Solutions to increase FDI enterprises’ connection to the economy

Nguyen Tung

Oct 09, 2017 / 10:50 AM

Recently, the government has encouraged Foreign Direct Investment (FDI) enteprises to increase cooperation with domestic enterprises, with an aim to spread the effect of FDI to the economy as a whole. After 30 years of the government’s effort in attracting FDI, there remains work to be done to increase the efficiency of this important fund to the economy.

Vietnam achieved high economic growth paritally thanks to FDI funds.

At present, there are many Vietnamese enterprises being the tier 1 vendors for big FDI enterprises, such as Honda or Samsung, which showcase the capabilities of Vietnamese enteprises are comparable with enterprises from Taiwan or China. However, one of the reasons for only few Vietnamese enterprises to take part in FDI enterprises’ supply chain is that they still lack the confidence and belief in their own capabilities. All of these have lead to Vietnamese enterprises do not reach out to cooperate with FDI enterprises, so that they have not really taken part in the FDI enterprises’ supply chain process. This was the conclusion of the Vice General Director of Samsung Electronics Vietnam Bang Huyn Woo said. “We have to search for Vietnamese enterprisese taking part in our supply chain ourselves. I hope Vietnamese enterprises will be more confident and be able to meet the requirements with regard to scale, capital, technology to be come our vendors” – Mr. Bang Huyn Woo said.

With the current scale of production of Samsung, the Corporation requires a massive amount of material input, but also with high requirements for quality, so that it would be very difficult for Vietnamese enterprises to get in the supply chain. “It would be very difficult for Vietnamese enterprises to right away become our tier 1 vendor. But they can take the first steps and become the tier 2 or 3 vendor. After a process of gaining experiences and capabilities, they can become our tier 1 vendor. The most important things is that, they have the ambition and determination to join our supply chain” - Mr. Bang Huyn Woo said.

Meanwhile, Vietnamese enterprises are facing challenges with regard to technology and small market in some specific sectors, for example in the automobile industry, so that not many enterprises want to become vendor in supply chain. For Toyota, currently only 02 Vietnamese enterprises taking part in its supply chain as tier 1 vendor. While tier 2 and tier 3 are many more, tier 1 of Toyota has 20 vendors, both from Vietnam and abroad.

On the other hand, with regard to the supply chain of Samsung, there are a total of 215 enterprises, including 25 tier-1 vendors and 190 tier-2 vendors, are currently participating in the supply chain for Samsung’s factories in Vietnam. Samsung will also increase the number of Vietnamese enterprises to take part in its supply chain to 29 tier 1 vendors by the end of this year. After 3 years, the number is expected to rise to 50 enterprises. However, it is still a too small number compared to hundred of thousands of Vietnamese enterprises. As one of the objective of the Vietnamese government in attracting FDI is to spreading the positive effect from the FDI sector to the Vietnam’s economy, which is until now one of the shortcoming of the FDI to Vietnam.

In addition to the lack of confidence, Vietnamese enterprises would need to have long term strategy for development, being able to quickly adapt to requirements of FDI enterprises; continuously improving capabilities in the context of global integration. Besides, the government also needs to increase the role of associations and organizations in connecting domestics enterprises and FDI enterprises.

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