Vietnamese firms in the mechanical engineering outsourcing sector have low competitiveness when joining global supply chains largely due to their small scale, technological shortages, and low productivity.

Illustrative photo (Source: VNA)

Statistics from the Ministry of Industry and Trade (MoIT) showed Vietnam has some 1,800 part suppliers. However, only 300 firms, or 17 percent of the total, are in the supply chains of multinational groups.

Notably in the automobile industry, as a result of small scale and low localisation rate, manufacturing costs in Vietnam are about 20 percent higher than that of other countries in the region. The local content of cars in Vietnam is just about 7 – 10 percent, compared to the regional average rate of 65 – 70 percent.

The Ministry of Industry and Trade recently proposed a 100 trillion VND (4.31 billion USD) preferential credit package for the development of the country’s supporting industry.

The ministry aims for the Vietnamese supporting industry products to have high competitiveness, meeting 45 percent of essential demand and local consumption, and accounting for 25 percent of total export value by 2020. 

The supporting industry plans to meet 70 percent of local demand by 2030 and to have 1,000 firms capable of supplying products to assembly companies and multinational groups in Vietnam.