Vinh Phuc Establishing Mechanisms to Encourage Supporting Industry Development

 

The projects of Toyota, Honda, Yamaha, Piaggio and others have brought great social and economic value to the locality. In the 1^st Quarter 2014, FDI enterprises contributed VND4,000 billion (VND200 million) to the state budget , up 23 percent compared to the same period in 2013, attracting over 45,000 local workers. Aiming to attract investments in the industrial sector, with the priorities to automobile, motorcycle and electronic manufacturing sectors, Vinh Phuc has become a centre of industrial production in Vietnam.

 

Supporting Industry (SI) has contributed to the economy of Vinh Phuc, accounting for over 50 percent of its GDP. Vinh Phuc’s SI primarily focuses on three major sectors: mechanics, electronics and computing and automotive and motorcycle, accounting for over 10 percent of the industry. However, besides industrial products for the automobile and motorcycle industry, the fields of mechanical engineering, automotive, electronics-computer are limited in manufacturing simple components. Specifically, in recent years, the Vinh Phuc deficit was at least US$1 billion. Many sectors of FDI enterprises such as automobiles, motorcycles and electronics have high export value, but depend entirely on imported sources, so their added value is low.

 

The industrial growth of Vinh Phuc has received great contribution of FDI businesses from Japan which are Toyota and Honda Vietnam, accounting for 80 percent of the provincial GDP. However, at present, the two companies mainly operate in assembling imported spare parts so the localisation rate of some of the main products is not high. According to a survey of the management board of industrial parks in Vinh Phuc, Honda Vietnam Company has about 500 suppliers of SI products, including over 400 FDI enterprises. Meanwhile, so far, Vinh Phuc has only 40 SI enterprises.

 

According to survey of the Japan External Trade Organisation (JETRO), the number of local components and raw material supplied for industrial products in China and Thailand accounted for 50-60 percent of industrial output value, while the number in Vietnam accounted for only 27.8 percent. Therefore, the added value of Vietnam's products ranges from 15-30 percent, including products for export such as garments and footwear.

 

So, Decision 1588 dated June 24^th 2013 of Vinh Phuc People’s Committee on development planning for SI by 2020, towards 2030, identified the SI planning as closely linked with industrial development planning. Although it is a bit late, but it is also considered a good solution of local government in the development of this industry. In particular, SI development will become the foundation for the industry towards the use of advanced technologies, with high competitiveness, first to increase the localization rate of major industrial products. The SI sector of the province strives to become a link of chain supplying SI products for industries in the province and neighbouring provinces, as well as participate in global supply chains of large multinational corporations in the world.

 

For FDI projects investing in manufacturing SI products, in addition to preferential treatment under general regulations of the State of Vietnam, when investing in Vinh Phuc, investors will be entitled to privileges by the province, namely: supporting documentation consulting fee from VND20-200 million (1,000-US$10,000) for projects with a total investment of US$200,000 to US$5 million; supporting VND2 million to support the announcement of the establishment of the enterprise; supporting VND5 million for environmental impact assessment fee; resolving administrative procedures in "one-stop shop" under the provincial Investment Promotion Agency (IPA), shortening by half the time for granting investment certificate and business establishment certificate. In addition, they will be supported with funds for training and prioritized in employment at the request of the project, not only in the preparation for investment stage, but also during project operation.