Policies needed to boost production linkage, localisation rate: insiders

Wednesday, Apr 12, 2023 09:45

Just over 300 Vietnamese enterprises have been able to participate in the supply chains of these multinational corporations. — Photo nhandan.vn

Policies are needed to boost the number of domestic enterprises participating in the supply chain of multinational companies, and a boost is necessary for the localisation rates of the processing and manufacturing industry, which now remain modest, insiders said.

According to data from the Ministry of Industry and Trade (MoIT), local industry led in attracting foreign investment last year, with a combined registered capital exceeding US$14.96 billion and accounting for 59.5 per cent of Viet Nam’s total FDI.

So far, 107 countries and territories have invested in the industrial sector.

Deputy head of the MoIT’s Vietnam Trade Promotion Agency Le Hoang Tai called processing and manufacturing a magnet to foreign investors, including multinational conglomerates such as Samsung, Toyota, Honda, and LG.

The sector’s key units, such as telecommunications, electronics-IT, steel and cement production, and garment-textiles, were the most attractive, he noted.

However, just over 300 Vietnamese enterprises had been able to participate in the supply chains of these multinational corporations.

Deputy Chairwoman and Secretary General of the Vietnam Association of Supporting Industries (VASI) Truong Thi Chi Binh said connecting with multinational companies was the shortest way for Vietnamese enterprises to participate in the global supply chain, but not many of them succeeded.

According to a VASI study, support activities have only successfully linked a few enterprises to foreign businesses on an annual basis.

The reason behind the assessment is the small scale of Vietnamese firms, as well as low competitiveness, and shortage of financial resources. These shortcomings conspire to cause Vietnamese firms to be unable to meet requirements of giant partners.

Viet Nam currently houses approximately 500 companies capable of supplying foreign groups.

Binh said the key for Vietnamese supporting enterprises to develop and participate more deeply in the chain of super-manufacturers was to cut production costs.

They needed better access to credit, land, production premises, and factory building procedures, she said, adding that it was also necessary to increase their size and form clusters of enterprises and ecosystems serving the production of complete assemblies.

The official also recommended promoting localisation by preferential policies on tax, labour, and research and development (R&D). — VNS

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