Industry News
Local, foreign firms: divided they stand

According to a survey by the Việt Nam Chamber of Commerce and Industry last year, only 14 per cent of private Vietnamese businesses had foreign-owned businesses as clients.

As for foreign businesses, only 26.6 per cent of them bought materials or equipment in Việt Nam, and that too mostly from other foreign enterprises operating in the country.

The survey also found that foreign firms in technology-intensive sectors depended more on materials and equipment imported from their own countries than those that in low-tech industries.

Analysts said the links between foreign and domestic businesses remain too weak for the former’s technology and labour productivity to percolate into the latter.

In other words, Việt Nam has not taken full advantage of the possible benefits that accrue from having foreign businesses, which account for over 50 per cent of the country’s manufactured goods and 70 per cent of exports.

Why?

According to VCCI representatives, there are very few joint ventures between Vietnamese and foreign companies, meaning local enterprises do not have much opportunity to take advantage of foreigners’ strengths like capital, technology and management skills.

Eighty per cent of foreign companies operating in Việt Nam are fully owned by foreigners.

A Ministry of Planning and Investment official rued the failure to grab this opportunity, saying there is a vast difference between the development levels of Vietnamese and foreign enterprises.

The biggest drawbacks of domestic enterprises are their poor marketing skills, lack of information about foreign companies’ needs and quality management standards.

The establishment of industrial parks exclusively for foreign companies in many localities has made it easier for foreign investors to produce and export, but also put paid to the chances of their having a positive effect on domestic firms because of the limited contact between them.

Analysts said breakthrough measures, mainly in the form of tech consulting, setting up of technology development funds and tax breaks, are necessary to narrow the gap in technology levels between Vietnamese and foreign firms. Only these could make Vietnamese businesses to further invest in technology, they said.

The Government also needs to have robust policies to develop domestic firms in the supporting industries so that they could tie up with foreign ones.

Deputy Prime Minister Vương Đình Huệ recently said that in attracting FDI the Government gives top priority to companies with investment strategies dovetailing with Việt Nam’s restructuring process, modern technology and production chains, outstanding management capability and a readiness to collaborate with Vietnamese companies.

It also plans to roll out more policies to connect the domestic private sector and the FDI sector.

Source : Vietnamnews Online
Aug 2017

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