Vietnam's support industry is struggling to attract foreign investment as multinational companies look for alternative options during the COVID-19 pandemic.

Electronics components are manufactured at 4P Limited Co in the northern
province of Hung Yen (Source: VNA)

That was the message from the Vietnam Association of Support Industry (VASI) who said most of their members are small-scale and they fall short when it comes to meeting demands of companies looking to move to Vietnam.

Truong Thi Chi Binh, VASI vice chairwoman, said just a few domestic companies could meet the workload requirements demanded by multinational organisations.

And, as reported by the Nguoi lao dong (Labourer) newspaper, she feels the government should intervene and negotiate direct with international firms on behalf of the support industry.

She said there should also be detailed plans put in place offering incentives for medium-sized companies to expand production meeting demand of the foreign firms and build effective programmes to encourage start-up companies in the support industry.

To solve current difficulties caused by COVID-19, VASI proposed the government cut taxes and fees, and delay payment of tax and loan interest, Binh said, as it would encourage production and business in the support industry.

In the long term, the State needs to have a legal system and policies in place to encourage development of the support industry and cut administrative procedures. It also should build and develop domestic corporations that produce finished products.

Meanwhile, Nguyen Dinh Cung, member of the Prime Minister's Economic Advisory Group, told zingnews.vn the Government could set up a special working group to negotiate directly with foreign groups to move investment to Vietnam after the pandemic.

The working group would help local and foreign companies know each other’s demands, he said, which would increase quality and efficiency of investment.

Cung also noted the State should simplify administrative procedures, including investment and business procedures, to attract high quality foreign investment.

According to the association, some local enterprises in the support industry have been able to continue production during the pandemic.

However, a half of VASI member companies in the first quarter of this year reduced revenue by 50% compared to 2019, Binh said, adding that about 85% of them are expected to reduce by 70% in the second quarter.

Some companies producing plastic and mechanical components received more orders due to the difficulties in supply from China but as soon as China recovered production, these orders have gradually decreased, she said and the orders are expected to stop completely in the next few months.

In the future, the global supply chain will still take time to recovery, which may close the door to exports markets and force businesses to close.