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MINISTRY OF EDUCATION AND TRAINING – MINISTRY OF PLANNING AND INVESTMENT VIETNAM INSTITUTE FOR DEVELOPMENT STRATEGIES DO THUY NGA DEVELOPMENT OF SUPPORTING INDUSTRIES IN HANOI CITY Major: Development Economics Code : 31 01 05 SUMMARY OF DOCTORAL DISSERTATION Hanoi – 2018 This dissertation has been completed at VIETNAM INSTITUTE FOR DEVELOPMENT STRATEGIES Supervisors: Assoc Prof., Ph.D Bui Tat Thang Ph.D Duong Dinh Giam Reviewer 1: Prof., Ph.D Nguyen Dinh Huong Reviewer 2: Ph.D Tran Hong Quang Reviewer 3: Assoc Prof., Ph.D Nguyen Van Huan The dissertation will be presented in front of the Doctoral Dissertation Evaluation Committee at Vietnam Institute for Development Strategies Dissertation copy can be found at National Library; Library of Vietnam Institute for Development Strategies INTRODUCTION Problem Rationale Economic globalization and cooperation are expanding trends, along with rapid development of global science and technology revolution, countries in different regions are working together under a global network of labor division Every country wishing to develop should allocate the national labor force into international labor division network With high levels of international labor division and production fragmentation, few industrial products are produced in a single space, place or company of a country Production process is divided into several stages, performed by subdivisions of companies in different localities, countries or continents Supporting industries (SIs) have been established as a necessity stemming from the need of new industrial production based on a fundamental principle that profoundly specializes stages in the production process [34] Supporting industries in Vietnam contemporarily focus on some sectors such as automobile parts with localization ratio about 5-20%; electronic products about 5-10%; leather footwears about 30%; textiles and apparels about 30%; SI for high technology about 1-2%; other machineries about 15-20% From low level of localization ratio of the SIproducts, the value of parts imported annually to Vietnam for assembly, manufacturing and production for export was several billions of US$ (electronics and automobiles only around US$ 30 billion) [22] Supporting industry of Hanoi city has proved its independent roles by creating economic efficiency, income livelihoods, budget contribution, technological innovation, etc Some well-known SI-products made in Hanoi are automobile parts, motorbikes, electrical materials, packaging, mechanical parts of cement industry, mining mechanics, thermal power, hydropower which have contributed to increase localization ratio and replacement of spare parts, creating competitiveness for industrial products nationwide In order to have more SI products to replace imported products, to reduce import of raw materials, development of SIs in Hanoi city is necessary Recently, localization ratio of motorcycle parts reached over 80% Some difficult SI-details such as engine gears, motorbike crankshaft were produced by Japanese FDI firms in Hanoi instead of imported ones Electronic components for information technology sector meet not only the demand of domestic market but also significant amount for export [47] However, production value of Hanoi SI-companies only accounted for about 10% of the total industrial production value in the city [8] Although automobile parts and motorbike industries are among the most developed supporting industries as large market in Hanoi, the percentage of revenue accounted for only 26% of the industry Electronics and informatics products were lower at only 10% While electrical industries in Hanoi have wide range of product categories as well as many different sub-categories, the industries including electrical appliances and tools, mechanical supplies, mechanical parts, etc only accounted for 29.16% of the industries revenue [14] The SI group for textiles and leather and footwear is a special group, which accounted for a relatively low proportion of the industries revenue due to being discouraged to develop in Hanoi after the year 2020 The development of Hanoi supporting industries was also spontaneous and fragmented, without the strategic orientations which concentrate on some key sectors and strengths of the city to develop, overlapping products and uneven quality Production capacity of the enterprises was still limited and especially the enterprises have been unable to find solutions for coordinating and linking together to achieve better business performance for individual enterprises as well as the development of supporting industries in Hanoi city [54; 47] One of the biggest challenges for development was lack of qualified human resources, making SI development more disadvantageous The level of technology in SI-enterprises is at an average level, with the number of technologically advanced firms being comparable to those of other countries in the region (about 20%) [12] Foreign invested enterprises (FDI firms) have equipped with more advanced machining technology, but the capacity is sufficient to meet the internal needs of its parent companies Competitiveness of Hanoi SI-enterprises is low, lack of coordination, lack of specialized allocation between production facilities, and weak linkages between main producer with subcontractors, between subcontractors, between FDIenterprises and local firms While SI-products are mainly used for domestic production (satisfying about 10% of demand), export