Vietnam firms overlook R&D, new technologies

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By failing to invest in research and development, Vietnamese companies are missing out on new technologies and falling behind in the rapidly changing global marketplace, officials say.

Deputy Minister of Science and Technology Nguyen Quan said that modernized production methods enable a worker at Hai Phong Paint Company to make around US$100,000 worth of products every year, much higher than the usual rates of $5,000-7,000 at other companies that had yet to invest in modern equipment.

Quan said that investing in new technologies not only helped individual companies, it benefitted the economy as a whole.

He said Quang Trung Mechanical Enterprise in the northern province of Ninh Binh had invested in employing modern methods and had thus helped the country save a lot of money and time by supplying equipment for large hydropower projects.

Unfortunately, there are not many companies in Vietnam that have successfully used new technologies to improve their competitiveness, Quan said.

He said too many companies faced "obstacles" in obtaining new technologies or just accepted the status quo and refused to invest in research and development.

According to the Department of Science and Technology in Ho Chi Minh City, Vietnam's industrial production hub, a recent study of 429 companies found that only three of them had applied advanced technology.

More than half were found to have been using "outdated technology."

Falling behind

Le Hoai Quoc, deputy director of the department, said technology development in Vietnam has been hindered by several factors, including an unskilled labor force, low capital and a fledgling market economy.

Although Vietnam's economy has expanded rapidly, local companies are facing the risk of falling behind in terms of technology, Quoc said.

They are now leaning towards doing contract work and exporting raw materials instead of creating added value for their products, he said.

An Australia-based company, for instance, imported partially processed titanium ore from Vietnam at only $300 per ton. But after the ore is refined, the company can earn $300 per kilogram.

The lack of technology has, however, prevented Vietnamese companies from adding such values to their products, Quoc said.

Nguyen Huu Thai Hoa, a consultant to the Minister of Science and Technology, said many large multinational corporations were moving production to China, where technologies are improving more rapidly.

Many foreign manufactures only consider Vietnam a place to assemble products where they can benefit from cheap labor and preferential investment policies. As a result, they rarely transfer technology to factories in Vietnam, he said.

Lack of support

Hoa, who is also Asia-Pacific Quality Director at Schneider Electric, said the French company last year spent 4 percent of its $21 billion revenue for research and development activities.

Vietnamese state owned enterprises only invest around 0.5 percent of the country's gross domestic product in research and development, while such ratio for the private sector is only 0.2 percent.

But some companies said they need support to enhance their technology.

Le Van Truyen, deputy general director of Savipharm Pharmaceuticals, said his company applied for a VND1.4 billion loan from the Ministry of Science and Technology to fund a research project.

It took 18 months for the application to be approved, but four months have since passed and the company is still waiting for the money, said Truyen, former deputy minister of Health.

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