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Low technologies hinder Vietnam from joining global supply chain

Great opportunities are available, but the capability of Vietnamese enterprises to join global supply chains remains low.

Vu Trong Tai, CEO of Reed Tradex Vietnam, said at ‘Metalex Vietnam – Welding Vietnam 2019’ held some days ago that Vietnam is in a special period with great opportunities to develop production and join more deeply the global supply chain, but warned there are big challenges which cannot be overcome easily.

 

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According to the Ministry of Industry and Trade (MOIT), Vietnam has 1,800 enterprises which make components and accessories, but only 300, or 17 percent, have joined the production networks of multi-national groups.

The cars made and assembled in Vietnam have a production cost 20 percent higher than other regional countries because of the small production scale and low localization ratio.

The cars made and assembled in Vietnam have a production cost 20 percent higher than other regional countries because of the small production scale and low localization ratio.technological content

According to Frank Weiand from the USAID-funded project on connecting small and medium enterprises, 98 percent of Vietnam’s enterprises are small and medium size, which make up 63 percent of the labor market and contribute 45 percent to GDP.

Attracting big FDI, Vietnam has great opportunities to join foreign invested enterprises’ (FIEs) production chains. The total FDI capital registered in 2018 was $35billion, while FIEs made up 70 percent of Vietnam’s total exports.

However, very few Vietnamese enterprises can meet the requirements to join global supply chains because of the low rate of advanced technology application, low productivity, the lack of experience in working with foreign companies, the workers’ lack of skills, language barriers and financial limitations.

Commenting about the trend of using industrial robots at factories in the 4.0 era, Huynh Phong Phu from ABB Vietnam said supporting industries in Vietnam are developing with the appearance of large-scale factories of Samsung, LG, Toyota, Honda and Canon. Some production facilities are the key units of the world’s production and supply chains.

Vietnamese manufacturers and assemblers have also developed to a large scale and they comply with production regulations and standards of the world. These two conditions have promoted the development of the system of supporting enterprises. The requirements on products and productivity also increase.

The government’s support plays a very important role in helping Vietnamese enterprises join global supply chains. According to Le Nguyen Duy Oanh, deputy director of the HCMC Center for Supporting Industries Development (CSID), the loan amount that can get interest support for equipment and technology procurement projects is VND200 billion maximum per project.

Frank Weiand also announced that USAID's Small and Medium Enterprise Link (LinkSME) project chose METALEX Vietnam 2019 Exhibition as a business connection platform to help Vietnamese businesses join global supply chains.

Kim Chi 

 

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