Opportunities to participate in global supply chain

After a period of supporting electronic and mechanical engineering businesses to improve connectivity to the global supply chain, the Government Office, the Ministry of Planning and Investment and the US Agency for International Development (USAID) has officially launched the Linkages for Small and Medium Enterprises (LinkSME) with an aim to expand the scale of support for many other industries.

Accordingly, the US$22.1-million project, which will be carried out during September 2018-September 2023 to enhance supply and linkage capability of SMEs, and improve the capabilities of business organisations in Vietnam in supporting SMEs’ development.

In fact, for over 30 years since opening up FDI attraction in Vietnam, there is still a lack of linkage between the domestic economic sector and the foreign direct investment (FDI) sector. This fragmentation has also made the FDI sector almost become an "oasis" in the Vietnamese economy, making the economy unable to promote all resources for sustainable development.

In the new generation and strategy to attract FDI , one of the goals considered most important is strengthening the linkage between the FDI sector and domestic enterprises which aims to create spillover for the economy whilst improving the efficiency of FDI inflows.

According to calculations by the LinkSME Project, if the supply chain is strengthened in all industries, it can generate US$58 billion for the Vietnamese economy. There are also other great benefits such as: the experience from projects helps to propose institutional reform, the simplification of administrative regulations and procedures, the reduction of costs for businesses; facilitation for businesses to enhance international integration; enhancement of localisation, and job generation.

However, the solution to the problem of strengthening linkages is also a challenge for Vietnam. Because when determining investment in Vietnam, FDI enterprises have built an ecosystem and tend to continue to cooperate with foreign suppliers. Therefore, the opportunity to participate in the supply chain for domestic enterprises are very few. Also success only comes when domestic enterprises can meet the standards of enterprises at the top of the value chain.

This project may not solve all the problems raised, but at least takes concrete steps to connect domestic enterprises with FDI enterprises. Thereby, SMEs can connect with and access to procurement processes and procedures of enterprises at the top of the value chain that are interested in looking for domestic supply chain and increasing the content of localisation of products. They also can get supported to improve the capacity to meet new requirements.

As for FDI enterprises, it is also possible to access the suppliers, which are Vietnamese SMEs, that have been assessed for their capacity as well as detailed information on product lines with low connection costs.