HCM City (VNS/VNA) - Better supplier-buyer relations with multinationals located inVietnam would help small- and medium-sized enterprises (SMEs) gain access toelectronics global value chains, experts have said.

Duong Thi Kim Lien, deputy director of USAID Vietnam Linkages for Small-and Medium-sized Enterprises (LinkSME) programme, said such relationswould help lower costs for multinationals in Vietnam to source locally, whilerepresenting a huge opportunity to grow the country’s SME sector and build itsmiddle class. 

Speaking at a workshop held in HCM City on October 4, Lien said theLinkSME programme improves Vietnam’s regional competitiveness by making ita more predictive investment climate.

Vietnam has had one of the world’s fastest rates of growth over the past 20years, but its growth rates have been slowing in recent years, raising concernsthat Vietnam may be falling into the middle-income trap, according to Lien. 

However, Vietnam has made raising productivity and increasing value-addedproduction a high priority as part of its plan to modernise and grow itseconomy.

One way to do this is by strengthening the linkages between domestic firms andglobal value chains.

The purpose of the LinkSME programme will be to bring about systemic changes inbusiness relationships between Vietnamese SMEs and multinationals in thecountry.

Nguyen Trong Hieu, an expert with the USAID Governance for InclusiveGrowth (GIG) programme, said that 70 percent of the value of spare partsto make electronics products still comes from imports.

In addition, more than 20 percent of Vietnamese manufacturers also havefinancial troubles accessing loans from commercial banks, he said.

Nguyen Thi Xuan Thuy, head of the Industry Department at the Ministry ofIndustry and Trade, said the ministry would continue to offer preferentialpolicies to foreign investors and encourage domestic supporting industries tohelp local electronics producers become more involved in global productionchains.

Vietnam has moved up in the global value chain, and has become better known asa manufacturer in Asia, with four industrial sectors participating in theworld’s production chains, including electronics, automobiles, agriculture andtextiles, she said. 

The country, especially the electronics sector, is expected to attract moreforeign direct investment (FDI) in the near future, creating more jobs forlocal workers as well as opportunities for suppliers of electronics.

To better integrate into global electronics value chains, Vietnam should callfor investment from the private sector, and enhance communication systems,market competition and customs clearance procedures.

According to recent World Bank reports, only 300 Vietnamese firms are fullyeligible to join the world’s production chains.

Nguyen Quoc Cuong, director of Hanel Plastics, said that SMEs faced hurdleswhen joining global supply chains because of the unstable quality of products,a problem cited by Samsung and Canon manufacturers in Vietnam.

Most SMEs do not have a system to ensure quality for all products, he said,adding enterprise leaders lack sufficient commitment and innovation.

“To become a supplier of the first level, enterprises must also ensurestandards related to delivery, safety, employee morale, work environment,communications, and technology,” he said.

“The key to success is a long-term strategy with top priority being given toquality of products, skilledl human resource, professional management, and theuse of cutting-edge technologies."

In recent years, the electronics industry has grown rapidly and has become oneof the most important sectors of Vietnam’s economy. The growth rate rose from7.4 percent in 2011 to 32.5 percent in 2015. 

The development of Vietnam’s electronics industry is attributed to largeinvestments from multinationals, especially from the Republic of Korea andJapan, which manufacture electronic components.

Electronics is the largest export sector in Vietnam, with export turnovergrowing from 22.9 billion USD in 2012 to more than 71 billion USD in 2017.

It is now 2.5 times and five times greater than the textile and footwearsectors, respectively.

Of the total, 95 percent of the country’s electronics export turnover is due toforeign direct investment (FDI) enterprises. 

Organised by the Ministry of Industry and Trade, the workshop was held to helpVietnamese SMEs improve competitiveness and join global value chains.-VNS/VNA