More must be done to support Vietnam’s suppliers

Vietnamese suppliers have become more reliable partners to numerous FDI large businesses in the country in recent years, said industry leaders and economists.

During a meeting with Prime Minister Pham Minh Chinh last week in Hanoi, Samsung's financial director Park Hark Kyu said the number of Vietnamese suppliers working with Samsung has increased to 309 this year, 12 times higher than the number recorded in 2014.

The world's largest phone maker has recently reaffirmed that it will continue to invest $1 billion annually with one of the objectives to increase the number of Vietnamese partners participating in the supply chain and enhance cooperation in worker training.

To date, Vietnam has become home to most of South Korea's major firms including Samsung, LG Electronics, Hyundai, CJ, Lotte, SK, Shinhan Bank, Namyang and Hanwha. South Korea has been Vietnam’s largest investor with massive projects underway and strong expectations of a new wave of South Korea's investment landing in the country.

Meanwhile, the year 2023 saw significant growth in foreign direct investment (FDI) inflows into Vietnam including Japan's Thai Binh LNG Power Plant project with a registered investment capital of $1.99 billion, Hong Kong's $1.5 billion Jinko solar Hai Ha Vietnam project, $690 million LITE-ON Quang Ninh Factory project, and South Korea's LG INNOTEK Hải Phòng Factory project with an additional investment of $1 billion.

A recent survey by the Vietnam Chamber of Commerce and Industry (VCCI) showed strong optimism regarding the role of Vietnamese suppliers in FDI businesses, showcasing domestic companies' potential to further integrate into the global supply chain.

The chamber said the optimism was the continuation of a trend, observed over the year as FDI businesses have become increasingly dependent on domestic suppliers over the past time, increasing from 63.32% in 2022 to 75% in 2023.

VCCI said the government's measures to improve links between FDI businesses and Vietnamese suppliers have started to show results.

"Higher dependency on domestic suppliers is another indicator of FDI businesses are looking to buy from domestic sources to minimise the negative impact of heightened U.S.-China trade tension," said the chamber.

However, businesses said more must be done to improve Vietnam’s supply chain.

Truong Thieu Cuong, director of a display equipment trading company based in China, said Việt Nam lacks an ecosystem that strengthens its suppliers. For example, in China, there is an established ecosystem that covers all aspects of product development and commercialisation such as design, material input and mass production, which accelerates production, seizes new opportunities, as well as product sales and value.

"As Vietnam relies heavily on importing raw materials, costs are significantly higher compared to China," he said.

However, he said Vietnam also enjoys numerous advantages such as vast land fund, dense population and a wide range of natural resources. Government policies must be implemented to improve Vietnam’s supply chain to attract foreign investors.

Meanwhile, investments should be made to train additional skilled workers for future development. Many businesses say advanced technology is the key to producing high-quality products at lower costs. They stressed the importance of mastering the technologies being transferred as parts of FDI projects, especially in the high-tech sector.

They urge the government to study and adopt additional policies to help domestic companies in the global value chain.