Workers makes shoes at a footwear company. HCM City plans to provide further incentives for small- and medium-sized enterprises that invest in support industries. Some key sectors like machinery, garments, textiles and footwear have been hurt by the lack of support industries. — Photo vov

HCM CITY (Biz Hub) — HCM City plans to provide further incentives for small- and medium-sized enterprises that invest in support industries, according to Nguyen Phuong Dong, deputy director of Department of Industry and Trade.

He said that support industries played an essential role in advancing the country's goal to become an industrialised nation by 2020.

A robust support industry, which is needed to improve the competitiveness of Vietnamese products, is seen as a top priority.

Support industries not only provide jobs and promote exports, but also prevent excessive dependence on imported goods and services, according to Dong.

However, their development has been slow in Viet Nam because policies are not attractive enough to investors.

The country has achieved success in developing support companies for the motorbike and electrical appliance industries.

Some key sectors like machinery, garments and textiles, and footwear are hurt by the lack of support industries. This has caused them to depend excessively on imported feedstock and inputs, thus losing out on profits and competitiveness.

Dong said the promulgation of a new decree was important to creating a legal framework for State agencies to oversee and manage the sector.

The decree is expected to help support industries in key sectors like IT, electronics, automobiles, textile and garments, leather footwear and technology.

One of the major challenges to attracting investment in support industries in the city is the lack of clear policies and information about the field.

Most Vietnamese companies involved in support industries are small- and medium-sized, and many of them lack funds to invest in modern technology as well as human resource training or necessary technologies.

The country has only 656 enterprises producing spare parts compared to 58,000 businesses operating in the manufacturing industry.

According to the Ministry of Industry and Trade, the underdeveloped state of the local support industry has resulted in increased production costs, and a risk of bigger trade deficits with foreign partners and low competitiveness of Vietnamese products compared with regional peers.

Viet Nam has to rely too much on imports of components and spare parts, mostly from China.

Support industry decree

The Ministry of Industry and Trade recently completed a draft decree on developing support industries with many incentives.

The ministry has stressed the need for incentives for those operating in the support industry area because the sector is still in a primitive stage.

The top incentives include exemption of business income tax for organisations and individuals operating in the field and transfer of support industry technologies, according to the draft decree.

The state will support a maximum of 50 per cent of funding for the training costs of technical staff of businesses operating in support industries.

Each employee would be trained only once with a training period lasting no more than six months.

The state budget will also support a part of the cost of advertising in mass media and registering trademarks for businesses' operations.

The funding to participate in local and international trade fairs and access market information will also be partly covered by the state.

There will also be a pilot program lasting until 2020 that will cut 50 per cent of personal income tax for people working as specialists or trainers in technology transfer in support industries for a maximum period of one year.

The incentives also include exemption from import duties for goods that are imported to create fixed assets for production of support industries.

The lending interest rate for projects in support industries will enjoy a preferential rate that will not exceed the maximum rate of 80 per cent of normal rates for loans with a maturity period of up to 10 years.

There will also be centers for the development of support industries to be established across the nation.

The ministry said the policies to support the sector needed to be implemented before 2018 when the regional free trade agreement takes full effect. — VNS