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Weak links between mechanical engineering businesses, limited bidding mechanisms, and inappropriate policies have hindered the steady development of support industries in Vietnam over the past years.

According to a reImproving support industriescent survey of 650 support industry businesses in HCM City, Dong Nai and Binh Duong by the National Centre for Socio-Economic Information and Forecasting, most businesses in the support industry are facing a range of difficulties related to market instability and expansion, capital shortages and limited access to financing.

Businesses were asked about their product volume, product lists, revenues and profits over the last three years.

About 600 of the businesses surveyed said they are trading 460 product codes and services, which account for 46.7 percent of support industry-related products including 27 codes for electronic and computer products and 15 for automobile spare parts.

This indicates that the variety of products produced by support industries remains poor and the technological content is still low, which is a long way from meeting the demands of the assembly industry in Vietnam.

Export products, on average, account for 32.6 percent of the surveyed businesses’ total revenue, with foreign direct investment (FDI) businesses recording 42.7 percent, triple that of private businesses.

Electronic and computer businesses said that exports account for 57.7 percent of their total business.

FDI businesses import 51.3 percent of their input materials and spare parts, while private businesses only import 18.9 percent.

The market links between support industry businesses is still very poor, even though more than 74 percent of the businesses surveyed confirm they are interested in using domestic suppliers.

In addition, the supply contracts signed between businesses tend to be short-term; 80.6 percent of input supply contracts and 74 percent of output contracts are on terms of less than one year. Very few contracts are arranged for over one year.

Businesses not taking advantage of existing policies

The survey indicated that limitations of current policies have prevented businesses from making development breakthroughs.

Survey Manager Nguyen Viet Se says that very few of the surveyed businesses have benefited from preferential policies.

Around 45 percent reported they enjoyed benefits from preferential policies for tax relief and land leases, while just 19 percent said they benefited from credit support policies. Only 5.1 percent of businesses mentioned benefiting from training support policies.

Se attributes the low level of beneficiaries to the continually changing policies, and lack of information and necessary consulting services, which has decreased business confidence in the support industry’s prospects for development.

According to the survey, 41.4 percent of businesses say they will continue to invest in the support industry while 50 percent have decided not to invest or have not yet devised clear plans for action.

To stimulate the support industry’s growth in the future, the survey group has asked the Government and relevant agencies to revamp regulations in order to create a legal foundation for businesses, and ensure equality and transparency in business consulting to create favourable conditions for them to access the benefits provided by Government policies.

It is imperative to renew technologies, attract more FDI businesses and trans-national groups, and strengthen links between local businesses to promote the development of a strong Vietnamese support industry, the survey group emphasizes.

Source: VOV

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