HCM City (VNA) – The processingand manufacturing sector is attractive to foreign investment, but domestic supportingindustries still need favourable mechanisms to develop, heard a workshop in Ho Chi MinhCity on March 9.

Le Hoang Tai, Deputy Director of the VietnamTrade Promotion Agency under the Ministry of Industry and Trade (MoIT), saidthe processing and manufacturing sector is the magnet to the majority offoreign direct investment (FDI) as seen in the 14.96 billion USD or 54% of the totalregistered capital in the first 11 months of 2022.

To attract investment to processingand manufacturing, supporting industries which supply materials, components,and spare parts have a critically important role to play. Given this, the MoIThas issued many policies to help with the industries’ development, according toLe Huyen Nga, head of the division for supporting industries at the MoIT’sIndustry Agency.

Certain results have been recorded in developing domestic enterprises’capacity, seeking new markets, and connecting local companies with FDI firms. Domesticbusinesses in supporting industies are now able to produce items with hightechnological content meeting requirements of final manufacturers in supplychains.

However, Nga noted, the existingpolicies for developing supporting industries still lack mechanisms efficient enoughto connect suppliers and manufacturers, capitalise on the capacity of manufacturers(mainly FDI firms) to improve the added value of the domestic content in finishedproducts, or develop supply chains in the domestic market. They are also notattractive enough to draw major foreign investors to supporting industries.

In the time ahead, those policies willbe supplemented with many preferential mechanisms and assistance in terms offinance, research and development, technology transfer, and productionmanagement.

It is also necessary to build a lawfor facilitating key industries and developing both domestic and export marketsfor industrial products, she went on, adding that a more effective creditpolicy is also needed for businesses in supporting industries.

Echoing the view, Truong Chi Binh,Vice Chairman and Secretary General of the Vietnam Association for SupportingIndustries, said the production capacity of Vietnamese businesses in supportingindustries is not low, but they are still unable to compete with foreign rivalsdue to high production costs.

Therefore, reducing production costsis the key to deeper engagement in supply chains, he opined, suggesting businesses be given better access to credit, land, and factory buildingprocedures.

Binh also recommended state agenciesform clusters and ecosystems for companies in supporting industries, help themconnect with foreign and multinational enterprises, and carry out policieseffectively to create optimal conditions for businesses to focus onproduction./.