Local firms kept out of supply chains

20-Nov-2014 Intellasia | TBKTSG | 6:00 AM Print This Post

Vietnam’s policies to develop supporting industries to help local enterprises participate in supply chains right in the local market have yet to create a favourable legal corridor, said minister of Industry and Trade Vu Huy Hoang.

Hoang, the first minister grilled by National Assembly (NA) deputies at the question-and-answer session on November 17, admitted policies to develop supporting industries have lagged behind reality.

Grim reality

Deputy Nguyen Thi Kha of Tra Vinh Province reminded the session of a bitter reality that Vietnam still failed from nuts and bolts in supporting industries, having to import even small screws while the country is calling for foreign investors in autos, mobile phones and electronics.

Deputy Le Dinh Khanh recalled the gilded age when Tran Hung Dao Mechanics Factory of the 1960s and Vietnam Engines and Agro-Machines Factory and the likes were once the country’s pride. “Voters ask where they are now,” says Kha.

Facing these questions, minister Vu Huy Hoang said policies have yet to catch up with the reality.

In 2007, Vietnam issued a master plan for developing supporting industries to 2010 with a vision to 2020, and in 2011, the prime minister issued a decision on policies for supporting industries, Hoang said. Most recently, the Ministry of Industry and Trade has also brought out a master plan for supporting industries.

However, the legal corridor for supporting industries has not yet created favourable conditions for supporting industries to develop, he told the NA.

Supporting industries largely concern manufacturers and suppliers of components and materials to create complete supply chains to make the most of domestic production, according to the minister.

For certain industries, however, the market size is not big enough to woo suppliers.

For example, the automobile industry can only woo suppliers once the market size exceeds 100,000 autos a year, but local manufacturing is now only 70,000 units a year.

As such, local content in cars accounts for only 10 percent. However, the rate for buses is higher, at 40 percent, he said.

Minister Hoang also briefed NA deputies of local content in other industries, at 50 percent for the apparel sector, 60 percent for footwear, 30-35 percent for electronic home appliances, and 15 percent for electronics.

The minister explained that the globalisation is now dictated by multinational corporations, and local enterprises find it hard to engage in global supply chains.

On the other hand, the poor capacity on the part of local suppliers has prompted foreign-invested manufacturers to look for foreign suppliers, which is the key reason behind huge trade deficit for domestic manufacturing industries, he said.

The total import value of components and materials for key manufacturing industries amounted to $53.1 billion, and is predicted to jump to $67.6 billion this year, he added.

Trade fraud

Upon the question by several deputies that smuggling and trade frauds are still rampant, minister Hoang said this big headache was largely due to the fast increase in Vietnam’s external trade, but the low capacity of local market monitors is also to blame.

Illicit trade, especially smuggling, is a big problem that has persisted for years, and tends to rise further, he said.

The number of trade fraud cases, including smuggling, has been steadily increasing year after year. The number of cases uncovered by market monitors this year to date has increased 12-14 percent, he said.

The market size is expanding, and external trade is also on the rise, making inspections harder. Meanwhile, many ill-intentioned traders, foreign and local alike, have managed to bring substandard and fake products onto the market.

Hoang said in many cases market monitors do not have the needed equipment to test products, and “even some market monitors when wanting to ascertain the quality of fertilisers have had to taste such substances.”

Upon this answer, deputy Nguyen Thi Kha of Tra Vinh Province reacted, saying the ministry must have solutions to fight fake products and cannot point the finger at the lack of equipment.

“If fertiliser is tested by taste, then how fake fertiliser is tested?” she charged the minister.

On November 18, minister of Home Affairs Nguyen Thai Binh and minister of Transport Dinh La Thang will join the Q&A session.


Category: Economy, Vietnam

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