Joining the supply chain by product capacity and quality
Several large FDI enterprises have come to Dien Quang Hi-Tech Co., Ltd. to place orders as the company has gradually affirmed its position as one of the manufacturing enterprises in the electronics industry.
According to the Production Director of Dien Quang Hi-Tech Co., Ltd., several FDI enterprises have come to DienQuang to evaluate, as well as inspect and control the quality to meet standards and start to order. The company also provided them with certification to participate in the global supply chain.
Besides the manufacturing sector, logistics is also a potential field for Vietnamese enterprises to participate in the supply chain with FDI partners.
Mai Tran Thuat, Director in charge of Supply Chain Solutions, Bee Logistics Group, said that when free trade agreements such as the EVFTA came into effect, they created several opportunities for logistics businesses in Vietnam. In particular, along with the trend of shifting supply chains out of China, EU businesses have invested heavily in Vietnam. This is also an opportunity for logistics businesses to have more jobs and revenue during the COVID-19 period.
Along with the supply chain shift of multinational corporations to Vietnam, many "giants" in the manufacturing and service industries such as Samsung, Panasonic, LG, Bosch, and Marsk, are continuing to search for suppliers of auxiliary equipment in Vietnam. The good news is that Vietnamese businesses are also meeting the standards of these giants to join the global supply chain.
As for the industrial sector, according to the Department of Industry, the Ministry of Industry and Trade, Vietnam currently has no enterprises that play a pervasive leading role in the industry. However, so far, about 30% of supporting industry enterprises have joined the global supply and value chain.
Specifically, in the textile, leather and footwear industry, 64% of supporting industry enterprises supply the domestic market (of which 3% supply to FDI enterprises), 9% export and 27% supply both markets. In the electronics industry, 44% of enterprises supply the domestic market (of which 22% supply completely for FDI), 16% supply the export market and 40% of the supporting industry enterprises supply for both domestic and export markets.
Overcoming limitations
As reflected by businesses, in the past, the world's large manufacturing corporations operating in Vietnam are stepping up the search for local suppliers to increase the localisation rate. However, the current problem is that the ability of domestic enterprises is still limited because the requirements to participate in the supply chain of terminal manufacturers are very strict.
According to Pham Thi Quynh Huong, from Source OfASIA Company, foreign investors will have high demands on quality and price. If enterprises’ prices cannot compete with other markets, it is also difficult to penetrate deep into the supply chain.
Realising the current limitation in the process of participating in the global supply chain, Vietnamese enterprises are increasingly improving by investing in machinery and management, as well as improving working processes, product quality and accessories. However, this process of enterprises is facing many difficulties.
Chairman of the Ho Chi Minh City Electromechanical Business Association Do Phuoc Tong, shared that currently, the resources of Vietnamese enterprises, in general, are not large. Some businesses have boldly invested, but the amount is still too small compared to the needs of the current economy. Therefore, the State needs to have policies to support businesses.
On the business side, Tran Ba Linh suggested that toparticipate more deeply in the global supply chain, businesses are looking for opportunities to cooperate with several domestic enterprises to expand supply sources.
The Ministry of Industry and Trade has been actively cooperating with Government agencies of other countries,such as the Republic of Korea, Japan, Sweden, Switzerland, the UK, international organisations and some large multinational corporations (for example, Samsung),to implement cooperation projects to improve domestic supporting industry enterprises and strengthen the connection of domestic enterprises with global production chains.
In the long-term, the solution is to support the improvement of the competitiveness of domestic industrial enterprises by focusing on the development of industrial human resources and science and technology, innovation associated with the practice, and with needs of domestic industrial enterprises.
In addition, it is necessary to strengthen linkages between domestic enterprises, the FDI sector and the global market, to make good use of opportunities from free trade agreements, from the fourth industrial revolution, and to help domestic industrial businesses to participate more deeply in the global value chain.
