Vietnam is facing a great opportunity to develop its supporting industry. However, proposals are needed regarding the best ways to take advantage of opportunities. Certainly, efforts of the government as well as Vietnamese businesses are vital, the Communist Party of Vietnam (CPV) Online Newspaper said.

This is the theme of the 10th supporting industry forum, titled “How to develop the supporting industry in Vietnam” held on May 22 by the Japan External Trade Organisation (JETRO), the Investment & Trade Promotion Centre of Ho Chi Minh City (ITPC) and Reed Tradex company.

Hirotaka Yasuzumi, Managing Director of the JETRO office in Ho Chi Minh City, said in 2013, total direct investment capital of Japanese enterprises licensed in Vietnam was 22.4 billion USD, with 500 projects, accounting for 26 percent of total FDI. The figures show that Japan is still the largest investor. Japanese companies continue to be highly active in Vietnam.

A difficulty for Japanese companies is the shortage of supporting industries in the domestic market. A 2013 JETRO Survey showed that the proportion of domestic supply for the Japanese companies was less than 32 percent in Vietnam compared to 64 percent in China and 53 percent in Thailand. Over the past ten years, JETRO has attempted to improve the sector through trade exchanges and exhibitions for supporting industry but it has not improved significantly.

Bui Quang Hai, representative of the Ho Chi Minh City Association of Mechanical Engineering (HAME), shared that Vietnam’s manufacturing enterprises only meet 11 percent of the needs of Japanese companies in Vietnam.

In recent years, Vietnam’s export of electronic products, computers and phones has achieved high revenue and increased to double digits, but these are products from FDI enterprises. Imports account for 58 percent of Vietnam’s total export value. This equates to about 40 billion USD of manufactured technology products. Phone components alone stand at almost 20 billion USD. These imports come mainly from China.

Many enterprises admit that their operations depend on materials sourced from abroad. “Currently, we are facing opportunities with Japan to build an industrial cooperation strategy between Vietnam and Japan through 2020 with a vision to 2030. In this regard, six industries stand out, including electronics, agricultural and agricultural product processing machines, environment, energy saving, shipbuilding and automotive parts manufacture,” said Hai.

More specifically, Hirotaka Yasuzumi said that this year JETRO plans to cooperate between private enterprises and the relevant state agencies for the development of supporting industries. The organisation has promoted technological transfer to Vietnamese enterprises by encouraging development of human resources and establishing close ties with Japanese companies.

Duangdej Yuaikwarmdee, Deputy Executive Director of Reed Tradex Company, which has co-hosted the supporting industry forum over the past ten years, commented that Vietnam is now an attractive investment destination for international manufacturers in the fields of automotive, electronics and supporting industries. Japanese companies are continuing to expand their production capacity in the domestic market in the near future. Finding suitable partners for business cooperation will also help to strengthen Vietnam’s industry and achieve long term profitability.

Garment enterprises tend to be largely dependent on importing raw materials from China, which does not participate in the Trans-Pacific Partnership Agreement (TPP). These companies are searching for new import markets in order to qualify for tax advantages when exporting to the US.

Chairman of the Association of Garment-Textile-Embroidery-Knitting in HCM City (Agtex) Pham Xuan Hong said Agtex and its members are seeking raw material sources within the country as well as countries participating in the TPP. In the coming time, Agtex will send representatives to Malaysia to discuss cooperation with Malaysia’s Association of Textile and Garment with a view to exploiting the advantages of the businesses of the two countries.

“Since enterprises investing in Vietnam’s materials sector are few we need to adopt policies to attract more investment in this sector. There is a significant need for preferential policies in capital and land-rent price for domestic enterprises to invest in textiles and dye because the investment in these fields needs a big capital injection of thousands of billions of VND. Without preferential terms, there will not be sufficient private enterprise willing to borrow money for the relevant investment,” said Pham Xuan Hong.

According to the Chairman of the Board of Directors of Saigon Garment Manufacturing Trading Joint Stock Company (Garmex) Le Quang Hung, the domestic textile sector has not kept up with the growth of the garment sector in recent times. Domestic garment enterprises like Garmex have been searching for locally sourced raw materials to reduce costs, but many kinds of fabrics are not produced in-country. Meanwhile, most businesses in the sector are not sufficiently resourced in terms of capital and technology to produce raw materials for the garment sector, especially the textile and dye sectors. Moreover, many localities don’t want to grant license to build dye factories due to environmental impact.

“When negotiating TPP, we must sacrifice benefits of some sectors to receive the export tax exemption for the garment and textile sector. If we do not take advantage of the opportunity, it is insignificant to perform TPP, especially with regard to regulations on the origin of raw materials. Consequently, it is necessary to have policies to develop the sector providing the garment and textile materials clearly published from the Government,” Hung said.-VNA