Ms. Le Nguyen Duy Oanh, Deputy Director of the HCMC Center of Supporting Industries Development Center under the Department of Industry and Trade, said that since the beginning of the year, the center has received a list of nearly 450 components and supporting industry products from 14 FDI enterprises that need to find suppliers. Of which, there are many leading enterprises in the world, such as Samsung, Mercedes-Benz, Panasonic, Techtronic Tools, and Sankitech. On the basis of checking the actual production of domestic enterprises, more than 100 enterprises have been chosen to connect with FDI enterprises. According to Ms. Oanh, most of the supporting industry products that FDI enterprises are looking for are precision mechanical components, electronic components, molds for the manufacturing of automotive and motorcycles parts, and plastic products. These are the products that domestic enterprises have many advantages and experience in supplying, so the connection was very smooth. However, obviously, with current capacity, domestic enterprises can only meet the positions of tier 3 or tier 4 suppliers.
A survey conducted by the Ministry of Industry and Trade shows that the mutual limitations of domestic enterprises are the small production scale, limited governance, and many defective products, resulting in low competitiveness. Meanwhile, core products that require high-tech production lines also make it difficult for domestic enterprises because their investment capital is small, and it is difficult for them to access low-interest loans. This is also the reason why domestic enterprises have not been able to participate in higher tiers in the global supply chain.
In the opposite direction, enterprises said that joining the supply chain must start from the bottom, so starting with the position of tier 3 or tier 4 supplier is rather optimistic. The remaining problem is that enterprises need to actively seek available support resources from authorities, as well as FDI enterprises, to improve their supply capacity. In HCMC alone, after the municipal People’s Committee issued Decision No.15 on supporting investment for the development of production in the supporting industry, many enterprises have risen and deeply taken part in the supply chain of well-known FDI enterprises in the world. Mr. Chau Ba Long, General Director of Minh Nguyen Supporting Industry Joint Stock Company, said that the loan support policy of 85 percent of the total investment value and preferential interest rates for up to seven years has helped his company to have the chance to upgrade the production line. Currently, the company has grown to become a tier 1 supplier in the global supply chain for Samsung. On average, the company supplies more than 200 types of products with at least 20 million components for its Korean partner annually.
In the past three years, the Department of Industry and Trade of HCMC has coordinated with FDI enterprises to run a program to improve production efficiency for enterprises operating in the supporting industry. Enterprises with the needs and determination to participate in the global supply chain of FDI enterprises will be supported by the department. The special feature of the connection program is that FDI enterprises will send leading experts to each factory of domestic enterprises to survey and directly assist it to improve production efficiency. After the process of production efficiency improvement is the stage of appraisal and re-evaluation of production capacity. Then, the supplier will receive the appropriate tier.
Through this program, many enterprises, including Minh Phuong Packaging Company, Thai Duong Rubber Joint Stock Company, and Nhat Long Mechanical Trading Co., Ltd, have gradually improved their production capacity, reduced the rate of defective products and inventory, and joined the supply chain of many big brands, namely Unilever, Hultech, and Titi-Wedia.
The latest survey conducted by the Japan External Trade Organization shows that up to 41 percent of Japanese enterprises said that they had plans to make new investments or expand investment in Vietnam. The demand for on-site component supply is extremely huge, and this is an opportunity for the supporting industry in HCMC. Moreover, the breakage of global supply chains in the US, Europe, and especially China has forced many FDI firms to diversify supply chains in many other markets, including Vietnam. Sharing the same point of view, the representative of Samsung said that the group has completed its production capacity and brought into its supply chain more than 200 domestic enterprises producing supporting industry products. However, to meet the need to expand production in the coming time, the multinational conglomerate is searching for about 50 other suppliers.
Ms. Le Bich Loan, Deputy Head of the Saigon Hi-Tech Park, emphasized that in the context that supply orders are interrupted due to the Covid-19 pandemic, FDI enterprises will loosen their criteria for choosing suppliers. Instead of eliminating supporting industry production enterprises that do not meet the supply criteria, FDI enterprises will opt for supporting enterprises with many limitations to improve their capacity, ensuring sustainable participation in their supply chains. This is an opportunity for Vietnamese enterprises to step by step to improve their production capacity. Therefore, Vietnamese enterprises need to be more proactive in accessing supportive policies from authorities to increase the possibility of connecting to the global supply chains.
By Ai Van – Translated by Thanh Nha
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