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Vietnam firms need to meet foreign firms’ requirements to enter global supply chains

Vietnamese companies need to meet the requirements of foreign firms if they want to participate in global supply chains from mid-2021 when the Covid-19 pandemic is expected to be under control, experts said.

The difficult situation caused by the pandemic in the EU, the US and many other parts of the world is expected to worsen the disruption in the global supply chains of raw materials for production.

However the pandemic is also creating new business models, bringing opportunities for the establishment of new value chains as Việt Nam attracts a wave of investments shifting from other countries.

The number of Vietnamese enterprises that have become tier-1 suppliers for Samsung Electronics Vietnam has increased to 42 now from four in 2014, and is expected to reach 50 by the end of this year.

Jang Yoon Ho, director of Partner Support – Samsung Electronics Việt Nam, said his company was willing to provide technical support to Vietnamese enterprises seeking to join the supply chain, thus enabling Việt Nam’s supporting industries to improve.

The company plans to expand production further in Việt Nam, according to the director.

It has six plants producing mobile phones, electrical and electronic products, television sets, and home appliances, and plans to open a product research and development centre in Hà Nội by the end of this year.

It makes three million mobile phones a year, and accounts for 50 per cent of the group’s global mobile phone exports.

A recent study by the Japan External Trade Organisation (JETRO) found that demand for supporting industry products from foreign-invested enterprises in Việt Nam is set to rise, including from Japanese firms, which are expected to invest heavily in Việt Nam next year.

“As many as 15 out of 30 Japanese firms with overseas production bases said they want to expand and diversify their supply sources in Việt Nam,” it said.

Shimizu Akira, chief representative of the Japan International Cooperation Agency in Việt Nam, said many Japanese enterprises expected to enter Việt Nam as part of their plans to expand and diversify their supply chain.

To grab the opportunities arising from the wave of investments, Việt Nam needs to offer unencumbered lands in industrial and economic zones along with attractive land policies and good infrastructure, according to Akira.

Việt Nam also needs to improve its investment climate and quality of human resources to meet the requirements of foreign investors.

The process will require close co-ordination between the Government, localities and industries to create conducive policies and improve the business climate.

Lê Bích Loan, deputy head of the Saigon Hi-tech Park management, said the management had worked with Long An, Bình Dương, Đồng Nai, and Bà Rịa – Vũng Tàu provinces to develop a network of supporting industries, she said.

The provinces would work to improve production capacity of the local enterprises, she added.

The HCM City Export Processing and Industrial Zones Authority (HEPZA) is now working on a demand from foreign enterprises that local firms need to guarantee delivery in time.

The city also plans to expand some industrial zones near the Saigon Hi-tech Park like the Bình Chiểu and Linh Trung industrial parks and the Tân Thuận Export Processing Zone.

More high-rise factories are also being built to meet the needs of supporting industries, according to HEPZA.

The Tân Thuận Export Processing Zone is expected to open a three-storey factory with a floor area of 18,000sq.m and a two-storey factory with a floor area of 5,094sq.m at the Bình Chiểu Industrial Park by the end of this year.

After 2020 the Bình Chiểu Industrial Park is expected to build an eight-storey plant with a floor area of 177,000sq.m.

Việt Nam had emerged as one of the top locations in Southeast Asia for foreign investors looking to relocate or supplement their China operations, experts said.

They attributed it to the stable political and business environment, low wages and a growing economy despite the outbreak.

VNS

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