of SI-products is limited because of difficulties in accessing to large markets or efficient scale of production capacity Previous studies in Hanoi have focused on some specific problems of industrial development such as Nguyen Ngoc Dung (2011) [16] studied on "Development of synchronous industrial zones in Hanoi"; Nguyen Dinh Trung (2012) 71] studied "Infrastructure construction for industrial clusters in Hanoi"; the industrial development plan of Hanoi city to 2020 with vision to 2030 [84]; project on "Developing SI in Hanoi city from 2017 to 2020, orientation to 2025" [87]; the project "Development of major industrial products in Hanoi to 2020, orientation to 2025" [88] of the People's Committee of Hanoi, but there is unavailable research on supporting industries in Hanoi This is a great challenge for development of the city supporting industries Based on the facts mentioned, the topic "Development of supporting industries in Hanoi city" is selected for this dissertation Objectives a General objective Based on clarification of theoretical issues on development of supporting industries, the dissertation analyzes and evaluates current situation of supporting industry development in Hanoi city Thereafter, it is to propose solutions for promoting development of supporting industries in Hanoi city in the following years b Specific objectives - To systematize theoretical and practical issues related to development of supporting industries, thereby to propose constituents and criteria for evaluating development of supporting industries in Hanoi city; - To analyze and evaluate current situation of supporting industry development in Hanoi city as well as comparing with the national development; - To analyze the factors influencing development of supporting industries in Hanoi city and achievements and limitations in the development of supporting industries in Hanoi city; - To propose orientations, ideologies and solutions to promote development of supporting industries in Hanoi city, the period up to 2030 Research object and scope The object of this dissertation is all components of supporting industries in Hanoi city in terms of economic development It is a process of mobilization and development of supporting industries that aims to support the city's supporting industries to develop towards sustainability and green growth - Spatial scope: The dissertation analyzes enterprises of supporting industries in Hanoi city - Time scope: The dissertation studies and evaluates current situation of supporting industries development in the period of 2010-2017 and proposes measures to promote development of supporting industries in Hanoi city by the year 2030 - Constituents scope: The dissertation focuses on theoretical and practical issues of supporting industries development (scale, quality and efficiency) in Hanoi city Research methodology a Research approach - System approach - Institutional approach b Method of data collection - Collect data through documents, published reports - Method of investigation, field survey c Methods of synthesizing and processing data (1) Search and synthesize scientific papers and reports by international organizations related to SI development in general and SI for specific sector (2) Collect research papers by scientists, administrators, research institutes and universities in Vietnam, which have been published and discussed aspects of SI development in the provincial or city and nationally level (3) Study doctoral dissertations, master theses which have studied issues related to development of SI in the whole country and in Hanoi city d Data analysis methods - Dialectical method; - Integrated approach; - Comparative and historical methods; - Exploratory Factor Analysis (EFA) Dissertation’s main contributions - The dissertation has clarified theoretical issues and perspectives on development of SI in a locality, especially the theoretical issues of concept, content, influencing factors and criteria used to evaluate the development of SI in Hanoi, focusing on three groups of indicators: scale, quality and efficiency of SI development This is a theoretical contribution to further research on development of SI in general within a province or region - The dissertation described current situation of SI development by employing SI development criteria for measuring increase in size of the SIs (number of SI enterprises, number of workers participating in the industries, production value, etc.); quality of SI development (SI growth rate, the ability to apply science and technology, product quality, etc.); and efficiency of SI development (contributions of the SIs to industrial development of the city, to the production value, to linkages among SI enterprises, etc.) - The dissertation analyzed in depth the factors affecting development of SI including policy mechanism, global economic linkage, market, human resources, infrastructure At the same time, the Exploratory Factor Analysis (EFA) model was used to determine impacts of each factor as a basis for debate and perceptions from practical research - Based on projections of domestic and international contexts that may affect SI development, the dissertation proposed a system of ideology, orientations and solutions to accelerate the development of SI in Hanoi city, the period up to 2030 CHAPTER LITERATURE ON SUPPORTING INDUSTRY DEVELOPMENT 1.1 Studies on supporting industry development 1.1.1 International studies a Studies related to attracting investment in supporting industries