supporting-industry

Despite efforts, Vietnamese enterprises are still not part of big manufacturers’ global supply chains, and the domestic support industry remains small.

However, some Vietnamese businesses are spending big money to buy operational foreign companies in support industries and take over the companies’ production lines and clients.

Duc Long Gia Lai is a typical example. The conglomerate has carried out a series of merger and acquisition (M&A) deals recently to take over electronics manufacturing companies in the US, South Korea and Japan.

Most recently, Duc Long Gia Lai has bought Hanbit, a South Korean company which makes memory cards, circuit boards and LED lamps to provide to Hyundai and LG. Prior to that, it took over QSIC (Quality Systems Integrated Corporation), a US invested electronics factory in the hi-tech park in district 9 in HCM City.

Vietnamese conglomerates are buying foreign companies in support industries to implement their strategy to squeeze into global supply chains.

The move by Vietnamese enterprises in general and Duc Long Gia Lai in particular to acquire foreign supporting companies were praised by Dinh Trong Thinh from the Finance Academy.

He believes that this is a reasonable step that has helped Vietnam develop supporting industries, and join global supply chains.

“Since Vietnamese enterprises cannot provide parts and accessories which can satisfy foreign manufacturers, the foreign direct investment’s effect on Vietnam’s industry development is nearly zero,” he said.

While Vietnam understands that it needs to develop supporting industries, it doesn’t know where to start.

Commenting about Duc Anh Gia Lai’s move, Thinh said it showed the business ‘knows its times’.

“Instead of sitting and waiting for something to come, many Vietnamese businesses take initiative in looking for foreign partners to cooperate with,” he said.

An analyst commented that Vietnamese enterprises would ‘receive many benefits’ when acquiring foreign supporting enterprises.

“The biggest benefit is that they will be able to join global supply chains,” he said.

“They will have production lines, and technologies and inherit the existing customers from the enterprises they take over,” he explained. “These will bring prestige, relations and branding in the world market.”

Vietnamese enterprises would be able to develop centipede-foot-shaped networks of their own which comprises domestic enterprises making accessories for them.

“This will both benefit Duc Long Gia Lai and the Vietnamese supporting industries,” he commented,

In related news, the Government is considering allocating VND1.72 trillion (US$76.85 million) for a scheme to boost the development of supporting industries in the 2016-2025 period.

(Source: Datviet)

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