Many parts suppliers for automobile production want to have new investment but face large capital obstacles because collateral is unavailable after two years fighting COVID-19. (Photo: VNA) In thecontext of a pandemic-disrupted supply chain and political conflict, supportfrom the Government and organisations for the linkage among businesses issignificant.
According to the VietnamAssociation of Supporting Industries (VASI), to improve the capacity ofVietnamese enterprises, it is necessary to have supportive policies to reducecosts, easy access to credit and preferential interest rates for businesses ininvestment activities and production. There are also solutions for training andimprovement of management.
Many parts suppliers for motorcycle production want to have newinvestment but face large capital obstacles because there isno available collateral after two years of fighting COVID-19.
Dao Phan Long, Chairman of the Vietnam Association of Mechanical Enterprises(VAMI), said that the market is important. The supply has met the demand in themotorbike industry, while the electronics and automobile industries are facingdifficulties due to requirements for large investment and high technology.Therefore, few enterprises dare to put investment in production expansion.
Long said ministries and sectors should quickly provide solutions to supportdomestic enterprises and encourage foreign direct investment (FDI) companies toimplement localisation with tax, labour, and research and developmentactivities incentives.
Ministries and branches should also create favourable conditions to promotesupport and linkages between Vietnamese manufacturing enterprises and foreigncompanies.
Nguyen Van Doan, the representative of SKD Vietnam Precision Mechanic Company,said now the company was a part supplier for Samsung and had a linkage inproduction with Japanese enterprises. The pandemic and political tensions madeit difficult to connect and find raw materials. Meanwhile, the company had poorfinance and management experience, so it was looking forward to receivingsupport to strengthen cooperation and expand production.
According to VAMI, the demand for Vietnam’s machinery and equipment is verylarge, with a value of 300 billion USD by 2030.
To participate in this potential market, besides the business efforts, it isnecessary to have support from the State with a synchronous and stable policysystem for sustainable development. The business community has overcome thepandemic. They have not recovered, so they need more practical and openpolicies.
The Ministry of Industry and Trade said to support the enterprises, theministry would continue to strengthen and improve the operational efficiency ofcentres on support for industrial development in the North and the South. Now,these centres were actively cooperating with FDI companies in Vietnam, such asToyota, Mitsubishi and Canon, in finding suitable suppliers to participate inthe value chains of these firms.
Nguyen Quoc Viet, deputy director of the Vietnam Institute for Economic andPolicy Research (VEPR), said the most important thing was to institutionalisepolicies to promote stronger participation of domestic enterprises in the globalvalue/production/supply chains.
To help the domestic small and medium-sized enterprises (SMEs) improve theircompetitiveness, the State should continue to promote the reduction of businesscosts for enterprises and prevent acts that generate unofficial costs forbusinesses. This would improve the quality of the business environment, Viet said.
There should be a mechanism to support connecting businesses who are findingdomestic supply chains to domestic enterprises to increase localisation andhave technical support to improve the capacity of domestic enterprises.
Besides that, the State should create favourable conditions for domesticprivate enterprises to improve productivity and efficiency of production andbusiness, and gain experience in operation and management fromforeign enterprises.
Meanwhile, the private enterprises need to innovate themselves, establish asupporting industry ecosystem and cooperate with large foreign technologygroups to participate more in the global value chains.
According to VASI, about 300 enterprises are participating in the productionsupply chain for foreign companies in Vietnam, of which the motorcycleindustry has a high rate of localisation, while the electronics and automobileindustries have a low rate of localisation.
Vietnam is still importing about 90 percent of electronic parts. For theautomobile industry, the country has 60 enterprises as part suppliers at level1 for foreign partners and approximately 145 enterprises as part suppliers atlevel 2. It must import more than 70 percent of components for the supportingindustry.
Truong Thi Chi Binh, vice chairwoman and general secretary of the Vietnam SupportingIndustries Association, said that linking with foreign enterprises was thefastest way for domestic enterprises to participate in global supply chains.However, the COVID-19 pandemic and political conflicts had made the connectionmore difficult.
According to foreign organisations on consulting and supporting businessassociations, Vietnamese enterprises have not yet met quality, price, anddelivery time requirements.
"Enterprises must ensure competitive prices, transparency, flexibility,and delivery time to meet requirements of the supply chains. However, if theymeet the quality, the competitive price is still difficult for Vietnameseenterprises because their prices are at least 20 percent higher than the pricesof other existing suppliers," Binh said.
When entering Vietnam, large manufacturing corporations have their suppliers.These suppliers are experienced and have advanced production networks with lowcost and large output. Meanwhile, domestic enterprises have weak management andno advanced production, leading to low price competitiveness.
VAMI chairman Long said that over the years, a series of limitations inmanagement mechanisms and policies of the State and weakness of enterprises hadcaused the mechanical engineering industry not to develop, so it had notyet met the requirements of the world market.
With the pandemic, the supply of goods and materials was disrupted, and thelinkages between businesses were loose, causing the firms to stop productionand leave the market.
In the domestic market, mechanical engineering enterprises also found itdifficult to compete with foreign companies. Many large industries mainly usedimported mechanical products or made by FDI enterprises, including sectors ofconstruction, transportation, irrigation works, oil and gas, marine economy,shipbuilding, automobiles, and motorbikes.
Nguyen Trung Hieu, head of Business Planning and External Relations Department,Toyota Motor Vietnam Company, said that Vietnam was weak in producing rawmaterials such as steel and plastic, had low technical productionand small market scale. These factors caused component production costs torise, a barrier to supply chain linkages./.
VNA
