Besides, the Vietnamese government actively supports the growth of supporting industries through a range of policies, including tax incentives, financial aid, and access to specialized training programs. In addition, the government has signed multiple Free Trade Agreements (FTAs), further boosting the country’s export activities and global trade connections.

However, despite remarkable success in attracting foreign investment, Vietnam’s supporting industries continue to face significant hurdles. 88% of local companies in these industries are classified as small or medium-sized enterprises, who often struggle with limited financial and human resources. Moreover, Vietnam lacks industry-leading companies with strong market influence, and investment in research and development (R&D) as well as new product innovation remains minimal. These challenges limit the country’s ability to fully integrate into global value chains.[6] Adding to the difficulty, international companies tend to rely on well-established suppliers or firms from their home markets, leaving Vietnamese companies at a disadvantage. Weak connections with major global brands often place local businesses in a reactive position, making it difficult for them to secure favorable terms and partnerships.[7]

Opportunities for Japanese enterprises in Vietnam’s supporting industry

Japan has established itself as one of Vietnam’s most significant economic partners, playing a crucial role in the development of the country’s industrial and supporting industries through substantial investment and close collaboration. Among 143 countries and territories investing in Vietnam, Japan stands out as the third-largest investor, with around 5,300 projects totaling $74 billion in value, more than 70% of which are in the industrial sector[8].

Vietnam’s supporting industry is receiving much attention from Japanese businesses and investors. Mr. Takeo Nakajima, Chief Representative of the Japan External Trade Organization in Hanoi, emphasized Japan’s strong interest in Vietnam, stating, “Many Japanese enterprises now consider Vietnam an indispensable link in their supply chain. To further strengthen this role, Vietnam needs to focus on the extensive development of its supporting industries. A stable domestic supply of raw materials and components will enable businesses to create more flexible supply chains, reduce costs, and drive the advancement of the domestic manufacturing and processing sectors”[9].

On the other hand, according to a survey by JETRO, the localization rate of Japanese enterprises in Vietnam has increased from 28% ten years ago to 37% in 2022[10]; but the companies are facing difficulties, particularly in terms of supplier quality. Despite some companies achieving high localization rates, the need for reliable, high-quality suppliers who can offer competitive pricing remains a challenge for further progress.

In response to this situation, many Vietnamese companies in the supporting industry have expressed their commitment to meeting the high standards of their Japanese partners. These Vietnamese companies are willing to continue investing in facilities and technology to meet Japanese standards, reflecting the importance of these partnerships in driving growth and success in the industry.

Besides, the Vietnamese government has put critical effort into promoting the development of supporting industry. Recognizing that reducing costs is critical to the growth of Vietnam’s supporting industries, the government has put on initiatives such as preferential loans, tax exemptions, and unsecured guarantees to help enterprises expand production and integrate into global supply chains. The proposed amendment of Decree No. 111/2015/ND-CP aims to broaden the definition of supporting industries and offer enhanced incentives for businesses involved in essential production stages like forging and plating. It also seeks to leverage Vietnam’s free trade agreements to increase the localization of raw materials and reduce reliance on imports. Looking ahead, the Ministry of Industry and Trade is drafting the Key Industrial Law[11] to create a unified legal framework for the development of processing, manufacturing, and supporting industries.

In conclusion, Japan’s strong investment and collaboration offer significant opportunities for advancing Vietnam’s supporting industries. With government incentives and improved localization efforts, Vietnam still presents a promising direction for Japanese companies to strengthen supply chains and foster sustainable partnerships.

[1] Decree No. 111/2015/ND-CP on Development of Supporting Industry <Access>

[2] Vietnam Industry Agency (2022) Overview of Vietnam’s mechanical market in 2022 <Access>

[3]  Vietnam Standard Industrial Classification (VSIC) <Access>

[4] VSIC 24310 Casting of iron and steel; VSIC 24320 Casting of non-ferrous metal; VSIC 25910 Forging, pressing, stamping, and roll-forming of metal; powder metallurgy; VSIC 25920 Machining (drilling, lathe, cutting, grinding..); treatment and coating of metals

[5] MOIT (2023): Supporting industry enterprises need to get closer to the global value chain <Access>

[6] HCMC Center for supporting industries development – CSID (2023): Where is Vietnam Supporting Industry  <Access>

[7] VNEconomy (2024): For the development of support industries <Access>

[8] VNBusiness (2024): Japanese enterprises consider Vietnam a safe investment destination <Access>

[9] CafeF (2023): Developing supporting industries to attract Japanese enterprises <Access>

[10] CafeF (2023): Developing supporting industries to attract Japanese enterprises <Access>

[11] Vietnam Government Portal (2024): Proposal for the development of a Law on Key Industries <Access>

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