Weak supporting industry threatens FDI

 A Honda motorbike engine on display at an exhibition in Ho Chi Minh City. Vietnamese firms are able to meet only a very small part of the demand from Japanese investors for spare parts and accessories.

Vietnam faces a reduction in foreign capital inflow even as it implements free trade agreements with its partners because its underdeveloped supporting industries will be a discouraging factor, experts say.

The Japan International Corporation Agency (JICA) has said Vietnam would not be a choice for foreign investors interested in the ASEAN region to set up factories over the next five years, if the supporting industries developed very slowly.

ASEAN members including Vietnam will complete the Common Effective Preferential Tariff, cutting import taxes on most items to zero in 2015. Some tariffs will be removed three years later.

JICA expert Katsumata Teruhisa said investors would house their factories in countries where supporting industries are highly developed, and only consider the others as potential markets.

Vietnam’s supporting industries were far less developed than other ASEAN countries like Thailand, Malaysia and Indonesia, he said.

Vietnamese firms are at present able to meet only a very small part of the demand from Japanese investors for spare parts and accessories in the automobile, motorbike, electric and electronic industries.

The local content ratio was about 5 to 10 percent in automobiles, 20 to 40 percent in electrics and electronics and 70 to 80 percent in motorbikes, Teruhisa said.

Half the content in local motorbikes was provided by foreign traders or investors who’ve set up factories in the country, he added.

Le Tuan Anh, managing director of Cathaco, said it was not easy for local firms to start up supporting industries because of the capital and skilled labor force required. Moreover, those entering this business need to be patient about getting returns on their investment, he said.

Cathaco, one of pioneers in the industry since 1999, manufactures parts and components of television sets or computers for foreign-invested businesses.

Anh said many local firms were not patient enough to run supporting industries which require producers to take care of details. They typically wanted to see their profits very quickly with minimum trouble, he said.

“That is the reason why only a small number of small- and medium-sized enterprises are involved in the (supporting) industries and why they have developed slowly in the country,” he told Thanh Nien Weekly.

Anh said his company was seeking foreign partners in Singapore, Thailand, Malaysia or China to join a new project which aims to increase its capacity and competitiveness because it was difficult to find local partners.

More time needed

Viroj Sirithanasart, managing director of Thai Tool and Die Industry Association, said it takes at least 10 years for a country to develop its supporting industries and Vietnam would need more than that.

Government support with favorable development policies and the supply of skilled labor was necessary for this development, he stressed.

Sirithanasart said Thailand had started developing supporting industries for electronics, plastics and steel over 10 years ago and now the country is focusing on the automation industry.

Thai supporting industries mainly serve the automobile industry and their capacity, with about 50,000 firms in the fray, exceeds its export demand.

Vietnam should utilize support from France and Japan, he said, adding the latter has also helped Thailand to develop is supporting industries.

Thai businesses are looking to collaborate with Vietnamese partners to develop the industry in the country, he added.

JICA has said it is developing a project to help increase local content in products made by Japanese businesses in the automobile, motorbike, electrical and electronic industries.

The project, which will work with 100 businesses over four years from 2010, was surveying requests from local businesses in three main regions of the country, the agency said. It said 21 businesses have been selected so far to receive support from Japanese experts in the technical aspects of plastic production and die-casting as well as management activities.

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Be original, add value

Local firms advised to realize economic potential of creative industries

Vietnamese footwear products displayed at a shopping mall in Ho Chi Minh City. Experts say local products need more distinctive designs to make a bigger mark in both export and home markets.

Local enterprises should get involved in and take advantage of creative industries to add value to their business, experts said at a meeting held in Ho Chi Minh City last week.

They said although the industries, which cover a range of activities like advertising, designing, performing arts, architecture, crafts, toys and games, were relatively nascent in Vietnam, they had the potential to make significant contributions to the national economy.

At the meeting organized by the Vietnam Creative Enterprise Network in HCMC, Edward Gomez, a Filipino design consultant, and Vietnamese fashion designer Ngo Thai Uyen shared their ideas about global market trends and creativity with participants from the textile, garments, advertising, plastics, furniture, communication and shoe-making industries.

Gomez said many buyers and consumers were seeking unique products that combine ethnic elements with contemporary designs.

He said competition at the low-end segment was strong and required significant production capacity while the luxury market focused more on distinctive designs, higher quality and smaller quantities with greater flexibility in pricing.

Gomez also said that buyers were now seeking other suppliers than Chinese firms that were now focusing on their home market.

Dang Vo, chairman of the network, told Thanh Nien Weekly that creative industries are becoming an increasingly important component of the national economy. The government should see it having the potential to make significant contributions to the country’s gross domestic product and issue policies to support its development, he said.

The development should start from training, said Tran Ngoc Danh, managing director of Arts and Design School, a member of the Creative Enterprise Network.

Danh said the school, supported by the British Council, would start its first training course next month that focuses on creative skills for designers in key export industries like furniture, garment, plastics, handicrafts and toys.

Tu Minh Thien, director of the Investment and Trade Promotion Center, said HCMC authorities considered the industries essential for growth.

“Authorities want the development of the city attached to the added value provided by creative industries,” he said at a meeting held July to announce the city’s Creative Saigon 2010 Plan to develop four of the creative industries, including communications, interior décor, information technology, and packaging and labeling.

Thien said the plan aimed to promote designing activities through training courses, fairs and contests.

The British Consul General in HCMC, Tim Brownbill, said his government considered assisting Vietnam in creative industries as a strategy to further its trade and investment relationship with Vietnam.

