Supporting industries seek newer policies

Joseph Uddo, chairman, American Chamber of Commerce (Hanoi)

Vietnam remains well-positioned to capture significant investment as companies increasingly seek to diversify their global supply chains. Like all major sourcing locations, Vietnam needs to continuously evaluate what its competitive advantage is. We believe Vietnam needs to prioritise labour and engineer training, sustainable practices, work permits for foreign engineers, and the country’s ability to support a more vertical industry, particularly as companies are looking to diversify tier two and three suppliers from China.

We recommend removing barriers to foreign investment in professional and vocational training to assist the development of important skills and capabilities in the workforce. The government is also urged to provide better support for small and medium manufacturers. These companies are part of critical supporting industries, but their individual investments are small.

Current Department of Planning and Investment metrics often do not favour such investors, causing delays in licensing and permissions. These companies are often premium employers of skilled and professional labour and are critical to building the support system that global manufacturers need here.

To capture the diversification opportunities, our members also urge the government to quickly develop a better regime for approving brownfield ventures (purchases or leases existing production facilities to launch a new production activity).

International manufacturers struggle to sell facilities they have already built/invested in, and potential buyers have trouble getting purchases approved and executed, and business licences intended in brownfield facilities approved. A functioning brownfield market is an important facilitator for investment here.

Improvements in supply chain financing (facilitation of cash needs during manufacturing transactions) are needed and will help grow investment in Vietnam. In most competing markets, a customer purchase order is sufficient documentation for a bank to provide short-term financing, enabling a manufacturer to obtain materials and perform operations prior to receiving payment from the customer.

Muto Shiro, chairman Japanese Chamber of Commerce and Industry in Vietnam

The key to Vietnamese economic development is to strengthen the cooperation between local enterprises and foreign-invested enterprises (FIEs) and see how many local companies can participate in the value chain of foreign firms.

According to a survey of ours, the local content ratio of Japanese companies in Vietnam has only increased by 10 per cent over the past 10 years, which needs to be further accelerated. In order to encourage Vietnamese companies to enter the value chain of FIEs, we believe that it would be more effective for the Vietnamese government to find and develop Vietnamese companies with technological capabilities, introduce them to foreign manufacturers, and provide opportunities for business matching.

At present, we are co-hosting supporting industries exhibitions with Vietrade and others. Every year, we also publish a directory of excellent Vietnamese suppliers, which are fully utilised by the procurement personnel of Japanese manufacturers. In this way, it is expected that the quality and technology of local Vietnamese companies will improve, and more companies will participate in the supply chain of FIEs.

We believe that the measures to boost Vietnam’s local manufacturing industry and to promote competition will contribute to improving industrial competitiveness. As members of Vietnam’s local manufacturing industry increases, the number of companies which can supply products that meet quality standards will also increase.

It is necessary to strengthen institutions that develop industrial human resources. Japanese companies provide extensive in-house education and on-the-job training, and are praised in terms of human resource development. However, the competition for human resources is intensifying, and the outflow of trained talent is increasing due to the lure of competitors.

When recruiting personnel, it is desirable to have personnel with basic education and technical training. Therefore, we hope that public human resource development institutions, such as universities and vocational training schools, will strengthen their functions and actively collaborate with Japanese companies.

Ngo Ngoc Khanh, vice chairman Vietnam Industry Supporting Alliance

With the goal set forth, Vietnam should achieve the criteria of an industrial country with modern industry and high average incomes by 2030, but the Law on Supporting Industries has yet to be promulgated.

Major foreign-invested enterprises here are always followed by vendor companies and supporting industry manufacturers from those countries, while Vietnam’s supporting enterprises are mainly small- and medium-sized enterprises (SMEs), so it is very difficult for local players to compete with foreign ones. Very few Vietnamese enterprises can become large vendors of the top chains, we only participate a minimal part.

Local suppliers are struggling with green transition and sustainable development. These SMEs do not have enough resources and finance to do it soon, unless receiving some assistance from the government.

In recent months, orders have increased but not by many, because manufacturing capacity and equipment are poor. We expect some preferential policies for industrial enterprises from the government to provide financial support, for example reducing domestic tax rates, which will contribute to increasing the localisation rate of industrial products.

There needs to be a preferential loan policy for SMEs to upgrade machinery, update new technologies, and receive advanced technology transfer. This is because currently the machinery and equipment for supporting SMEs are middle-class or even low-end, so the country cannot achieve the goal by 2030.

In other countries, when top enterprises invest, they have to commit the localisation rate very early. In Vietnam, we still do not have many constraints on this. So we need to have policies that both encourage and support and connect business-to-business trade between lead manufacturers and vendors.