Support industries need help
More Government support for local companies involved in the support industries was needed, according to the managing director of the Japan External Trade Organistion (JETRO)'s HCM City office.
Hirotaka Yasusumi said the investment by Japanese companies in Vietnam was still full of vigour, but "the biggest problem when investing in Vietnam is the deficiency in the supporting industry."
According to a JETRO survey, the percentage of local procurement in Vietnam for Japanese companies had improved by 11 % in the last four years, from 22 % in 2011 to 33.2 % last year.
But it was still low compared to 66 % in China, 55 % in Thailand, and 43 % in Indonesia, he said.
Although the supply of industrial materials and sub-components by Vietnamese firms to Japanese businesses had gone up by 2.5 % in the 2013-14 period, it still accounted for less than 45 % of total local procurement in Vietnam.
Yasusumi said Japanese firms investing in Vietnam want to buy industrial materials and sub-components from local companies to reduce costs.
But since most Vietnamese companies involved in the support industries are small- and medium-sized, many of them lack funds to invest in modern technology, as well as human resource training or necessary technologies.
Duangdej Yuaikwarmdee, deputy managing director and general manager of Reed Tradex Co, Ltd in Vietnam, said Vietnam has been a prime destination for foreign investment, resulting in a surge in local demand for industrial parts.
"It is vital for industry to understand factors affecting supporting industries, which play a major role in industrial development," he said.
Most of the global electronic brands have assembly plants in Vietnam.
"Compared to other ASEAN countries, you have good fundamentals, and the key thing is how we can develop the electronic support industry," he said.
"I think that the key concern is how to make local manufacturers adapt to new technologies to increase production.
Pho Nam Phuong, director of the Investment and Trade Promotion Center of HCM City, said in the first five months of the year, the city attracted around US$1.05 billion in new investments and additional capital of foreign investors, a year-on-year increase of 33 %.
"Japanese, Korean and Taiwanese manufacturers have been moving many of their factories and technology to Vietnam."
This offers an opportunity for domestic parts producers to become suppliers of these corporations, she said.