Vietnam supporting industry could get boost from giant FDI projects

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A phone production line at Samsung's plant in Bac Ninh Province

Experts hope that the increase in the number of foreign firms in supporting industries accompanying major foreign companies as they invest in Vietnam will help strengthen the country's own anemic supporting industries.

The supporting industry is widely acknowledged as being poor, with foreign investors often listing it among the issues of greatest concern for them.

Hirotaka Yasuzumi, managing director of the Japan External Trade Organization (JETRO), said Japanese firms, Vietnam's biggest investors in the first half of the year, find it difficult to expand their business in the country where their use of locally made parts is less than 30 percent. The number is 53 percent for Thailand and 60 percent for China.

Tran Dinh Thien, head of the Vietnam Economics Institute, is hopeful that major projects by foreign investors like South Korean electronics giant Samsung would be a magnet for small and medium-sized foreign investors in supporting industries.

He said technologies brought to the country would benefit local firms and motivate them too to step up research.

The World Economic Forum's Global Competitiveness Report last year ranked the country in the bottom 10 of 144 countries in terms of technological readiness.

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Samsung wants to start construction of a US$1.2-billion plant in October to manufacture electronic components for handheld devices.

It is in fact the second of two it plans to build in a $3.2-billion high-technology complex in Thai Nguyen Province. Work on the first plant started in March.

Samsung already has a $1.5-billion plant in Bac Ninh Province.

Korea's Keosan Vina Electronics got the license in May for a $400,000 factory to manufacture equipment to test phones made by Samsung.

Many foreign firms who already have a presence in the country are also planning to expand to meet Samsung's needs.

Haesung Vina, a phone camera maker, has tripled its investment to $36 million to increase annual capacity 2.5-fold.

Samsung has in fact been accompanied by a total of 54 firms who have invested $2 billion, VnEconomy said, citing official data.

Samsung said its supporting companies have so far delivered components worth $1.7 billion to take its ratio of local parts to 20 percent.

Many other big names in the technology sector like Canon, chip-maker Intel, and Nokia too have a presence in the country.

Besides the money brought into Vietnam by companies in the supporting industry, experts also said these companies would help establish a local supporting industry.

Thieu Phuong Nam, semiconductor firm Qualcomm's general director in Indochina, said the companies that have come with Samsung would also support those entering in future.

Benefiting would be both domestic firms like phone producers Viettel and Q-Mobile, and foreign one like Nokia, he said.

Nokia Vietnam general director Ivan Herd has already said his firm is considering partnering with supporting companies that are supplying to Samsung.

Nguyen Van Dao, deputy director of Samsung Vina, a Samsung subsidiary, said many foreign supporting companies were in the early phase of investment, but he expected them to help Vietnam's supporting industry soon.

Kazuhiko Osato, another JETRO director, was quoted by news website Saigon Times as saying at a forum in Ho Chi Minh City last month that supporting industries in Vietnam, by sticking to assembling for long, make little value addition.

JETRO proposed cooperation between the two countries to boost Vietnam's supporting industry.

It will target industries like molding, metal processing, and information technology.

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