Southeast Asia's manufacturing base is surging ahead and Vietnam's supporting industry has been left behind.
Hiroyuki Moribe feels that the country's most urgent task right now is developing a concrete action plan for firming up this foundation. The Chief Representative of Japan's External Trade Organization (JETRO) sat down with Thanh Nien Weekly for an interview and laid it all on the line.
Thanh Nien Weekly: What is your take on the supporting industry in Vietnam?
Hiroyuki Moribe: Vietnam's supporting industry is still seeing slow growth compared to developed ASEAN countries. If Vietnam's supporting industry is not yet developed by 2015, when the country becomes a full participant in the (ASEAN) free trade area, its market may be flooded by Thai or Indonesian products.
The Japanese government's agencies (such as JETRO and JICA) are helping support Vietnam in its efforts to devise an action plant. The Vietnamese government should formulate this plan soon.
Is Vietnam's reliance on imported materials one of the reasons that the nation's supporting industry is still under-developed?
Japan (geographically) is similar to Vietnam, as they both stretch from north to south over long coastlines and generate many kinds of agricultural and aquaculture products. Japan's terrestrial resources (like land and oil) are very scarce. Nevertheless, the supporting industry for the automobile and electronic industries have already developed well
Vietnam enjoys a much larger bounty of natural resources. Thus, we cannot say that the country's supporting industry did not develop due to a shortage of natural resources. Some ASEAN countries have seen strong supporting industry development despite limited natural resources. They have effectively combined imports and advanced technology to foster development.
What should Vietnam do to develop the industry?
Some advanced ASEAN countries have developed good supporting industry. For example, the automotive supporting industry has come along well in Thailand and Indonesia. The same goes for the electronic industries in Malaysia. These countries have identified key industries to focus on, and at the same time they foster cooperation to attract investment and develop their supporting industries. Thus, Vietnam should identify a key industry to focus on for the next ten or 20 years.
Which sectors do you think Vietnam should prioritize when developing supporting industry?
Vietnam taps crude oil, exports it to countries like Singapore (for processing), and then imports the refined product. Vietnam's first oil refinery came into operation this year and the country plans to build more in the near future. Many oil products have been produced. Vietnam has a great potential to develop industries that use these oil products or crude oil, doesn't it?
Vietnam has also planned to build steel manufacturing factories so you can expect to see a surge in industries that rely on these products. High-quality steel products can serve many industries.
There are opinions that Vietnam should call for more foreign direct investment in the supporting industry. What do you think about this?
Foreign firms will help transfer technology to Vietnam, and train laborers for a supporting industry role. Thus, I agree with the idea of luring foreign investment in the supporting industry to help develop it. Creating a favorable investment environment is very important.
According to an annual survey by JETRO, Japanese businesses operating in Vietnam are still concerned about issues such as incomplete infrastructure and the legal system.
Foreign firms, which are interested in Vietnam, often compare the investment environment of the country to that of other ASEAN nations. Vietnam should have concrete policies to develop key industries, and lure more foreign investment.
What's the next step for Vietnam in terms of developing the supporting industry?
Supporting industry includes mainly small- and medium-sized firms, so it is necessary to implement policies that support their development. The small- and medium-sized firms often face financial difficulties, so they need assistance such as low-interest loans, technology training centers and product quality assurance.
I know there are Vietnamese enterprises which pour more money into the stock and property markets than into equipment. Investment in supporting industry is very important, and the government should facilitate businesses in doing so.
Vietnam's supporting industry has not yet developed, so it should quickly model its development policies on those that succeeded in Japan, and certain developed ASEAN countries.
Now, there is a trend of tax reduction in the world, so Vietnam doesn't have much time to develop its SI. The most essential thing now is to define a concrete action plan: "where, when, and what to do" and implement it well.