The Vietnamese government approved Resolution 115/NQ-CP (Resolution 115) on August 6, 2020, to promote supporting industries in Vietnam. The approved resolution maps out a comprehensive approach to improve both administrative policies and enhance private sectors’ capabilities through training and financial incentives. Supporting industries that are listed in the prioritized list prescribed in the Law on Investment and Decree 111/2015/NĐ-CP are the focus of this resolution.
To understand the implications of this resolution to manufacturing industries and the business environment in Vietnam, Vietnam Briefing will discuss the highlights of Resolution 115.
Set targets for supporting industries
Resolution 115 sets out targets for Vietnamese enterprises that are able to produce highly competitive supporting industrial products in the next decade, in particular:
These targets imply the government’s proactive approach to addressing the rising demand for supporting industries. This is a result of Vietnam’s industrialization and further participation in the global supply and value chain.
Synchronizing and completing policy mechanisms to facilitate supporting industries
- Mechanical engineering industry: industrial products supporting high-tech industries (high precision molds, standardized mechanical details, microelectronic circuits), components and spare parts for equipment using renewable energies, new generation motors, etc;
- Textile and garment industry: natural fibers, synthetic fibers, technical fabrics, chemicals, auxiliaries and dyes for fabrics dyeing, etc.;
- Leather and footwear industry: leather and leatherette, chemical tanning, shoe sewing thread, shoe accessories, etc;
- Electronics industry: basic electronics – photoelectronic components, components of quartz, materials for electronic component production (semiconductors, magnetic materials, etc.), electronic circuits, batteries, etc; and
- Automobile industry: electrical components, engine and engine details, lubrication systems, cooling system, fuel supply system, power transmission system, etc.
The government is also working on synchronizing different mechanisms across upstream and downstream industrial activities.
For example, the resolution stresses on coordinating policies between material industries and processing and manufacturing sectors, so that the upstream sector can be more responsive to downstream sectors’ demands. This helps create a more self-sufficient industrial foundation for the domestic market, reducing its dependence on imported materials.
Further, local governments are encouraged to step in to invest resources, implement policies, program initiatives to promote the expansion and upgrade prioritized supporting sectors, as per local conditions and demands.
Financial incentives for supporting industries
To support the modernization of supporting industries, the government will provide financial incentives in forms of favorable interest rates and more short-term loan availability.
The government will also grant interest rate difference compensation for medium and long-term loans for businesses in the listed prioritized industries. These industries will also be considered for loans financed by central, local budgets, official development aid (ODA), and other foreign concessional loans.
Developing the domestic value chain
The government has pledged to facilitate and develop the value chain by promoting business connections, especially between Vietnamese supporting enterprises and multinational manufacturing companies.
The resolution sets a plan to build more industrial clusters and zones, support the training of workers and management capacities to improve the level of domestic value-add.
To reap opportunities from Vietnam’s multiple free trade agreements (FTAs), the Ministry of Industry and Trade (MoIT) will introduce and enforce a system of technical standards for respective industries. This measure will strengthen quality inspection for industrial goods in accordance with international commitments and practices.
Meanwhile, the authority will also work on dismantling trade barriers, anti-monopoly behaviors, and other unhealthy competition to improve the level playing field for the domestic market.
This article is produced by Vietnam Briefing, a premium source of information for investors looking to set up and conduct business in Vietnam. The site is a publishing arm of Dezan Shira & Associates, a leading foreign investment consultancy in Asia with over 27 years of experience assisting businesses with market entry, site selection, legal, tax, accounting, HR and payroll services throughout the region.