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Enhancing connection between foreign-invested and domestic enterprises

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Samsung is expected to offer consultation to 12 local suppliers

The Samsung story

On June 20, 2017, Shim Won Hwan went on a special trip after he was re-elected for the position of Samsung Vietnam’s general director. He visited three Vietnamese enterprises, including Thanh Long Electronic Production Joint Stock Company in the northern province of Bac Ninh, Hanel Plastics Joint Stock Company in Hanoi's Sai Dong, and Vietnam HTMP Mechanical Co., Ltd. in Hanoi's Me Linh.

Since 2015, when Samsung officially started its consultancy and support programme for Vietnamese enterprises wishing to take part in Samsung’s supply chain, every year, Samsung’s general director has been visiting such enterprises. However, this was the first time for Shim Won Hwan. Also, this was the first time a PCB (Printed Circuit Board)manufacturer was on the list of enterprises to receive support from Samsung. It means that Korean giant now supports a firm in the hi-tech industry, instead of supporting packaging and mould manufacturers only, as it used to do in the past.

“By providing consultancy and support to a hi-tech enterprise, we help Vietnamese enterprises to manufacture more complex parts and join a higher value chain in the future. This is a strong promise of long-term sustainable investment in Vietnam,” Hwan said.

At the beginning of April this year, Samsung officially announced that it would offer consultation to enterprises in the hi-tech industry in its consultancy programme. This move is aimed at kitting out Vietnamese enterprises to be able to manufacture complex electronics by high-technology with high added value.

In 2017, Samsung is expected to offer consultation to 12 local supply enterprises, increasing the total number of businesses having undergone the programme to 26 since 2015. Notably, this will be the first time Samsung subsidiaries Samsung Display Vietnam and Samsung Electro Mechanics Vietnam have taken part in this programme as consultants for Vietnamese supply vendors. Moreover, Tier 1 suppliers will support Tier 2 and 3 ones.

“All of these changes demonstrate Samsung’s promise to boost localisation, support enterprises that wish to join Samsung’s supply chain, and contribute to the development of supporting industries in Vietnam,” Hwan said.

Whether the three enterprises visited by Hwan can become Samsung’s suppliers depends on their efforts. However, this visit may prove an invaluable opportunity for them.

One Samsung is not enough for the whole economy

One cannot deny Samsung’s efforts in developing its Vietnamese supply chain and that it has contributed to the Vietnamese economy a lot. However, support from only Samsung is not enough for the Vietnamese economy to flourish.

Dang Huy Dong, Deputy Minister of the Ministry of Planning and Investment, in the midterm Vietnam Business Forum (VBF) this year said that the Vietnamese economy is like a vehicle which cannot run smoothly with only a wheel of foreign invested enterprises. Instead, it needs all components to align.

“Thus, currently, strengthening the linkage between foreign invested and domestic enterprises is important,” Dong said.

This was not the first time this matter has been mentioned. Regarding the weak connection between foreign invested and domestic enterprises, many experts worry that foreign invested enterprises may flourish much faster and may dominate their domestic counterparts.

When talking about this problem, Hiroshi Karashima, chairman of the Japan Business Association in Vietnam, said that to enhance Vietnam’s attractiveness as a manufacturing economy, it is necessary to enhance the industry environment to raise added value.

“It is necessary to create more supporting industries by supporting the development of small- and medium-sized enterprises,” Karashima said. Also, he said that to facilitate the development of supporting industries, some Japanese SMEs should transfer technology to Vietnamese companies.

“Component suppliers should improve their quality, production capacity, and administration capacity, cut down on expenses, and obey international laws and regulations. Foreign invested enterprises should provide their suppliers with detailed guidance as well as publish their criteria of picking suppliers with the aim of supporting potential suppliers in Vietnam,” Wail A. Farghaly, head of the Automotive Working Group in VBF, said.

According to the General Statistics Office of Vietnam, as of May 15, 2017, the country’s total import-export turnover was nearly $142.41 billion, an increase of 21.3 per cent compared to the same period last year. Of the total, the export turnover was nearly $69.7 billion, an increase of 17.6 per cent compared to the same period of 2016.

The export turnover of mobile phones and components was nearly $14 billion as of May 15, 2017, 12 per cent higher than in the corresponding period of 2016. In April 2017, the export turnover of mobile phones and components was $4.38 billion, a record high in Vietnam. This hike originated from Samsung’s new Galaxy S8 and Galaxy S8+.

At the end of 2016, the Samsung Galaxy Note 7 incident involving exploded batteries led to a decrease in Vietnam's mobile phone and components exports for the first few months of 2017. In particular, in the first quarter of 2017, exports in the sector were $7.4 billion only, a reduction of 10.7 per cent compared to the same period in 2016.

By Nguyen Duc

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