Greater connectivity urged between domestic, FDI firms in electronics

Hanoi (VNA) – Very few domestic firms in support industries supply parts for FDI enterprises in the electronics industry, according to Nguyen Mai, President of the Vietnam Association of Foreign Invested Enterprises (VAFIE).

Though FDI in Vietnam has almost reached 190 billion USD to date, accounting for more than one fourth of the country’s total investment, its spillover effects on local companies have yet to expand as expected.

“FDI firms themselves want Vietnamese small- and medium-sized enterprises (SMEs) to be their local suppliers in order to help them reduce cost and improve competitiveness. But many problems have remained to hamper the effective connectivity among them,” Mai said.

Electronics has become one of the economy’s key sectors, making Vietnam among the world’s 12 leading electronic workshops and the third largest one in ASEAN, said President of the Vietnam Chamber of Commerce and Industry (VCCI) Vu Tien Loc.

The electronics led all industries in export turnover in 2017, earning the country more than 70 billion USD, 2.5 times higher than the textile-garment industry and nearly 5 times higher than the footwear, Loc noted.

The number of electronic firms in Vietnam doubled over the past five years. The workforce in the sector also tripled, from nearly 239,000 workers in 2011 to 611,500 at the end of last year, he cited, adding that the electronics has maintained a big magnet for FDI into Vietnam.

Despite such success, the VCCI chairman voiced concern over the fact that there is only one Vietnamese company among every 100 large firms in the electronics industry. Some 99 others are FDI enterprises, he said. These 99 firms contributed to 95 percent of the sector’s export turnover and 70 percent of sale revenue of electronic products in the local market.

“Most of FDI firms in the electronics sector are just assembling workshops in Vietnam,” Loc explained, stressing the need to improve connectivity between the domestic and FDI firms.

The Ministry of Industry and Trade’s Industrial Policy and Strategy Institute (IPSI) conducted a survey last year, interviewing 194 domestic manufacturers of mental, electrical, electronic, plastic and rubbery parts. The findings show that there were very few of them supplying parts for FDI producers in the fields of manufacturing, automobile, electronics, industrial machine and others.

To solve this problem, the Vietnam Electronic Industries Association (VEIA) has been coordinating with the VCCI and the Government of Japan to carry out several projects to increase the number and the quality of employment in the electronics sector and foster cooperation between FDI firms and local SMEs. These projects have benefited 127 companies through a series of training events and policy dialogues.

It could be the start of an era with improved connectivity between domestic and FDI firms towards the formation of a better electronic supply chain in Vietnam.-VNA