Prema-Chandra Athukorala and Do Manh Hong emphasized an increasingly important role of SIs for economic development in developing countries In order to promote sustainable development, developing countries need to create conditions to attract FDI, and attractiveness for FDI and effective use of FDI depend sustainable SI development as well as how much an economy can absorb FDI that, in turns, brings efficiency and sustainable development to the economy b Studies related to supporting industry development policy Porter; Ratana; Asia Productivity Organization; Goodwill Consultant JSC and VDF have shown an important role of policies by focusing on analyzing the role of attracting foreign investment in SI development c Studies related to supporting industry development JBIC; McNamara; Thomas Brandt pointed out that in order to develop SI, it is important for SI to link with each other, to link up with MNEs, and to join the global value chain to promote SI 1.1.2 National studies a Studies related to supporting industry development for specific sector There are many papers focusing on SI development of specific industries such as automobiles, motorbikes, textiles, electronics, footwear, etc., but without focusing on overall development of SI b Studies related to supporting industry development policy The main research focuses on proposing policies to develop SI for each specific sector and draw lessons learned for SI development in Vietnam c Studies related to supporting industry development These studies focus mainly on development of industries, SIs, and policies, tools and development for comprehensive industrial development, SI in Vietnam 1.2 Overall assessment of previous studies A number of studies have initially described an overall situation of SI development for some typical industries such as motorbike, automobile, electricity, household electronics, textile These studies have pointed out advantages, achievements, limitations and causes related to SI development, then confirmed limitations and weaknesses of SI, not only to reduce competitiveness of industrial products in particular, the national economy in general, but also impact on deficit of Vietnam's trade balance in international integration, affecting the goal of sustainable development of socio-economic of Vietnam These studies also deal with SI development in Vietnam in general and in Hanoi in particular, in the context of international integration, highlighting advantages and disadvantages in development Based on those discussions, policy implications, and solutions for SI development in the process of socio-economic development and show the directions for developing SI for some industries in Vietnam It emphasized that industrial zones, export processing zones, SMEs and business linkages in SI development are important factors to promote SI development in the following years 1.3 Limitations of previous studies and issues that need further study - Fundamental of SI in terms of economic development - SI roles of the national economy in general and specific industry of Vietnam in particular - Advantages, difficulties and new factors affecting the SI development in Vietnam in general, and in Hanoi in particular - Assessing the situation of SI development in some industries such as motorbike, textile and electronics, etc - Previous studies could analyze factors influencing on SI development for specific industry, but quantifying the factors by econometric models has not been conducted - Solutions for SI development of automobile, textile and electronics industries CHAPTER THEORETICAL AND EMPIRICAL LITERATURE ON SUPPORTING INDUSTRY DEVELOPMENT 2.1 Theoretical foundation for supporting industry development 2.1.1 Concepts of supporting industry development a Concepts of development Under different perspectives, development is understood to be multidimensional Development is the process of growing up, advancing all aspects, namely, satisfaction of increased elements, both qualitative and quantitative changes, better institutions, product types, organizations, market changes, law and enforcement, social security [98] Economic development is an increase in economic activity (in terms of size and quality) of a country (or region, province, district, enterprise, family) for the needs of its people Or, in other words, economic development is one or more of a number of actions [49] to achieve development of economic system In economic development, industry plays an extremely important role Industrial development is expansion of the economy’s productive capacity through diversifying commodity production as a part of overall socio-economic development [36, 37] b Concept of supporting industry and supporting industry development SI is understood to be a technical and economic sector, including production of intermediary products, supply of machinery parts and accessories, processed materials and services and production support services under certain processes to assemble the final products The development of SI is development of scale, including increase in production value, increase in number of SI enterprises, labor force involved in the SI industries; quality development, including quality of products, quality of human resources in SI industries; efficiency improvement of SI development, including growth rate of SI, VA/GO ratio, applications of science and technology and localization ratio of SI products Constituent of SI includes: (1) As a specific economic and technical branch of the