A worker operating the machine at the Trung Anh Engineering Factory in Can Tho Province. Vietnamese companies in part suppliers need much improvement to be competitive to enter the global supply chain.— File Photo

HCM CITY (Biz Hub) — Vietnamese businesses in part suppliers need to become more competitive to enter the global supply chain, a forum heard in HCM City on Thursday.

Truong Thi Chi Binh, director of the Part Suppliers Development Enterprise Centre, told the Nepcon Vietnam Forum that the number of Vietnamese firms in the sector remains modest, with most of them being small or medium-sized enterprises.

Only a few of them are part of the production chain of multinational companies, she said.

Poor production and trading competence and lack of market information are the main factors that prevent domestic firms from entering the global manufacturing chain, she said.

But with the free trade agreements the country has signed, more and more foreign investors would come to Việt Nam, providing them opportunities to do so, she said.

She said Japanese companies are the largest auto suppliers to the US and Canada, but most of their factories are based in China.

Many people think Japanese auto firms would shift their factories in China to Viet Nam or open new factories here to take advantage of the Trans-Pacific Partnership, she said.

The question is whether Vietnamese firms can capitalise on this opportunity, she said.

She urged local firms to improve their technologies, management and foreign language competence and promote their products better.

Pham Tuan Anh, deputy general director of Division of Heavy Industries, said parts suppliers provide the foundation for key industries by supplying components.

"A country's industrial sector cannot develop if its parts suppliers are not developed since the latter determines production cost and value addition for finished products and thus their competitiveness," he said.

Though the Government has policies in place to boost the development of part suppliers, the rate of locally sourced parts remains modest at just 10 per cent, he said.

Luu Hoang Long, chairman of the Việt Nam Electronic Industries Association (VIEA), said the electronics industry has developed strongly in recent years with exports rising year after year.

But most of the exports are by foreign-owned firms with a low rate of local sourcing of parts, he said.

According to studies by the Viet Nam Development Forum and National Graduate Institute for Policy Studies, raw materials, parts and components are the decisive factors in production costs, generally accounting for 80 per cent, while labour only accounts for 2 per cent.

Therefore, the development of parts suppliers is an important element in the development and competitiveness of the electronic industry, he pointed out.

Speakers at the forum, which was organised by Thailand-based Reed Tradex, VEIA, and the Viet Nam Association of Small and Medium Enterprise, also spoke about the basic contents of the new-generation FTAs and the Government's support polices for parts suppliers.

The forum was held as part of NEPCON Vietnam, an exhibition on SMT, testing technologies, equipment, and parts suppliers for electronics manufacturing to be held in October. — VNS