The need for domestication rate eequirements to foster supporting industries

Speaking at the seminar “Creating Attraction for Support Industries: The Role of Localities” organized by Cong Thương Magazine on August 29th, Mr. Pham Tuan Anh, Deputy Director of the Industry Department (Ministry of Industry and Trade), said that the government has had many policies to support and incentivize enterprises over the past time.

Specifically, in 2015, the Government issued Decree No. 111/2015/ND-CP on the development of supporting industries; in 2017, the Prime Minister signed Decision No. 68/QD-TTg approving the Program for developing supporting industries from 2016 to 2025… These policies have had a great impact on the practice of the supporting industry.

Specifically, supporting industry products have gradually participated in supply chains and achieved relatively high added value. Besides, many industries have increased the self-sufficiency of raw materials, such as: the textile-footwear industry is self-sufficient in about 30-45%; the mechanical engineering industry is self-sufficient in about 30% of raw materials; the automotive industry has a relatively high localization rate…

With preferential policies for supporting industries, many satellite FDI enterprises following large corporations have invested in Vietnam to enjoy preferential policies on policies, taxes, and environmental-related policies that have been issued. The leader of the Industry Department assessed that some localities have great potential for developing supporting industries such as: Hanoi, Ho Chi Minh City, Thai Nguyen, Bac Ninh, Bac Giang, Hai Phong… in the recent past, based on the general policies of the Central Government has proactively issued policies for their own localities.

These policies focus mainly on some contents such as supporting enterprises in training human resources, helping enterprises access global production chains. For example, Ho Chi Minh City has a policy for priority projects to borrow capital by subsidizing interest rates. Most recently, on July 19, 2024, the People’s Committee of Ho Chi Minh City also issued Decision No. 42/2024/QD-UBND on implementing interest rate support policies for investment projects in priority economic-social development fields in the locality.

Mr. Nguyen Trung Hieu, Head of Business Planning Department of Toyota Vietnam, said that Vietnamese supporting industry enterprises have made significant improvements in both quality and quantity over the past time. Accordingly, in terms of quantity, the number of Vietnamese enterprises achieving ISO/TS 16949 certification has increased from 300 to over 500.

Similarly, the quality of goods has changed significantly. Firstly, Vietnamese enterprises are now not only producing components with low technology content and only focusing on strengths in low-cost labor, but have also moved up to higher levels of components requiring higher technology, such as: stamping, forging, or components for new car series.

Notably, according to representatives of Toyota Vietnam, the management level of the leadership, awareness of improving competitiveness in terms of quality, cost, and delivery capability has been raised to a significant level. Many enterprises have understood very well and proficiently applied standards such as 5S or have systems to organize training for employees.

Representing manufacturing enterprises in the supporting industry, Mr. Duong Minh Hai, Production Director of KIMSEN JSC, shared that KIMSEN’s products have been supplied to multinational corporations, FDI companies operating in Vietnam and exported. Up to now, about 50% of the company’s output is for direct exports and domestic FDI enterprises.

According to Mr. Duong Minh Hai, to develop the supporting industry, besides preferential policies, enterprises need the connection of the MOIT, localities with large enterprises. Although achieving many positive results in developing supporting industries, many opinions suggest that localities are still quite passive in implementing policies to develop industry in general and supporting industry in particular.

The building and implementation of separate policies, developing supporting industries, especially the arrangement of resources and attracting investment in this field are still limited. Meanwhile, most Vietnamese industrial enterprises are small and medium-sized enterprises, and the operation of enterprises is closely related to localities.

The representative of the Industry Department said that to continue promoting the development of supporting industries, MOIT is proposing policies related to market creation, building industry clusters, supporting enterprises in credit… There will be mechanisms and policies to require foreign enterprises to have commitments in developing the domestication rate during the investment attraction process. At the same time, continue to coordinate with localities to build programs to develop supporting industries at the local level.