Support industries play a key role in developing other sectors but how to develop them effectively remains an open question.
At the third Vietnam Support Industry Forum held recently in HCM City, Vu Xuan Mung, a representative from the Ministry of Industry and Trade (MoIT), said proper policies and large amounts of capital are needed to develop appropriate support industries.
Hiroyuki Mizuno, an expert from the Support Industry Development Project under the Japan International Cooperation Agency (JICA), said the lack of support industries in Vietnam has lowered the country's competitive edge against other countries in the region for attracting investment from Japan.
Illustrative photo - Source: VOVNews
Vietnam's industrial sectors have only focused on basic assembly rather than developing support industries, which have prevented businesses from attracting foreign investors.
If it does not want to be left behind, Vietnam needs to keep pace with support industry development in other regional countries such as Thailand, Malaysia, Indonesia, China and the Republic of Korea.
According to a 2011 Japan External Trade Organization (JETRO) survey on Japanese investors' use of locally available materials, Japanese companies operating in Vietnam reported they were only able to access 28.7 percent of input materials or industrial spare parts locally, a much lower percentage than in other Asian countries.
In China, Japanese companies are able to get 59.7 percent of their required inputs from local support industries, while the proportion is 53 percent in Thailand, 41 percent in India and Indonesia, and 39.3 percent in Malaysia.
Support industries in Vietnam and the Philippines are considered slow-paced and their development is showing a downward trend. This will adversely affect economic development in the future if the countries are not determined to change the situation.
In fact, support industries in Vietnam are actually in a fix due to the lack of coordination between management agencies.
The garment and textile sector’s proposal to set up a leather production area to serve domestic manufacturers has received no response from localities. Local authorities say they fear building such an area will adversely affect the environment, which is why they have not yet submitted the sector's proposal.
At a recent meeting with some ministry and sector leaders, Chairman of the Vietnam Leather and Footwear Association (Lafaso) Nguyen Duc Thuan asked the MoIT to implement a pilot project on support industries, saying that the garment and textile sector will be in the vanguard.
A number of proposals for developing support industries have been put forth but functional agencies have paid little or no attention to dealing with them.
At the meeting, businesses complained that they received no support from relevant agencies in their efforts to carry out projects to develop support industries.
Truong Ngoc Phuong Hang, Director of the Phan Sinh Company in HCM City, said her company was not given any specific instructions on tax policies or interest rates for businesses involved in support industries. This is why most businesses are unable to access macro-policies related to developing support industries.
Mizunoe said businesses need to make more efforts to master technology without depending on State support.
Japanese investors said Vietnamese businesses still rely heavily on subsidies and have failed to adapt to tough competition in production and services, which impedes the development of support industries.
The Japan-funded support industry project has already supported 29 Vietnamese businesses and is currently assisting 22 more.
Judging from the project's achievements in the past year, support industries can develop successfully in Vietnam if there is proper and effective investment, said Mizunoe./.