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Prospects of supporting industry in Vietnam in the future

Currently, Vietnam is one of the countries with the fastest industrial economic development. In particular, supporting industry is always a leading bright spot, playing a spearhead role in the development of the country’s economy. In today’s article, join RX Tradex to learn about the development prospects of supporting industries in Vietnam in the future to plan a sustainable development strategy.

1. Overview of supporting industries in Vietnam.

Currently, the investment and development of supporting industries are being strongly promoted by enterprises, aiming at self-reliance in input materials, reducing import dependence. According to the Institute for Industry and Trade Policy Strategy, Vietnam currently has about 2,000 enterprises producing spare parts and components, of which only about 300 enterprises participate in multinational supply chains. [1]

In general, the supporting industry in Vietnam has good capacity in production fields such as: Molds of all kinds, bicycle components, motorcycles, cars, mechanical components, electrical cables, plastic – rubber components & materials,… These supporting industry products have brought great revenue to the national economy and are exported to many countries around the world. In addition, enterprises operating in the field of supporting industries in Vietnam are also increasingly actively applying modern standards and management tools to production and manufacturing, typically there are companies and corporations such as Viettel, Vingroup, Thaco, Thanh Cong, Hoa Phat,… These enterprises have created a foundation for the country’s supporting industry to develop, helping Vietnam’s economy gradually participate more deeply in the global production network and value chain.

1.1. Vietnam’s supporting industry achievements have been achieved.

Currently, supporting industries are being invested and strengthened by agencies as well as enterprises, especially in key manufacturing industries such as textile and garment, footwear, electronics, processing industry,… Since then, the supporting industry has gradually created a premise for increasing the localization rate. In addition, Vietnam in recent years has also recorded remarkable milestones in the supporting industry, such as:

As of 2023, 4 factories in Vietnam bring in nearly 71 billion USD for Samsung, accounting for 30% of the total revenue of this leading Korean corporation. This is a prosperous signal for Vietnam’s supporting industry when it has deeply participated in the supply chain, mobile device manufacturing, etc smartphone. [2]
Toyota is also one of the companies that put its trust in Vietnamese enterprises when there are a total of 5 suppliers supportingsuppliers of supporting industrial products in 2020 (accounting for 15.15%). [3]
In 2019, the VinFast automobile brand appeared, marking the transformation of Vietnam’s automobile industry in terms of autonomy in investment, production and participation in the global value chain. After 30 years of only doing assembly with a low localization rate, the automobile supporting industry is rising to a new position. [4]
In the first quarter of 2023, according to data from the General Department of Customs, Vietnam imported goods with a total value of 74.49 billion USD, down 15.4% over the same period in 2022. Specifically, supporting industry commodity groups have slightly reduced import weight compared to the same period last year. [5] This clearly demonstrates the outstanding development of the domestic supporting industry production system , which is gradually meeting domestic demand.

1.2. Difficulties and challenges for supporting industry in Vietnam.

In addition to the development of supporting industries over the years, Vietnam still faces many difficulties and challenges, some of which must be mentioned such as:

Competition with many countries in the world: The supporting industry in Vietnam is facing competition from other countries in the region and around the world. Therefore, enterprises must make efforts to improve product quality, improve production processes and manage costs to reduce costs and compete effectively.
Lack of high-quality human resources: The supporting industry in Vietnam is lacking high-quality human resources, especially in the field of engineering and management. This makes it difficult for businesses to recruit and train employees, as well as affects product quality and productivity.
Difficult to operate supply chain: Supporting businesses in Vietnam are facing many difficulties in transporting goods and managing supply chains because transport infrastructure has not met the development needs of supporting industries.
Complex administrative and legal procedures: Support businesses in Vietnam are facing many complicated administrative procedures and difficult legal regulations when doing business. This affects the competitiveness and productivity of businesses.

