Japan Aids Vietnam’s Industries

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By Chua Siew Joo

Sept. 10 – Vietnam is expanding its support industries through aid from Japan in the areas of building business capacity, developing human resources and formulating legal framework.

The support industries include electronics and information technology, the garment industry, leather-shoe manufacturing, car-making and mechanical manufacturing.

During a seminar called the “Action Plan for Development of Supporting Industry of Vietnam” jointly organized by the Japan External Trade Organization and the Vietnam Chamber of Commerce and Industry (VCCI) held last Sept. 5, the government announced plans to boost production in major support industries.

Nobuhiko Murakami, the President of Toyota Motor Vietnam told the Vietnam Investment Review said that it is “[hard] to find local suppliers (of supporting products) which meet our requirements and expectations in terms of quality, cost, delivery and reliability.”

Foreign direct investment from Japan will have to switch to imports of the same products from ASEAN countries if there are no significant cost reductions through enhancement of local-sourcing, he added.

Developing support industries will also help maintain Vietnam’s competitive edge in the face of rising labor costs due to rapid wage hikes.

On top of Vietnam’s World Trade Organization commitments, the country will need to complete the ASEAN Free Trade Agreement liberalization process that should remove protection of local industries against ASEAN products by 2018.

According to delegates at the seminar, the weak support industries prevent added value local industrial products from increasing and discourages foreign direct investment.

Japanese firms in the country are left to deal with the challenges of poor infrastructure, workforce shortages and insufficient supply of domestic parts and components.

The entry of Japanese assemblers like Honda, Toyota and Canon is gradually improving the concept of support industries. An expert from Japan International Cooperation Agency (JICA), Ichikawa Kyoshiro, told the Vietnam Investment Review that the Vietnamese government should clearly define the needed products and technologies then build projects for attracting FDI in order to absorb more foreign direct investment in supporting industries.

Favorable policies on corporate tax, human resource training and industrial zone construction for supporting industries are needed, he said.

The Vietnam Development Forum (VDF) proposed to build a “Vietnam-Japan Monozukuri Partnership for Supporting Industry” to boost Vietnam’s competitiveness.

Monozukuri is modelled after the Japanese-style of manufacturing goods. Adhering to the monozukuri means producing products of the highest quality products and constantly improving production systems to maximize quality, cost and delivery.

The VDF also suggested that finalization of action plans and related work to be completed by early 2009 and monitored until 2013.

Vu Huy Hoang, the Vietnamese Minister of Industry and Trade told the VIR that the government will focus on urgent issues; to “[improve] the knowledge of local governments, industrial managers and business people on the imperative need to boost the country’s supporting industries as well as the basic infrastructure for overall industrial production in Vietnam.”

This is Vietnam's race against time. Foreign companies doing business will not sit back and wait for a decade to pass before Vietnam develops its supporting industry given mounting international competition.