By the end of 2024, Vietnam's supporting industries had expanded significantly, with over 6,000 active enterprises operating across key sectors, including textiles and garments, auto manufacturing and assembly, footwear, mechanical engineering, and electronics.

This development has played a crucial role in boosting Vietnam’s trade surplus, which surged from $2 billion in 2017 to over $28 billion in 2024, according to Mr. Vu Ba Phu, Director General of the Vietnam Trade Promotion Agency (VIETRADE) under the Ministry of Industry and Trade.

Despite this progress, the supporting industry meets only about 10% of domestic demand for components, posing a significant challenge.

"This figure is a major challenge, especially as Vietnam has to import billions of US dollars worth of components annually to serve domestic production," noted Mr. Phu.

Japan remains one of Vietnam’s leading investment partners in manufacturing and high-tech industries. In the past decade, Japanese direct investment in Vietnam reached $3.5 billion in 2024, ranking fifth in total investment value.

According to Mr. Haruhiko Ozasa, Chief Representative of the Japan External Trade Organization (JETRO) in Hanoi, JETRO's latest survey revealed that Japanese enterprises operating in Vietnam—including local supporting industry enterprises—achieved a localization rate of 36.6%, comparable to Malaysia and the Philippines.

However, when focusing solely on Vietnamese enterprises, their supply rate to Japanese businesses stood at 15.7%, reflecting a 1.5 percentage point decline from the previous year. Over the last decade, this figure has remained relatively unchanged, lagging behind Indonesia, Thailand, and Malaysia while remaining comparable to the Philippines.

JETRO’s survey also found that 56.1% of Japanese companies in Vietnam plan to expand investment within the next one to two years, surpassing the ASEAN average of 37.7%.

While Vietnam ranks behind India and Pakistan, it leads ASEAN in terms of investment expansion.

Moreover, 50.9% of Japanese firms intend to increase procurement within Vietnam, the highest rate among ASEAN nations. Industries such as electrical equipment and electronics, textiles and garments, and machinery have expressed strong demand for local suppliers.

To further increase the localization rate, Mr. Phu emphasized the need for enterprise proactivity, along with supportive government policies.

“Vietnamese businesses must monitor international market trends and adopt modern governance and internal control models to align with global standards,” he said.

“Additionally, embracing trends such as digital transformation and green transition will be essential in meeting foreign enterprises' requirements.

Key strategies such as automation, new technology adoption, and process optimization will enhance productivity, helping businesses meet international quality standards.”

The JETRO’s leadership also highlighted the importance of Vietnam improving its business investment environment to provide more favorable conditions for enterprises, thereby ensuring higher profitability. One crucial factor in achieving this goal is the enhancement of Vietnam’s localization rate.

Source: VnEconomy