Strengthening connectivity and participation in supply chains will help Vietnam’s supporting industry enterprises recover from disruptions caused by the Covid-19 pandemic.
Increasing demand for local production
Vietnam’s economy has shown resilience and recorded growth forecast to reach 1.8-2.9 percent in 2020, achievements attributed to very effective disease prevention and control.
However, during the Covid-19 outbreak, most manufacturing industries in Vietnam experienced interrupted supply chains. Once recovery begins, demand for production will increase. Although it will be slower than before the pandemic, manufacturers that meet international supply chain standards will still get orders from partners.
Jeff Nessom of Techtronic Industries Vietnam (TTI) said that the company achieved export turnover of US$300 million and was seeking some 200 domestic suppliers in the fields of metal, electronics, and plastics.
TTI is moving factories from Northern America to Asia and other regions and at present it has a factory in the Saigon Hi-Tech Park that has invested in production, research and development in order to shift its supply chain to Vietnam.
Indeed, Ho Chi Minh City’s Department of Industry and Trade is reporting increased demand for cooperation with domestic suppliers, advising Vietnamese businesses to invest in high-quality equipment and human resources in order to participate in specific supply chain segments. Supporting industries are also being advised to strengthen coordination and cooperation and professionalize each field and product, with upstream enterprises in the supply chain playing a leading role, orienting and advising small and medium-sized enterprises (SMEs) on making products that meet market demand.
Grasping investment opportunities
Supporting industries contribute to determining the efficiency, quality and prices of industrial products. Rational and balanced development of supporting industries in the context of globalization creates competitive products, forms production networks with multiple supply chains, and helps connect domestic production and assembly enterprises with multinational corporations and FDI enterprises.
Robert Greenan, Deputy US Consul General in Ho Chi Minh City, said the United States Agency for International Development (USAID) is working closely with Vietnamese authorities and business under the LinkSME project to promote connections between Vietnamese SMEs and upstream enterprises. The USAID will continue to accompany the Vietnamese government and other organizations to boost Vietnamese participation in regional and global supply chains, he emphasized.
According to Deputy Head of the Saigon Hi-Tech Park (SHTP) Management Board Le Bich Loan, her agency has taken various steps to support domestic enterprises, for example enabling them to participate in specialized exhibitions to connect with upstream and downstream FDI enterprises.
SHTP also offered an area of 162,000sq.m for operations of domestic supporting industry enterprises. Investors in SHTP also enjoy corporate income tax (CIT) incentives for 15 years, including tax exemption for four years and 50 percent of CIT reduction for the next nine years. The local support industry also enjoys preferential interest rates for up to seven years under an investment stimulus program on loans not exceeding VND200 billion per project.
The government issued Resolution No.115/2020/NQ-CP in August on solutions to promote the development of supporting industries over the coming decade. The resolution maps out a comprehensive approach to improve administrative policies and enhance private sector capabilities through training and financial incentives.