Speaking at a seminar held in HCMC on Thursday with sponsorship of the EU-Vietnam Mutrap III, Truong Thi Chi Binh, director of the Supporting Industry Enterprise Development Center (SIDEC) of the Institute for Industry Policy and Strategy (IPSI), said just 300 local manufacturers are joining supply chains.

The actual number might be bigger, Binh said, adding these producers only supply spare parts and accessories, instead of taking part in supply chains. There are only 50 firms able to supply auto makers while the respective figures in Thailand and Malaysia are 2,500 and 400 in 2010, according to the Vietnam Automobile Manufacturers Association (VAMA).

Most suppliers of manufacturers in the country are foreign-invested or Vietnam-foreign joint-venture firms. Among the parts suppliers of Honda Vietnam, local enterprises number 19 compared to the 59 owned by foreign investors, Binh said.

The apparel and textile sector, a high export earner, has a total of 3,700 businesses with 70% of them producing garments, 17% making textiles, 6% manufacturing yarn and 4% dyeing fabrics.

Up to 99% of cotton needs and 70% of artificial fiber demands are imported. The country, meanwhile, exports 65% of locally-produced yarn and imports 5.2 billion meters out of the total need of six billion meters of cloth to make clothing products.

Many companies in supporting industries have found no way to enter existing supply chains for large firms specializing in assembly and production. For instance, a Danang-based rubber company is known as a good brand for tires but it has yet to sell products to domestic auto makers.

It is hard for local suppliers to approach major firms like Toyota. They have long-established business ties with their suppliers from Thailand and Japan, so there is no reason for them to shift to local suppliers, Binh explained.

The same problem has also happened to local leather and footwear industries, with a majority of materials imported from other nations, said Nguyen Thi Tong, vice chairwoman of the Vietnam Leather and Footwear Association (LEFASO).

Binh emphasized the role of the Government in promoting local supporting industries. Investing into supporting industries requires modern machinery and skilled labor but faces risks, so Binh the Government should give a helping hand to resolving this matter.

Source: SaigonTimes.