Britain is one of the European states with a strong development of creative industries, earning 5 percent of the nation’s total exports.

No parallel

Globally, creative industries rake in revenues of US$3 trillion and account for a significant part of national economies in Asia, said Thien.

Thien said the industries added 12 percent to Thailand’s GDP, 6.5 percent to Indonesia, 5.8 percent to Korea and 5 percent to the Philippines, but in Vietnam, this was miniscule.

Danh of the Arts and Design School said the furniture, interior décor and advertising industries have grown strongly in the country, luring investment from foreign firms and their supporting agencies.

However local industries were not making full use of the creative potential, he said.

Most export-oriented industries are implementing contracts where the importers supply the designs, and this is negatively impacting their own creativity and competitiveness, he added.

Vo Van Yen, deputy head of the Gia Dinh Textile and Garment Corporation’s Sales Department, conceded the corporation has not invested much in designs for both domestic and export markets.

“The designs that we create are mostly based on consumer trends or that used by other producers.”

The network’s chairman Vo said many local firms were yet to develop their design functions as they were afraid of being copied, while other firms worried about how much they would cost.

They were also not accustomed to outsourcing their design needs, said Danh.

Ong Din Han, country manger of Global Sources, said local firms should change their mindset about creative industries and invest in them. They would otherwise find it difficult to get new customers, he said. Global Sources is a Hong Kong-based service firm that connects buyers and sellers globally.

Vietnamese furniture was unique in the international market but other products like handicrafts did poorly in attracting customers, said Han. His company would hold a fair for Vietnamese export products next year to showcase their creativity, besides quality and prices.

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Be original, add value

Local firms advised to realize economic potential of creative industries

Vietnamese footwear products displayed at a shopping mall in Ho Chi Minh City. Experts say local products need more distinctive designs to make a bigger mark in both export and home markets.

Local enterprises should get involved in and take advantage of creative industries to add value to their business, experts said at a meeting held in Ho Chi Minh City last week.

They said although the industries, which cover a range of activities like advertising, designing, performing arts, architecture, crafts, toys and games, were relatively nascent in Vietnam, they had the potential to make significant contributions to the national economy.

At the meeting organized by the Vietnam Creative Enterprise Network in HCMC, Edward Gomez, a Filipino design consultant, and Vietnamese fashion designer Ngo Thai Uyen shared their ideas about global market trends and creativity with participants from the textile, garments, advertising, plastics, furniture, communication and shoe-making industries.

Gomez said many buyers and consumers were seeking unique products that combine ethnic elements with contemporary designs.

He said competition at the low-end segment was strong and required significant production capacity while the luxury market focused more on distinctive designs, higher quality and smaller quantities with greater flexibility in pricing.

Gomez also said that buyers were now seeking other suppliers than Chinese firms that were now focusing on their home market.

Dang Vo, chairman of the network, told Thanh Nien Weekly that creative industries are becoming an increasingly important component of the national economy. The government should see it having the potential to make significant contributions to the country’s gross domestic product and issue policies to support its development, he said.

The development should start from training, said Tran Ngoc Danh, managing director of Arts and Design School, a member of the Creative Enterprise Network.

Danh said the school, supported by the British Council, would start its first training course next month that focuses on creative skills for designers in key export industries like furniture, garment, plastics, handicrafts and toys.

Tu Minh Thien, director of the Investment and Trade Promotion Center, said HCMC authorities considered the industries essential for growth.

“Authorities want the development of the city attached to the added value provided by creative industries,” he said at a meeting held July to announce the city’s Creative Saigon 2010 Plan to develop four of the creative industries, including communications, interior décor, information technology, and packaging and labeling.

Thien said the plan aimed to promote designing activities through training courses, fairs and contests.

The British Consul General in HCMC, Tim Brownbill, said his government considered assisting Vietnam in creative industries as a strategy to further its trade and investment relationship with Vietnam.

Britain is one of the European states with a strong development of creative industries, earning 5 percent of the nation’s total exports.

No parallel

Globally, creative industries rake in revenues of US$3 trillion and account for a significant part of national economies in Asia, said Thien.

Thien said the industries added 12 percent to Thailand’s GDP, 6.5 percent to Indonesia, 5.8 percent to Korea and 5 percent to the Philippines, but in Vietnam, this was miniscule.

Danh of the Arts and Design School said the furniture, interior décor and advertising industries have grown strongly in the country, luring investment from foreign firms and their supporting agencies.

However local industries were not making full use of the creative potential, he said.

Most export-oriented industries are implementing contracts where the importers supply the designs, and this is negatively impacting their own creativity and competitiveness, he added.

Vo Van Yen, deputy head of the Gia Dinh Textile and Garment Corporation’s Sales Department, conceded the corporation has not invested much in designs for both domestic and export markets.

“The designs that we create are mostly based on consumer trends or that used by other producers.”

The network’s chairman Vo said many local firms were yet to develop their design functions as they were afraid of being copied, while other firms worried about how much they would cost.

They were also not accustomed to outsourcing their design needs, said Danh.

Ong Din Han, country manger of Global Sources, said local firms should change their mindset about creative industries and invest in them. They would otherwise find it difficult to get new customers, he said. Global Sources is a Hong Kong-based service firm that connects buyers and sellers globally.

Vietnamese furniture was unique in the international market but other products like handicrafts did poorly in attracting customers, said Han. His company would hold a fair for Vietnamese export products next year to showcase their creativity, besides quality and prices.

Related Articles

• Be original, add value
• Food for thought
• Timeout with a good book
• Market moves up sharply
• Preparations for congress reviewed