Illustrative image (Photo: laodong.vn) Hanoi (VNA) - Small-and medium-sized enterprises (SMEs) insupporting industries can benefit from multinational groups’ China plus-onestrategies that include Vietnam, wrote Filippo Bortoletti, Country Director ofthe Dezan Shira & Associates Vietnam.
In his recent article published on Vietnam Briefing, Bortoletti said in the past 15 years, Vietnam hasseen lots of changes, from the manufacturing boom through watching a vibrantemerging start-up sector gain its legs.
The emergence ofthe China plus-one paradigm has seen supply chain restructuring and riskdiversification strategies implemented at large. Meanwhile, Vietnam has alsoopened up to greater foreign investment, thereby taking advantage of thesetrends to transform itself into a regional manufacturing hub, he wrote.
According to him, while the “China plus-one” trend has prompted large corporationslike Samsung and Nike to relocate their operations to Vietnam, the move of SMEshas been less widely recognised.
Often followingtheir leading multinational customers, these SMEs have also been drawn toVietnam thanks to the country’s favourable business environment.
Although theseSMEs may not operate in as glamorous industries as mobile phones and laptops,they play a crucial role in any economy, including Vietnam’s. In fact, SMEs inVietnam facilitate technology transfers and provide skills training that can beeven broader than that offered by larger organisations, highlighting theirimportance to the country’s economic development.
SMEs oftenoperate in a sector crucial for the sustainable development of Vietnam’smanufacturing sector: supporting industries. Vietnam has acknowledged inrecent years the importance of being not just one part of the global supplychain but rather of being a key part of these increasingly complex structures.
In this light,the Government has instituted tax breaks and incentives for supportingindustries looking to establish themselves in Vietnam.
SMEs, whetherthey are new to the region or following the well-trodden path from China intoVietnam, stand to benefit significantly from utilising these incentives, hesaid.
The official said Vietnam’s headway into developing supporting industries andlonger in-country supply chains has been slow. In 2022,Vietnam’s localisation rate was only around 36%, a fraction of its keycompetitors India and China. But for SMEs lookingto diversify into Vietnam, this is only a minor challenge.
Vietnam has become a highly integrated playerwithin Asia in recent years, thanks in part to its participation in variousfree trade agreements. The country has signed agreements with its SoutheastAsian neighbours as well as bilateral and multilateral deals with countriesaround the world, helping to facilitate trade and investment flows across theregion and beyond.
As a result,sourcing components and shipping them to Vietnam for assembly, or shippingparts and components from Vietnam elsewhere for assembly, is increasinglybecoming cheaper and easier.
Furthermore, there is impetus for change across the economy.
Forums andseminars promoting Vietnam as a supporting industry destination are becomingmore and more commonplace. The issues facing development of Vietnam’ssupporting industries are also front and centre at these events.
A number of bigmanufacturers are expanding the footprint of their supporting industries inVietnam. Samsung, for example, has opened a 200 million USD research anddevelopment centre in Hanoi.
With a vast coastline connecting the burgeoning nation via aseries of ports to the rest of the world, Vietnam is in a very convenientlocation. It’s not just the Pacific access either.
One ofChina’s southern neighbours, Vietnam as a China plus-one destination is a great option. Components andparts for a broad range of manufacturers are already crossing the border, inboth directions, every day to the tune of hundreds of millions of dollars.
Right now,there is tremendous potential for SMEs in supporting industries, particularlyin Vietnam, the author concluded./.
