Foreign investments in Vietnam have the ability to change the economics of many of the country’s support industries, who are continually struggling to be part of the larger supply network.
However, they also have to be supported by appropriate state policies, and the right conditions in order to flourish.
Tedious procedures Policies in practice
The formation of an industrial cluster will not only bring in adequate infrastructure but also reduce logistic costs, increase specialization of each enterprise, so that businesses will not need to invest too much in machinery or manufacture too many products. This is also a strong premise for businesses to participate in the global supply chain. Enterprises expect that some localities also have policies to reserve land for industrial clusters like for instance in Ho Chi Minh City. However, upto now, industrial clusters for support industries have not materialized for many reasons. Enterprises nowadays are like single entities and unable to enter the common playing field, but the supply chain needs the right push from the support policies of the state. Countries such as China, South Korea, Japan, and Thailand, all have strong policies for their support enterprises to develop.
There are many policies for support industries, but according to enterprises, these policies are difficult to put into practice. More recently, the Government issued Resolution 115/NQ-CP on solutions to promote the development of support industries. The contents of the Resolution favor enterprises, such as preferential interest rates and policies for processing and manufacturing in which the State will compensate differences in interest rate with upto 5% per year. Besides this, it will also enhance the capacity of small enterprises through construction of technical centers to support regional industrial development from central and local investment, specifically, with five centers, that include three centers in mechanical fields, and two centers in textile, garment, and footwear sectors. The domestic value chain will be developed to promote links between Vietnamese and multinational enterprises, and build concentrated support industrial parks to create industry links, and also build pilot projects of dedicated industrial parks.