The localisation rate in Vietnam is low compared with other countries. (Photo: VNA)

Hanoi (VNA) – The localisation rate in Vietnam - the percentage of a product locally made - is too low as the number of Vietnamese part supplying businesses accounted for only three percent of the country’s total, Phan Dang Tuat, former Director of the Institute for Industrial Policy and Strategy said.

“We cannot build a part supplying industry with the limited firms,” Tuat said.

He told a forum on developing the industry, titled ‘Opportunities from Free Trade Agreements (FTAs) to attract investment into industries’ held in Hanoi on March 31 that Vietnam has 1,383 businesses operating as part suppliers out of a total 500,000 firms, divided into three groups of mechanic, electronics, rubber and plastic.

“Vietnam should promote the building of a start-up model for companies in the sector. Ministries and agencies should study how to establish more firms in the industry,” he added.

Deputy Minister of Industry and Trade Hoang Quoc Vuong said that under the tariff cut, Vietnam would have opportunities to improve competitiveness and exports to both traditional and new import markets, on the road map in bilateral and multilateral FTAs with important partners.

Vuong said this would be an opportunity for Vietnam to participate in global production and the supply chain while making Vietnamese industrial products more diversified.

Sharing ideas, Atsusuke Kawada, Chief Representative of Japan External Trade Organisation (JETRO), said the localisation rate in Vietnam was much lower than in Thailand, Indonesia and Malaysia.

A report from JETRO showed that the purchase of spare parts of Japanese firms in Vietnam last year was 32.1 percent while the rate of 2014 was 22.4 percent.

However, the rate was lower than those of Japanese enterprises operating in China with 64.7 percent, Thailand 55.5 percent, Indonesia 40.5 percent, and Malaysia 36 percent.

He also said that the development of the part supplying industry has not seen clear improvement though the country has priorities in this sector and that of the small- and-medium-sized enterprises as well as a policy on human resource training.

He said that the priorities for part supply of household appliances, office machines and automobile industry have been extremely important.

The chief suggested expanding the production scale of automobile spare parts. In addition, the Government should have clear policies in supporting Vietnamese enterprises which produce office equipment such as printers, and household appliances such as refrigerators and washing machines.

Several big producers from Japan have relied on imported spare parts from China. Vietnam could nurture businesses producing spare parts to reduce imports from China.-VNA