The dialogue between enterprises in the South East and the World Bank recently showed many inadequacies of Vietnamese enterprises in the global supply chain. Experts said that domestic enterprises needed to have a stronger breakthrough to gain a firm footing in the global supply chain.
Wood production at Minh Duong Wood Joint Stock Company (Thuan An Town).
Take the initiative
According to experts, Vietnam's current trade patterns in the global supply chain show a strong focus from the region. Domestic enterprises are contributing importantly in the supply chain of automotive, electronics, agricultural products, textiles and footwear. According to Brian Mtonya, a senior specialist at the World Bank, Vietnam stands at a fork, which one way is to continue growing as an export platform for global supply chains and performs low value-added assemblies, the other way is to be able to capitalize on the current growth wave to diversify and promote the supply chain with higher added value functions. Taking the opportunity to promote the formation and development, domestic enterprises will be more dynamic, creative and independent in the market.
Nguyen Phuc, Deputy Chairman of Binh Duong Furniture Association, worried that domestic companies were very easy to fall into the "trap" of low added value. Space for domestic enterprises is shrinking in the manufacturing sector, as the world's leading companies (such as Samsung, Ford, Toyota) in the global supply chain often use "universal suppliers" everywhere. In the long run, when competitors have lower prices (such as wages), they would make foreign investors leave Vietnam.
Currently, the proportion of FDI enterprises using raw materials and products produced in the country is still relatively low compared to some countries in the region. The relatively low level of supply for Vietnam's on-site production will make it difficult to continue attracting foreign investments.
Need a breakthrough
According to the World Bank, SMEs in Vietnam are currently lacking in close cooperation to promote internal resources. For example, the lack of competitive local suppliers means that foreign firms would seek elsewhere and associate with other firms to provide equivalent inputs (quality, quantity, unit price...).
Mai Huu Tin, Chairman of U&I Investment Joint Stock Company, said that domestic enterprises have links in Vietnam with a higher proportion of skilled workers and provide more formal training.. The reason for the lack of skilled labor force is that the leading companies perform high value added overseas, leading to the lack of "learning along with practice" for domestic enterprises.
Binh Duong as well as provinces and cities with strong industrial development need to make breakthroughs in local human resource training to meet the needs of business growth and expansion. Le Van Minh, Director of Tuong Van Company (Dong Nai province), said that startups were facing many difficulties in loan sources. Many enterprises complained about the difficult enterprises’ ability to access financial resources compared to other countries in the region. This is also the reason why SMEs do not have a breakthrough to catch up with global supply chain.
According to experts, supporting industries also need a breakthrough to enhance the competitiveness of enterprises. Non-developed supporting industries will make assembly companies, final product manufacturers depend much on imports. Although these products can be offered cheaply abroad, insurance costs will increase, because of too many categories, transportation costs, and risks in the progress, time to receive imports. For this reason, if supporting industries does not develop, the main industries will be lack of competitiveness and scope will be limited in some industries.
In order to attract more foreign investments, supporting industries must go one step ahead, creating the infrastructure to provide necessary inputs for the assembly industry. Because corporations and big companies themselves now only retain their research, product development and assembly stages, rather than all of them in a company or a factory.
Reported by Xuan Vi – Translated by Ngoc Huynh
