In recent times, the traditional model of economic growth in Vietnambased on the low wage and labor and natural resources intensive factors have been coming unstrung or even counter-produtive. A novel approach is therefore being urgently sought out to help Vietnam improve its competitiveness in the world market. Industrial cluster formation is one of the most useful tools to enhance the competitive capacity of enterprises and countries.
The state of industry clusters development in Vietnam:
1) Awareness and perception of clusters are incomplete or even incorrect – Clusters are usually understood as a “geographic concentration of firms” (more specifically industrial zones) which produce similar goods and services, follow common strategic ambitions.
2) Development strategies in different sectors have not been specifically planned: The growth of industrial zones and clusters lacks strategic planning and infrastructures in their broad meaning, the sole role of industrial zones is to provide industrial premises, instead of creating link corridors;
3) The supporting industries in Vietnam are still weak: the localization rate of enterprises operating in Vietnam, including FDI enterprises, is very low while the proportion of raw materials and accessories imported is very high. A large number of businesses do not pay attention to the absorption and application of knowledge and innovative technologies. This has led to the loss of competitiveness in the context of today’s “The World is Flat” paradigm;
4) Consulting services to support specialised industries is yet to develop: In general, consulting services for Vietnam enterprises such as legal consultancy, advertising consultancy, branding, tax and financial advisory… are still in the process of formation and taking shape;
5) The awareness of domestic enterprises about the issue is still faltering: Domestic enterprises lack long-term strategies of competitiveness enhancement , thus competition is excessively focused in price, not in terms of products value and / or differentiation in services. That causes local businesses to hold back on their own growth, resilience and development.
1. Policy recommendations from businesses to the Government
a) Recognition of industrial clusters’ role in the development of the economy;
The concept role and nature of industrial clusters should come up with development strategies in the right direction. Joining industrial clusters will increase the resilience for small and medium-scaled enterprises in Vietnam to deal with the fierce competition on the mảket. Participation in industrial products will help enterprises overcome those difficulties and produce diversified and cost-saving products that meet the increasingly stringent demand of exported and domestic markets.
b) The overall development policy of industrial clusters for each key economic sectors, regions, and localities;
In addition to planning 5 crutial cluster sectors including electronics and information technology; textile; food manufactoring, agricultural machinery; tourism and related services, which have been approved by the Prime Minister under Decision 32 / QD-TTg, the Government should conduct more specified and detailed research and analysis in terms of other services to further diversify industrial clusters across the country.
Policies of macroeconomic development should be consistent to create confidence for businesses and stabilise production in industrial clusters. Focus should be on setting up preferential policies on land rent, taxes, and vocational training, providing professional qualified human resources for industrial clusters.
The nature of industrial clusters obeys the natural laws. The formation of industrial clusters is due to the fact that enterprises are aware of the need to link between each other to increase competitiveness and product diversity and create added value for society. Government only plays the supporting role to promote the formation of industrial clusters rather than deciding upon and controlling it.
c) Establishment of departments that support deploying industrial clusters in national scale and forming the development of fund for industrial clusters
– Private enterprises recommend the Government to study the establishment of a service / task force in charge of industrial cluster deployment enabling the participation of professionals and entrepreneurs who fully understand industrial clusters. A fund would be established to carry out promotion campaigns which help businesses understand their right to participate in the industrial cluster chain, adminster preferential loans, and invest in key products.
d) Government should orient to develop industrial clusters from the formation of industrial zones across the country.
Policies to push localities towards the development of industrial clusters from the formation of local industrial zones are to be formulated, taking into account the need of avoiding excessively focusing in investment promotionwhile without qualitative and selective priorities… and of giving business investors in the industrial cluster chain favorable conditions such as access to the best infrastructures, tax and financial incentives,.
e) Development of supporting industries should be along industry clusters;
Government supports to promote the development of supporting industries and increase the rate of localization in production. Supporting industries plays an important role in developing industrial clusters, complementary to their sustainable development.
f) Govermnment should offer favorable conditions for consultant services of business development to develop and directly participate in the cluster;
The development of business services and professional business consultancy will contribute to developing industrial clusters at a more complete level. Consultants will analyze the strengths and weaknesses to help businesses realize their core values. At the same time, they will provide directions and help enterprises to find out which areas would suit them the most.
g) Selection of pilot model for clusters;
In Vietnam, industrial clusters have been taking shape in certain sectors and effectivey contributed to the value chain of global supply, mainly due to compulsory requirements of the market. There are a number of industrial zones and clusters,e.g. North Thang Long industrial zone in Hanoi links with major mechatronic assembly enterprises, in Ba Ria – Vung Tau province to focus on developing manufacturing in commodity chain links in industrial zones or industrial clusters.
Government should select pilot models and plays the supporting role for the development of industrial clusters. From that, they will analyze problems and limitations and work to overcome difficulties. At the same time, they will help industrial clusters develop and expand them to other localities, other sectors.
h) Developing the model of industrial cluster according to product orientation;
Industrial clusters should be developed according to product orientation instead of the multi-sector model currently in our industrial zones and provincial industrial clusters.
i) Training human resources for the sustainable development of industrial clusters;
The government and Vietnam enterprises should cooperate towards the development of chain links between vocational training schools, universities and industrial clusters right from the beginning. Businesses in industrial clusters will dictate training needs. The school will contribute to solving the problem of lack of skilled labor and in reverse, schools can solve the difficulty of finding work for graduates.
k) The role of the government is of great importance in creating the connection between outside businesses and enterprises in industrial clusters, between domestic industrial clusters and regional as well as international ones.
2. Recommendations for international organizations and partners.
International organizations and partners:
a) Should have supporting programs for Vietnam enterprises to participate in the global supply value chains. Providing the knowledge of business markets in other countries, necessary and sufficient conditions for goods and local products of Vietnam to be able to export to international markets.
b) Should transfer and share experiences in the deployment and implementation of industry cluster models in other countries.