Support industries need help

According to a JETRO survey, the percentage of local procurement in Viet Nam for Japanese companies had improved by 11 per cent in the last four years, from 22 per cent in 2011 to 33.2 per cent last year. Photo skhcn.vinhphuc

Hirotaka Yasusumi said the investment by Japanese companies in Viet Nam was still full of vigour, but "the biggest problem when investing in Viet Nam is the deficiency in the supporting industry."

According to a JETRO survey, the percentage of local procurement in Viet Nam for Japanese companies had improved by 11 per cent in the last four years, from 22 per cent in 2011 to 33.2 per cent last year.

But it was still low compared to 66 per cent in China, 55 per cent in Thailand, and 43 per cent in Indonesia, he said.

Although the supply of industrial materials and sub-components by Vietnamese firms to Japanese businesses had gone up by 2.5 per cent in the 2013-14 period, it still accounted for less than 45 per cent of total local procurement in Viet Nam.

Yasusumi said Japanese firms investing in Viet Nam want to buy industrial materials and sub-components from local companies to reduce costs.

But since most Vietnamese companies involved in the support industries are small- and medium-sized, many of them lack funds to invest in modern technology, as well as human resource training or necessary technologies.

Duangdej Yuaikwarmdee, deputy managing director and general manager of Reed Tradex Co, Ltd in Viet Nam, said Viet Nam has been a prime destination for foreign investment, resulting in a surge in local demand for industrial parts.

"It is vital for industry to understand factors affecting supporting industries, which play a major role in industrial development," he said.

Most of the global electronic brands have assembly plants in Viet Nam.

"Compared to other ASEAN countries, you have good fundamentals, and the key thing is how we can develop the electronic support industry," he said.

"I think that the key concern is how to make local manufacturers adapt to new technologies to increase production.

Pho Nam Phuong, director of the Investment and Trade Promotion Center of HCM City, said in the first five months of the year, the city attracted around US$1.05 billion in new investments and additional capital of foreign investors, a year-on-year increase of 33 per cent.

"Japanese, Korean and Taiwanese manufacturers have been moving many of their factories and technology to Viet Nam."

This offers an opportunity for domestic parts producers to become suppliers of these corporations, she said.