The development of the supporting industry should act as a means for Vietnamese enterprises to be able to supply spare parts to domestic assembly firms and get involved in wider global value supply chains.
According to statistics, Vietnam has approximately 1,800 supporting industry firms, but only around 300 enterprises of which can engage in the supply chain of multinational companies.
There are several underlying shortcomings of the supporting industry such as weak production and management capacity, outdated technology, and limited self-supply capability, while the imports of spare parts and components still exceed exports.
Vu Trong Tai, General Director of Reed Tradex Vietnam Co., Ltd. pointed out that enterprises in industrial sector still lack advanced technology and operate on a small scale. As a result, they are not capable of providing large orders and high-quality products that meet set requirements.
In addition, poor management has led to low productivity, low competitive capacity, and high product prices in comparison to neighbouring countries.
Currently, Japan is the nation’s major investment partner within the supporting industry. Hironobu Kitagawa, Chief Representative of the Japan Trade Promotion Organization (JETRO) in Vietnam, said that the Southeast Asian country receives the highest number of investment projects from Japan with a total of 630.
Moreover, the purchase of spare parts and raw materials in the country by Japan businesses has remarkably increased since 2010. Despite the rise in purchase, the figure is still lower than that of some neighbouring countries such as China, Thailand, and Indonesia.
The JETRO official underscored the importance of creating opportunities for firms to co-operate in production and business activities and providing optimal conditions for potential domestic manufacturers of spare parts and components to strengthen connectivity with Japanese manufacturers and assemblers in order to maintain long-term production activities.
Do Thang Hai, Deputy Minister of Industry and Trade, said co-operation in the supporting industry through the active implementation of the contents of the Vietnam-Japan Comprehensive Economic Partnership Agreement (VJEPA) and the Vietnam-Japan Joint Initiative has served as an important bridge between both countries.
The collaboration offers a wealth of opportunities for technology transfer, and the improvement of production capacity for businesses, Hai noted.
During the mid-term review meeting of the seventh phase of the Vietnam-Japan Joint Initiative held earlier this year, both sides agreed to assist the strong development of Vietnam's supporting industry through investment in human resource training, business management, investment attraction, and market promotion in a bid to increase sales and reduce production costs, said Mr Hai.
Nguyen Thuy Duong, a representative from Minh Hoa Investment Joint Stock Company said that in order to meet the requirements of selective customers, investment should be poured into improving the skills of workers and renovating machinery and technologies.
Additionally, there should be a roadmap for investment in automated machinery to ensure the progress of production and the quality of spare parts and components for the supporting industry.
In the future, local businesses will be looking to receive further support in trade promotion activities as a means of introducing their goods to demanding markets.
According to experts, in order to develop the supporting industry to match the country’s potential, the State needs to fine-tune mechanisms and policies, while local enterprises should focus more on training activities towards improving the quality of human resources.
Businesses have been advised to pour more investment into research development, technological innovation, and transfer application in an attempt to produce high quality spare parts and components for the supporting industry.