During the past 20 years, Vietnam has approached foreign direct investment (FDI) capital under favourable conditions. However, Vietnamese enterprises have missed great opportunities from large FDI inflows in terms of the absorption and acquirement of technology from FDI enterprises.
The reason for this is that Vietnam has a weak and underdeveloped support industry, in addition to the modest number of Vietnamese enterprises participating in the support industry who are mainly involved in outsourcing work.
According to the Ministry of Industry and Trade, the capacity and technology of a majority of Vietnamese enterprises in the support industry is limited. Domestic enterprises are capable of meeting only 10% of domestic demand for support industry products which are components and simple materials with low value. Most of them have yet to approach and meet the demands of support industry products with high technology content.
There is a big gap between the demand of multinational corporations and the production capacity of domestic enterprises. Some Vietnamese enterprises have participated in supplying support industry products, but they have only paid attention to expanding its scale but not its technology.
In addition, domestic suppliers and FDI enterprises have limited information about each other’s demands. The relationship between Vietnamese enterprises is also loose, which is very necessary for enhancing the competitiveness and competitive advantages.
In many countries, relationships between enterprises can be established through the development of industrial clusters. However, the establishment of industrial clusters in Vietnam is lacking in planning, with the main purpose being to clear land for production rather than creating relationships between enterprises.
Vietnamese enterprises, who want to participate in the production chains of multinational corporations, must meet the three requirements of stable quality, timely delivery and reasonable prices. However, few domestic enterprises can satisfy all of these requirements.
The Vietnamese Government has issued Decision No.68/QD-TTg on the development programme of the support industry from 2016, creating a premise and plans for the development of the country’s support industry.
Under the programme, products from the support industry are expected to meet 45% of domestic production by 2020 and 65% of domestic production by 2025, contributing to creating more jobs, increasing income and reducing the prices of several industrial products including automobiles, garments and textiles, footwear and electronic equipment and the prices of related services such as logistics and transportation.
The development of the support industry will also provide Vietnamese enterprises with opportunities to apply international standards and modern quality management systems in production and the chance to join the global supply chain.
