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Private investors not keen on support industries
Private-owned businesses pay little attention to support industries because of their small market scale and the absence of incentive policies for this field.
While support industries play an important role in the economy, they have not received sufficient attention from the state. In fact, the country has not introduced any long-term measures, considerable investment, or an explicitly favourable legal and business climate for the development of support industries.
Incentives needed
Dr Tran Van Phung, from the Academy of Finance, affirmed the importance of support industries in attracting foreign direct investment (FDI).
Phung cited the fact that developing countries all want to lure FDI from developed countries and especially multi-national corporations, which often look for political stability, cheap labour, and developed support industries when selecting countries for their investment.
Cheap labour is an advantage for Vietnam; however, this advantage is decreasing as labour only makes up a small proportion of total costs. For instance, in the production of home electric appliances and electronics, labour costs account for approximately 10 percent, while costs for spare parts reach nearly 70 percent.
Another expert, Tran Dinh Thien, from the Vietnam Economics Institute, said most developing countries fall into trade deficit as they have to import materials and by-products for domestic assembly. Developing support industries solves the fundamental trade deficit issue in developing countries, he said.
In reality, Vietnam’s state management agencies are gradually recognizing the importance of developing support industries, but are doing so at a snail’s pace.
Dr Truong Thi Chi Binh, an official from the Ministry of Industry and Trade, gave evidence for this. “So far, there has been no state management institution exclusively for support industries. Consequently, there have been few policies and programs on developing the nation’s support industries.”
Too slow
“We have gone too slowly and have squandered too much time not paying due attention to this issue,” said Truong Dinh Tuyen, former Minister for Trade. “It’s high time we took strong action to make up for that.”
Tuyen said the selection of products to develop must be based on criteria such as compliance with the strategy to develop support industries over a long period of time, and having domestic manufacturing and assembling establishments.
Due to limited sources, support enterprises, which are mainly small- and medium-sized, should initially focus on products such as mechanical, electric and electronic spare parts, and on casting moulds.
Tuyen highlighted that only by using sufficiently strong preferential policies can Vietnam develop its support industries in the context of its late entry into the field, its minimal protective barriers and the tough competition it faces.
Dr Binh said that Vietnam has so far attracted major FDI businesses to fill industrial zones and create a surge in industrial value, paying little heed to support enterprises.
The role of associations and state management agencies in assisting support industries is not prominent enough, he added.
Meanwhile, Dr Pham Tien Dat, an expert of corporate finance in the Academy of Banking, underscored the need to invest in a concentrated way.
“State budget is limited. To create focused investment, it’s necessary to set standards and an order of priorities, based on support industry development strategies, in close connection with the strategy to develop science and technology.
vietnamnet
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