Vietnam supporting industries fail to capitalize on huge demand

Thanh Nien News

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Photo: Diep Duc Minh Photo: Diep Duc Minh

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Vietnamese supporting industries have yet to capitalize on huge demand from international investors, Foreign and local experts pointed out at a recent conference.
Bui Quang Hai, a representative of the Ho Chi Minh City Association of Mechanical Engineering, said Vietnamese component producers have met just 11 percent of the demand from Japanese businesses operating in the fields of shipbuilding and the production of electronics, agricultural machinery and automobile components.
In recent years, the country’s exports of electronics, computers and cell phones have increased sharply, but all were produced by foreign businesses who mainly imported components for production, he said.
Hirotaka Yasuzumi, director of the Japan External Trade Organization (JETRO)’s HCMC office, said Japanese businesses which were licensed last year reported a combined capital of US$22.4 billion, making Japan the biggest investor in Vietnam.
However, Japanese businesses have certain difficulties caused by a lack of supporting industries, he said.
A survey conducted by JETRO last year showed that less than 32 percent of the supplies used by Japanese companies in Vietnam are domestically produced, compared to 53 percent in Thailand and 64 percent in China.
JETRO has made efforts to enhance the capacity of Vietnamese supporting industries over the past decade by organizing relevant conferences and exhibitions, but the situation remains nearly unchanged.
According to Yasuzumi, the organization plans to cooperate with local agencies and companies this year, including transferring Japanese technology to Vietnamese businesses to improve their technological and human resource capacities.
In trouble
A dearth of supporting industries has also left Vietnamese manufacturers in trouble.
Pham Xuan Hong, chairman of the Ho Chi Minh City Association of Garment Textile Embroidery and Knitting (AGTEK), told Thanh Nien that the association and its members are rushing to find alternatives to Chinese materials.
China, the largest material supplier to Vietnam, will not become a member of the Trans-Pacific Partnership (TPP) – a trade treaty that is being negotiated by Vietnam and 11 other countries.
As such, the use of Chinese materials in garments and shoes will leave Vietnamese manufacturers ineligible for tariff cuts in the US, the biggest market for Vietnamese clothing exports.
Vietnamese businesses are now seeking materials made locally or by other treaty signatories, Hong said.
According to Le Quang Hung, chairman of the Saigon Garment Manufacturing Trading Joint-stock Company, Vietnamese garment producers have always looked for local suppliers to reduce costs, but many components and materials cannot be found here.
Most local suppliers, especially weaving and dyeing businesses, lack the capital and technology to provide materials to garment producers, he said.
Moreover, many local authorities have refused to license dyeing factories out of environmental concerns.
The government needs to issue policies to attract investment in the production of garment materials, including tax incentives for dyeing and weaving businesses, as the businesses are costly, demanding of as much as trillions of dong, Hong said.

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