What is the current state of Vietnam's supporting industry sector?

Over 20 years ago, when foreign direct investment (FDI) enterprises first arrived in Vietnam, they struggled to find manufacturers that could meet their standards for even basic components like screws. However, after years of development and capacity-building programs, the supporting industry has transformed significantly. Today, Vietnam is home to over 5,000 supporting industry enterprises, actively adopting modern production standards and management tools. Major companies in key industries, such as Viettel Group, Vingroup, Thanh Cong Group and Hoa Phat Group, have helped strengthen the sector, enabling Vietnamese businesses to integrate into global production networks and value chains. As a result, products like electrical cables, gearboxes, and plastic components are now exported to major markets, including South Korea, Japan, China and the United States.

However, the number of supporting industry enterprises that meet high standards remains limited. The sector still occupies a low-value-added segment in the supply chain, with most products concentrated in textiles, footwear, wood processing and mechanics. Meanwhile, high-tech and complex supporting industry products are largely dominated by FDI enterprises. Statistics indicate that only about 100 companies serve as tier-1 suppliers to multinational corporations, while around 700 operate as tier-2 and tier-3 suppliers. Furthermore, research and development (R&D) in the sector, though receiving more attention, remains insufficient. A shortage of skilled human resources also continues to hinder growth.

What opportunities do the high-speed railway projects create for Vietnam's supporting industry sector?

The North-South high-speed railway and the Lao Cai-Hanoi-Hai Phong railway are critical national infrastructure projects, requiring massive investments and advanced technology. These projects aim to connect key economic regions, shorten travel times, and improve transport capacity, fostering rapid and sustainable socio-economic growth.

Investments of US$67.34 billion for the North-South high-speed railway and US$8.37 billion for the Lao Cai-Hanoi-Hai Phong railway will create a construction market worth tens of billions of dollars. Beyond modernizing transportation, these projects offer major opportunities for supporting industry enterprises, particularly in mechanical engineering, manufacturing, automation, steel production, building materials and components.

For example, Vietnam's steel and mechanical industries have the capacity to produce essential railway machinery, with Hoa Phat alone capable of manufacturing hundreds of thousands of high-quality steel rails each year.

Another major opportunity lies in technology transfer and advancement within the railway sector. Supporting industry enterprises can gain access to cutting-edge technologies from experienced high-speed railway nations such as Japan, France, Germany, South Korea and China. Beyond mastering operations and maintenance, as well as gradually producing replacement parts for high-speed and urban railways, these projects offer an important chance for Vietnam’s mechanical engineering industry to undergo vibrant transformation.

The high-speed railway projects create abundant opportunities for Vietnam's supporting industry sector

Are domestic enterprises capable of meeting the stringent technical and quality requirements of these high-speed railway projects?

The Government and the Ministry of Construction have emphasized mobilizing all domestic resources, including Vietnamese enterprises, for these large-scale railway projects. However, a key challenge for businesses is meeting the stringent technical and international standards required for high-speed railway components and equipment. Achieving this demands substantial investment in technology, production capacity and workforce training.

Additionally, cooperating with international partners offers challenges related to technology transfer, intellectual property protection and supply chain management. To integrate domestic supporting industry enterprises into the supply chain of these railway projects, the Government and central agencies must work closely with industry associations to assess production capabilities, coordinate with domestic and international contractors, and establish specialized financial mechanisms and policies. This includes setting clear criteria for domestic businesses to invest in and supply products before the projects break ground in 2027.

To seize these opportunities, enterprises must stay informed about project developments, continuously enhance their production capabilities, and collaborate with experienced international partners to improve technology and product quality.

What recommendations do you have for advancing the development of Vietnam's supporting industry sector?

In today’s global economy, national industries cannot thrive without a strong supporting industry sector. This sector plays an important role in controlling production costs, increasing value-added for final products, and enhancing competitiveness.

Recognizing its importance, the Party and Government have prioritized supporting industry development to accelerate industrialization and modernization. However, some policies still fall short of business expectations due to bureaucratic hurdles, particularly in accessing preferential interest rates and credit. Most supporting industry enterprises are small, financially constrained and lack collateral, making it difficult to secure loans despite high capital demands.

To drive growth, a top priority is urging the Government to draft and submit a Supporting Industry Law to the National Assembly. This would provide a strong legal foundation for industrialization. Businesses also propose establishing an inter-ministerial national steering committee, led by a Deputy Prime Minister, to address industry concerns efficiently.

Additionally, the Government should develop a clear roadmap for supporting industry growth, aiming for these enterprises to make up 5-10% of all Vietnamese businesses by 2025, with a long-term vision for 2030. Achieving this requires urgent financial solutions, such as lower interest rates, extended loan terms, and flexible credit policies. Establishing supporting industry zones connected to global supply chains with reasonable costs and incentives is also important. Financial institutions should offer favorable loan conditions, considering that supporting industry businesses typically take 2-3 years, or even up to 5-10 years, to turn a profit.

Thank you very much!