2. Prospects for supporting industry development in Vietnam in the future.

2.1. Many supporting industry projects are being implemented in Vietnam.

With large foreign investment and a prosperous economy in recent years, Vietnam is a bright spot for corporations to choose to build factories and manufacturing industrial parks. Since then, Vietnam’s supporting industry has benefited by participating in the manufacturing supply chains of these leading corporations. As a result, many domestic and foreign enterprises have started to link and implement many supporting industry projects, meeting the increasing production demand in Vietnam. Two typical supporting industry projects can be mentioned as:

Binh Duong Supporting Industrial Park: This is the largest supporting industrial park in Vietnam, owning an area of more than 1,000 hectares and more than 200 factories in operation. It focuses on fields such as electronics, mechanics, machine building,…
Hoa Khanh Supporting Industrial Park: Is a large-scale project of Da Nang, built with the desire to attract investment from domestic and foreign enterprises, while creating jobs and contributing to the economic development of the city. With an area of up to 1,100 hectares, this industrial park focuses on areas with great potential for development including: Mechanics, electronics, machine building,….

In addition to the above two projects, Vietnam is also implementing many other supporting industrial parks nationwide, including industrial parks: Hai Phong, Hanoi, Ho Chi Minh City, Quang Ninh, Vinh Phuc, Bac Ninh and many other localities.

2.2. The Government of Vietnam creates many favorable conditions for the development of supporting industries.

The Vietnamese government has repeatedly set out plans to develop supporting industrial parks nationwide in many different localities. These industrial parks are designed to provide an advanced and conducive environment for enterprises participating in the manufacturing supply chain. In addition, the Government has also set out plans to invest in infrastructure, creating favorable conditions for businesses to support trade and transportation of goods. Investment projects such as: Development of transport infrastructure, electricity and water supply, and other services.

At the same time, Vietnam is also promoting training and human resource development programs to meet the needs of supporting industries, including: training professional skills, management capacity, technology transfer,… In addition, the Government of Vietnam is introducing many support policies to create favorable conditions for supporting enterprises such as investment capital, tax to stimulate the development of supporting industries.

2.3. The investment cost of supporting industries in Vietnam is lower than many other countries in the world.

In Vietnam, foreign enterprises will have lower investment costs when compared to the general level in the world, including: labor fees, land rent, transportation and a few other costs. In addition, combined with the efforts from the Government of Vietnam in recent years, the supporting industry has been focused on developing and receiving many cost incentives such as taxes, transportation fees, import and export fees of raw materials,… This makes Vietnam an attractive investment location for supporting businesses.

2.4. Vietnam possesses a favorable geographical position for trade and production.

Vietnam possesses an extremely favorable geographical location for trade, located near developed countries such as China, Korea, Japan and other Southeast Asian countries. Since then, supporting businesses in Vietnam have the opportunity to access large and potential markets. In addition, Vietnam also has many large seaports, making the transportation of goods and materials of supporting industries extremely convenient. Since then, Vietnam has gradually penetrated deeply into the manufacturing supply chain in the world, playing an important role in the movement of goods and creating a significant premise for the development of supporting industries.

3. Summary.

Through the above article of RX Tradex, it can be seen that Vietnam has outstanding prospects for supporting industry development, with many advantages such as: Low investment costs, skilled workforce, the Government supports many reasonable policies,… Since then, Vietnam has become an attractive destination, attracting domestic and domestic investors for supporting industries. In 2023, businesses that want to learn more about the latest trends in technology and production equipment can, can immediately participate in exhibition events organized by RX Tradex Vietnam such as: NEPCON Vietnam, METALEX Vietnam, Vietnam Manufacturing Expo and Waste and Recycling Vietnam. .

Note:

[1], [3], [4]: Current situation and solutions for the development of Vietnam’s supporting industry.

[2]: 4 factories in Vietnam brought Samsung more than 70 billion USD

[5]: Vietnam’s export and import situation of goods in May and 5 months of 2023