In the past, Vietnam hasn’t been able to develop a support industry, a fundamental sector for industry growth. Domestic enterprises can meet only small part of the domestic need for auxiliary products, which are mainly simple components representing low values in a product’s cost structure.

Vietnam now has 30 economic and technical sectors that require support industries. Many of those sectors are involved in exports, including automobile and motorbike assembling, garments and textiles, and leather footwear. They can earn tens of billions of Euros or USD in revenue but must import up to 85% of the raw materials. 

Tran Tuan Anh, director of the 19-8 Mechanical Joint Stock Company, attributes the situation to Vietnam’s lack of links among sectors while the support industry hasn’t satisfied international requirements. He adds: few Vietnamese companies are involved in manufacturing spare parts because locally-made items haven’t met required quality standards. In other countries, there are trading companies which specialize in assisting auxiliary makers. But Vietnam doesn’t have such trading companies.”

Realizing the increasingly fierce competition Vietnam will face as it integrates internationally, the Vietnamese government has adopted several policies to encourage the support sector’s growth.

The high-value of Vietnamese products is making up from 15 to 30% of industrial products (Photo: Pham Huyen)

Last October the Ministry of Industry and Trade approved a master-plan for the development of the support industry until 2020 with a vision to 2030 aimed at turning Vietnam into an industrialized nation by 2020.

Under the plan, Vietnam’s auxiliary industry will meet 45% of domestic demand for production and consumption and export 25% of the industrial production value. By 2030 the rate of domestic consumption will be 70%.

Assistance and preferential treatment will be given to five areas which are believed to have potential to develop supporting industries.

Nguyen Manh Quan, director of the Ministry’s Heavy Industry Department, says: “the Ministry of Industry and Trade has worked with relevant agencies to continue reviewing and submitting to the Prime Minister solutions to specify preferential policies to encourage the industry’s growth. We’ll pursue this direction in a spirit of providing maximum support while ensuring economic stability.”

In reality, only 200 Vietnamese firms in support industry are qualified enough to provide products for foreign companies (Photo: Pham Huyen/ vietnamnet.vn)

The government has issued many new and more dynamic incentives for the support industry, including exemptions and reductions in land rental prices, corporate income taxes, and import duties on raw materials and component parts for each specific area and investment project.

Ho Quoc Dung, Chairman of Binh Dinh’s People’s Committee, comments on the province’s preparations so far: “Binh Dinh has actively prepared for investment attraction in the support industry. Recently the Vietnam-Singapore group made a fact-finding tour for its investment project in the support industry of an industrial park in Quy Nhon and Tuy Phuoc. The move is in anticipation of the Nhon Hoi Refining and Petrochemical complex project being licensed for operation.”