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Lack of trust limits growth of parts supplier networks
Hanoi has nearly 1000 manufacturing companies operating in 20 industries, but its network of firms able to supply needed components to foreign enterprises is still considered to be inferior to similar networks elsewhere in the ASEAN region
Many reasons have been cited to explain the weakness of Hanoi’s supporting industries, including the problems of capital, labour force, technology and the state’s policies. Nguyen Xuan Chinh, Head of the Management Board of the Hanoi Industrial and Export Processing Zones, emphasizes another reason. He says that domestic enterprises and foreign invested enterprises still do not trust each other.
Chinh said:
“Hanoi’s industries now rank in the top five in terms of industrial production value and scale. We have big enterprises and famous products. Firms like Canon, Yamaha and Panasonic employ some one million workers.
“One of our top objectives is to develop supporting industries that are able to supply components to these flagship foreign manufacturers. Currently, the majority of the parts and accessories they use in the products they assemble here are imported from other countries. This makes the added value the city’s industries gain to be less than you might expect.”
Thoi bao Kinh te Vietnam: Why are Hanoi’s supporting industries still weak, though they’ve been granted many incentives?
IZ Management Board head Nguyen Xuan Chinh: The main reason is that Hanoi’s manufacturing technologies remain at a low professional level. Factories that make parts and accessories for other companies still have not developed. Only recently, when the Government released the plan on developing supporting industries, have ministries and local authorities shown their higher determination to develop supporting industries.
Recently a number of Government agencies signed a cooperation agreement on developing the Nam Hanoi (Southern Hanoi) Industrial Zone which will chiefly serve enterprises in supporting industries.
TBKTVN: Is it true, as we’ve heard, that many foreign invested enterprises complain that Vietnamese enterprises do not take the initiative to contact them?
Nguyen Xuan Chinh: In this case, I think both sides can be faulted. Vietnamese enterprises in general, and Hanoi firms in particular, have been diffident in making investment to produce parts and accessories. Many enterprises fear they cannot find buyers for their products.
Meanwhile, the foreign enterprises have been worried that the components provided by Vietnamese companies will not meet their quality standards.
So, you see that a problem exists: The two sides do not believe in each other.
TBKTVN: In what respects?
Chinh: Price and quality are the two most important issues. What Vietnamese enterprises care for is whether they can get contracts to sell products to foreign partners for a long time. Especially, when the global economic crisis broke out in 2008, a lot of contracts signed with “foreign big guys” were canceled, which led to the death of enterprises that specialized in such products.
TBKTVN: What problems do the big foreign companies consider to be the biggest problems of Vietnamese enterprises, then?
Chinh: Slow deliveries and uneven quality. The problems have been caused by bad habits of Vietnamese workers, bad labour discipline, and in some cases by inferior technologies.
TBKTVN: Many enterprises complain that they cannot find places in industrial zones in Hanoi. What explains that?
Chinh: High rents are the biggest issue. The land leasing fee in Hanoi is always two or three times higher than in other localities. Meanwhile, parts and equipment suppliers tend to be small and medium enterprises, and do not have much capital.
To address this problem, we are going to build an industrial zone with suitable provision for small and medium enterprises. For example, the enterprises may lease premises for short periods, instead of having to make a commitment for many years.
vietnamnet, TBKTVN
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