Supporting industry, which is still known as the “backbone” of industrial production industries by supplying raw materials, components, spare parts, accessories and semi-finished products to manufacturing enterprises manufacture and assemble industrial products. We can completely see the “door” of supporting industry enterprises, which is a potential domestic market with huge space. However, although it has been started for a long time, the supporting industry in Vietnam is still only considered to be at the starting line. There are only about five thousand enterprises operating in the supporting industry in the whole country, which is a clear proof for the opinion of many experts: Never want to grow up!

In 2014, Samsung electronics group released a list of 170 accessories that Vietnamese businesses can make, to provide for the completion of their Samsung Galaxy S4 products and tablets. However, in the end, domestic enterprises at that time could not meet even simple components such as screws, USB cables or battery chargers. It is from here that spread the slogan that made waves in the community: “Vietnam can’t even manufacture a screw”. Of course, the truth is not so because at this time, macro policies have not had a clear impact, paying attention to the specific field of supporting industry.

Right after that, since 2015, Vietnam has developed a vision for the supporting industry. The Government has issued many policies to encourage the development of supporting industries, such as corporate income tax incentives at 10% for 15 years, tax exemption for 4 years, and 50% reduction in corporate income tax payable in the next 9 years… But it seems, there are still not many businesses interested in entering this particular industry. Why so?

Producing accessories and semi-finished products for the elevator industry has few enterprises involved

Firstly, the policy towards supporting industry has some shortcomings. We lack a mechanism to monitor actors in supporting industry activities, here are foreign direct investment (FDI) enterprises. This leads to not being able to take full advantage of the benefits of free trade agreements, creating conditions for Vietnamese businesses to participate in the global value chain.

Specifically, we also expected that when receiving the wave of FDI into Vietnam, it would stimulate the development of supporting industry. That desire is completely justified, but reality has shown it to completely disillusion us. When many foreign enterprises invest in this market, they already have a supply of components. Our country is just a place where processing and assembly factories are located to dominate the market or export to other countries. What attracts them is the benefit of trade agreements. Vietnam’s supporting industry is forced to stay out of the game, unable to participate in this important product supply chain. The core problem is that we also do not have the binding conditions on the responsibility of developing the domestic supplier system in Vietnam for FDI enterprises. The binding relationship between the incentives of enterprises producing finished products and the obligations towards small and medium enterprises (SMEs) has not been shown in any legal documents. Exploiting this factor, we will create a large space for the supporting industry market.

Meanwhile, a number of preferential and supportive policies, although specified in the Government’s Decree, are governed by specialized laws (such as the Law on Land, the Law on Credit Institutions, the Law on Bidding. …). Therefore, when implementing, there are still many problems such as credit guarantee policy for SMEs through the banking system, policies to support SMEs in supporting industry. Mechanisms on incentives for investment credit, tax, land rent, especially resource allocation to implement policies on supporting industry have not been concretized… making supporting industry enterprises difficult to access preferential source.

Second, the production level of domestic supporting industry enterprises is still low, lagging far behind the region and the world. Let’s talk about mechanical technology because this is the foundation of supporting industry. It is painful to admit that this technology in Vietnam is two to three generations outdated compared to the world. The equipment is mostly universal, over the years of use, it is outdated in terms of technical features, the accuracy gradually decreases, leading to an increase in errors, lack or there is not enough spare parts, capital for replacement investment, upgrading is always in a difficult situation… The proportion of enterprises with numerical control processing equipment (PLC, CNC…) only accounts for about 15% of the total number of mechanical manufacturing enterprises, and has not yet been fully utilized due to lack of synchronization in the production line. We have not yet mastered the complete core technology for mechanical technology and are not ready to apply the achievements of the 4.0 Revolution to enhance added value for products. Of course, these will lead to an undesirable result, that is, the gap in product quality between domestic and foreign component suppliers will widen. Who will lose in this game is not difficult to predict.

A survey of the industry and trade industry has also shown that not many enterprises make strategic investments in technology, management and human resources to really lead in supporting industry. And once we are still shy, our supporting industry will still be fragmented, making it difficult to create a distinct advantage to compete. Obviously, it will also be difficult to remove the “snatch” mentality of the business. Besides, the psychological factors that feel too small to do, lack of long-term vision are also serious diseases that have prevented businesses from making them “big enough” to participate in the global supply chain.

Third, we lack the “leading” enterprises to lead and inspire the domestic supporting industry to “boom”. The role of these enterprises is very important, creating room for domestic supporting industry. In fact, 90% of Vietnam’s supporting industry enterprises today are small or super small. This leads to the fact that we are only capable of fulfilling orders in small quantities, producing discrete components and simple spare parts with little technology content. There is still a lack of linkage, cooperation, and strength among enterprises, making the overall strength of supporting industry dispersed. And so, it is difficult to create a “punch” with the necessary force to promote the country’s industry to thrive.

The pace of globalization is happening faster and faster, making the world more “flatter” than ever. Supporting industry will face many challenges with many heavyweight opponents. Therefore, creating “giants” will be a necessary counterbalance to lead the game of supporting industry. Other supporting industry enterprises will act as satellites revolving around the above-mentioned “nuclei”, creating a mutual and developing ecosystem.

Back to the elevator sector. Elevator has just been added to the list of domestically produced items since 2014. Therefore, it can be said that this is a relatively young industry. The number of enterprises participating in providing supporting industry products for the domestic elevator industry is not significant. That is why most elevator products bearing domestic or joint-venture labels actually have a low localization rate of less than 20%. It is not exaggerated to say that the domestic elevator manufacturing industry is carrying many “borrowed” factors because of that.

How will we improve supporting technology for the elevator manufacturing industry in the near future? The answer should be left open for policy makers and supporting industry enterprises to create together./