Econ
Poor linkage between domestic and foreign firms remains a headache of policy makers
Productivity and technology spillover effects from FDI enterprises to locals have remained far from the desired, according to VnExpress.
Thirty years since Vietnam opened up its economy to foreign investment, the lack of linkage between domestic and foreign enterprises remains a major issue as the country continue to attract FDI for economic development, according to a report published by the Vietnam Chamber of Commerce and Industry (VCCI).
Under this context, productivity and technology spillover effects from FDI enterprises to locals have been limited, stated VCCI.
Statistics showed that only 20% of FDI in Vietnam operate under the form of joint-venture, while less than 14% of local private enterprises are supplying materials and services for the FDI sector.
Additionally, vertical linkage between FDI and local companies has also been inefficient, as less than 30% of inputs of the FDI sector are purchased in Vietnam, while the majority came from other FDI enterprises.
According to the report, Vietnam has been a successful story in attracting FDI, thanks to cheap labor cost and high level of market openness. However, Pham Cao Vinh, chairman of Goldsun Packaging and Printing Company, one of a handful Vietnamese enterprises being Samsung’s tier-1 vendors, said that low cost is not the most important factor.
For FDI enterprises, the most important thing is quality, commitment on delivery time and high standard on environment and labor rights, Vinh said to VnExpress.
The company’s recently launched factory worth US$21.3 million is specialized in making packaging for Samsung electronic products. More than half of Samsung smartphones are made in Vietnam, but only three Vietnamese enterprises participate in the supply chain of product packaging and manual.
Despite a unit price of US$2 per packaging and contributing less than 1% to Samsung’s product price, companies have to invest a huge amount of resources to maintain its vendor status of Samsung.
Goldsun’s US$20-million factory is just part of its total investment of VND2 trillion (US$85.49 million) that the company is carrying out to make packaging for Samsung’s smartphones.
High requirements on technology and products are major barriers of Vietnamese enterprises to join supply chain of multinational companies, Vinh said.
Nevertheless, sales to Samsung brought in revenue of VND600 billion (US$25.65 million) in 2018 for Goldsun, accounting for the company’s half of the total revenue.
However, the number of local enterprises joining Samsung’s supply chain remains modest, standing at 29 out of a total of 200 tier-1 vendors. By 2020, the number is expected to increase to 50.
A Samsung mobile phone plant in Vietnam.
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Statistics showed that only 20% of FDI in Vietnam operate under the form of joint-venture, while less than 14% of local private enterprises are supplying materials and services for the FDI sector.
Additionally, vertical linkage between FDI and local companies has also been inefficient, as less than 30% of inputs of the FDI sector are purchased in Vietnam, while the majority came from other FDI enterprises.
According to the report, Vietnam has been a successful story in attracting FDI, thanks to cheap labor cost and high level of market openness. However, Pham Cao Vinh, chairman of Goldsun Packaging and Printing Company, one of a handful Vietnamese enterprises being Samsung’s tier-1 vendors, said that low cost is not the most important factor.
For FDI enterprises, the most important thing is quality, commitment on delivery time and high standard on environment and labor rights, Vinh said to VnExpress.
The company’s recently launched factory worth US$21.3 million is specialized in making packaging for Samsung electronic products. More than half of Samsung smartphones are made in Vietnam, but only three Vietnamese enterprises participate in the supply chain of product packaging and manual.
Despite a unit price of US$2 per packaging and contributing less than 1% to Samsung’s product price, companies have to invest a huge amount of resources to maintain its vendor status of Samsung.
Goldsun’s US$20-million factory is just part of its total investment of VND2 trillion (US$85.49 million) that the company is carrying out to make packaging for Samsung’s smartphones.
High requirements on technology and products are major barriers of Vietnamese enterprises to join supply chain of multinational companies, Vinh said.
Nevertheless, sales to Samsung brought in revenue of VND600 billion (US$25.65 million) in 2018 for Goldsun, accounting for the company’s half of the total revenue.
However, the number of local enterprises joining Samsung’s supply chain remains modest, standing at 29 out of a total of 200 tier-1 vendors. By 2020, the number is expected to increase to 50.
