Incentives urged to boost support industries

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Nguyen The Hung, acting director of the Southern Investment Promotion Centre, said for instance, the Government's decision last February to boost support industries in some key sectors such as mechanical engineering, IT, electronics, textile and garments, leather footwear, and technology was not specific enough.

Speaking at the Oct.7 conference held on the sidelines of the Metalex Vietnam and Nepcon Vietnam exhibitions, he said: "The incentives were too general and not attractive enough to investors.

"Investors want to know the specific support. For example, the decision said merely the Government would offer import duty breaks for machines but did not say how much."

The Government offers assistance to investors with advertisement, investment and trade promotion programmes, distribution networks, land lease, and technical support besides the import tax breaks.

Industrial parks stopped offering incentives to investors after the country became a member of the World Trade Organisation.

Only hi-tech parks and economic zones still offer incentives, but the Sai Gon Hi-tech Park is almost full while economic zones in the central region lack good infrastructure.

"The development of support industries is an important and urgent task for improving the competitiveness of Vietnamese products," Hung said.

Speaking at the opening ceremony of the exhibitions, Doan Duy Khuong, deputy chairman of the Vietnam Chamber of Commerce and Industry, said many industries, especially producers of export products, continue to rely overwhelmingly on imported feedstock and parts.

The country has to import as much as 80 per cent of these, he said.

The auto industry uses only 5 to 10 per cent of local parts, while for motorbike makers it is 40-70 per cent.

Though foreign companies in Vietnam are potentially interested in local procurement, the domestic support industries cannot supply them, he said.

"If the situation does not change, large foreign assemblers and producers will leave Vietnam ."

While Vietnam remains one of the most attractive investment destinations in the region, it needs to enlarge its base of support industries to continue attracting FDI, he added.