Although a supporting industry, this is one of the premises for the development of the main industry. In practice, however, this activity is facing many difficulties in Vietnam.
“Subsidiary” but extremely important
At the workshop “Vietnamese Small and Medium-sized Enterprises in the Global Value Chain – Development of Supporting Industry” held by the VCCI during the SME Week, Prof.Dr Phan Dang Tuat from the Research Institute of Industrial Policy and Strategy, said the supporting industry assisted in assembling finished products by supplying components, details and intermediate goods. This industry serves as a foundation and is key for growth.
“Identifying the supporting industry in Vietnam must base on the nature and specific characteristics of aiding products, ability of supporting producers, requirements and purchasing policy of FDI assemblers. This industry plays a decisive role in restructuring the national industry, increasing VA/GO (the ratio of the added value to the total industrial production value), reducing trade deficit, attracting workers, stimulating creativeness, decreasing pollution, achieving sustainable development, and taking initiative in efficient integration”, said Mr Tuat.
In practice, the supporting industry in Vietnam remains fragile as enterprises have not shown strong collaboration. Moreover, many businesses hesitate to join the industry as they have not achieved sufficient profits compared to their earlier investments. Nevertheless, firms must strive to improve their current strategy because the most efficient form for production is to take deep specialisation and wide collaboration.
The firms’ hesitation, however, turns out to be a huge opportunity for Vietnamese producers to develop, especially the small and medium-scaled enterprises. Nevertheless, all investors set high requirements for component and spare-part manufacturing.
Manabu Tsurutani, SME Financial Aid Programme Consultant, said the SMEs were meeting challenges with their financial capability (bank finance, credit rating), and infrastructure (shared credit risk database, credit guarantee fund). And banks are also not familiar with trading risks in the supporting industry and have done little to improve their awareness of trading risks, thus, they provide no good credit rating for the SME-aiding industry…
Hard but not "impossible"!
As Mr Tuat said, it is difficult and takes time for the auxiliary industry to develop. It is necessary to choose the right direction, and there needs to be systematic evaluation and action, along with finding strategic partners. “The action plan to develop the supporting industry can be imagined as follows: identifying partners and schemes; consolidating legal foundation for this industry's development; selecting preferential sectors/products; establishing physical premise; evaluating capability of existing enterprises; providing training to change the perception; building database for the supporting industry, financial instruments, and marketing; associating and coordinating in actions and organisation for the development of the supporting industry”, said Mr Tuat.
He added that state administrative agencies had been attempting to improve the action plan for the development of the aiding industry; orders that were made by the Government on the plan's strategy to send to ministries/branches, local People's committees, organisations, associations, etc. Instructive circulars were also issued.
Ichikawa Kyoshiro, Investment Consultant of the Foreign Investment Agency (Ministry of Planning and Investment) and JICA Expert, said during the development of the supporting industry, manufacturing of important details, which requires sophisticated processing technique in Vietnam, would be done by foreign-invested enterprises in the short run. The jobs, however, would be transferred to Vietnamese enterprises in parallel with technical exchanges in the future. In addition, it is also very important for Vietnamese companies to manufacture components, which are relatively easy to process because it is essential to assist Vietnamese enterprises in developing their own technical qualification. This is so that they can be prepared for technical and manufacturing exchanges from foreign-invested enterprises. Details of small and less profitable processing volume must be imported. However, when it is more profitable to produce these details in Vietnam, the process of domestication and specialisation will be carried out between foreign-invested enterprises and Vietnamese companies.
Moreover, according to Dr Hoang Ngoc Vinh, Director of Professional Education Department - Ministry of Education and Training, human resources, within the supporting industry, played a key role in improving productivity, quality and efficiency of manufacturers, while also stimulating competitiveness within the industry. To have good human resources, it is crucial to develop a team of vocational trainers and university lecturers to teach. It is also vital to renew the teaching syllabus; update education in finance and increase investment in priority sectors; strengthen the cooperation between schools and enterprises; establish training centres at industrial parks, etc. Investing in human resources like this will ensure sustainable growth in supporting industry.
Quynh Chi
Vietnamese
