of the opportunity to involve in the global value chain of them.

Despite not giving any number on investment possibilities of the satellite manufacturers, in the recent talk with Dau Tu when Intel’s chip manufacturing plant officially went into operation, Steven C. Megli, vice President of Intel Corporation, general manager of technology and manufacturing group, affirmed that there have been many inquiries and collaboration invitations sent to Intel from its large-scale accessories firms. Megli said that those businesses are concerned about two issues; the first is whether the investment environment of Vietnam is attractive; and the second is whether Intel’s investment project is highly efficient. Fortunately, the answers are very positive, added Megli.

Coming later, but Compal (Taiwan) has attracted eight satellite-investors entering Vietnam’s market. Not only investing $500 million in building the laptop manufacturing plant, which is expected to go into operation in the first quarter of 2011, Compal also spent $75 million to develop Ba Thien Industrial Zone (Vinh Phuc), facilitating Compal’s satellites rapidly deploy their projects. Unfortunately, due to the impact of the global financial crisis, only Compal has still actively accelerated the project, other investors have to recalculate their investment progress in Vietnam. Nevertheless, deputy director of Industrial Zone in Vinh Phuc province Bui Van Quy expected that after Compal’s plant went into operation, those projects would soon start again.

Samsung (Korea) is also considered a typical organisation in attracting investors to come to Vietnam. While reporting Ministry of Planning and Investment, Shim Won Hwan, President of Samsung Complex Vietnam recently said that the mobile manufacturing plant of Samsung (Samsung Electronics Vietnam – SEV) in Bac Ninh currently has 42 satellite investors, 23 of which are operating in Vinh Phuc, Bac Ninh, Bac Giang, Hanoi, and Hung Yen, the rest are under construction.

According to the plan revealed by Hwan, Samsung would expand the mobile manufacturing plant into a manufacturing complex (Samsung Complex) with total capital investment by 2015 expected to be $1.5 billion. Many high-tech products would be manufactured here, such as vacuum cleaners, printers, cameras, etc. Along with this expansion plan, by 2015, Samsung Complex would attract 192 satellite investors, of which 50 percent are domestic suppliers.

Nguyen Van Dao, deputy general director of SamsungVina said, that is the expectation, in order to attract investment, Vietnam must have mechanisms and incentive policies for satellite manufacturers. For years, Vietnam has paid attention to large projects and core investors, and forgotten that those investors could attract a lot of other satellite investors, and they are the ones who have longer term impacts on Vietnam’s socio-economy. The grant of incentives is currently based on the amount of capital and technology. However, the capital of satellite investors is small and their technology is not high.
If considering each project separately, it is true that they are small; however, it gives different view when looking at them as a production complex. Therefore, Vietnam should have adequate incentive policies, said Dao.

The emergence of the giants would not only be a great support in attracting foreign investment into Vietnam, it would also help develop supporting industries, which have been in shortage and weak for a long time. However, the space for domestic firms in the global game of the giants remains an uneasy question, especially in the area of high technology.

Intel representative admitted that there would be no “door” for Vietnamese firms since there are only four to five Japanese and Taiwanese firms can provide chip. Even in the next five to ten years, there hardly is a Vietnamese company capable in this area. Similarly, for projects of Samsung, when even a screw in a mobile phone is currently still provided by foreign satellite suppliers, Vietnamese firms need to put much more efforts to be able to participate in the global chain value. – Dau tu

Tags: TNCs, Vietnam companies, Vietnam enterprises