industry, arising from labor division, high level and popular of production specialization (2) (2) SI plays a role as entities producing intermediate, attached and dependent products with major industrial products (3) High level of connectivity and support for development of the main industry Based on that, the author outlined constituent of SI development in this dissertation as followings: (1) increase in value of SI production, increase in number of enterprises producing supporting products for the main industry; creating jobs and moving toward more reasonable labor market structure; (2) improving quality of intermediate products that support the main industries to produce better quality and more efficient products; (3) improving efficiency of business activities of SI, including growth rate, application of science and technology, human resources development to improve quantity and quality of products 2.1.2 Roles of supporting industry development in socio-economic development Supporting industry development has the following roles: (i) As foundations for industrialization and modernization, stimulating the economy to grow in the long-run; (ii) Ensuring economic autonomy and reducing trade deficit; (iii) Promoting development of small and medium enterprises; (iv) Increasing competitiveness of major industrial products; (v) Expanding possibilities of attracting foreign direct investment 2.1.3 Factors affecting development of supporting industries Factors affecting development of supporting industries include: (i) Policy mechanisms of the State; (ii) Regional and global linkages, influence of multinational corporations; (iii) Markets of supporting industry enterprises; (iv) Scientific and technological progress; (v) Financial resources; (vi) Human resources; (vii) Infrastructure; and (viii) Cultural and political environment 2.1.4 Criteria for evaluating the development of supporting industries Criteria for assessing the scale of supporting industries Change in the size of SI is reflected in four basic indicators: an increase in SI production value, increase in number of participating firms and SI sectors, number of workers employing in SI enterprises However, when using this criterion, it should be noted that there is unavailable evidence to prove large scale enterprises associated with high development level of SI SMEs also have their own advantages and suitable for SI Characteristics of SI are mainly attributed to participation of SMEs Therefore, size of SI enterprises is just one aspect of the ability to meet requirements of major industrial enterprises Criteria for assessing the quality of supporting industries Evaluating quality of supporting industry products: Benchmarking is inherent quality of every product It must strictly adhere to technical specifications, technology and product operation at general level Superiority means that the product is always innovated to make a difference, compared to other competitive products Assessing quality of human resources in supporting industries: analyzing comprehensive and sustainable development of SI, it is necessary to analyze high-skilled workers in enterprises, index of trained level, ability to manage and use machinery and technical equipment; ability to use labor skills and technology for producing SI products Criteria for assessing the effectiveness of the supporting industry - Growth rate of supporting industries: This is an indicator reflecting an increase in speed and scale of output of SI for a given period The growth is compared by the original time, reflecting growth rate - VA/GO ratio: efficiency of SI production is expressed in VA/GO ratio, in which, VA (Value Added) is an increase in new creative value and GO (Gross Output) is production value of the sector If ratio of VA/GO is high, meaning the growth rate of GO is lower than that of VA It shows that the SI sector develops in depth, producing raw materials, creating large amount of added value In contrast, VA/GO ratio is low, the growth rate of GO is higher than that of VA This shows that the SI sector is expanding in width, outsourcing, and hiring A rise in GO without an increase in VA, which economists call the phenomenon "impoverished growth", should be avoided - Ability to apply science and technology and localization ratio of SI products: With modern technology system, SI companies meet all quality requirements, delivery time for customers It is flexible, ready to meet all requirements of customers when any change occurs In particular, in the context of globalization, international economic integration also helps SIs to improve their competitiveness in exporting products to foreign markets and exist as a satellite of MNEs - Criteria for assessing linkage of supporting industries 2.2 Experiences and lessons learned from supporting industry development Experiences in SI development from several countries such as Japan, Korea, Malaysia, Thailand and reality of SI development in Vietnam such as Ho Chi Minh City, Dong Nai province, there are some lessons learned for SI development in Hanoi as followings: (i) Implementation of policies to support the development of SI of the locality It is necessary to develop policies to support SMEs in terms of production sites; low interest rate loans as well as financial support for SMEs when borrowing credits for investment in SI production; (ii) FDI inflow should be directed into key industries prioritized for development, associated with technology transfer and skills for domestic enterprises; (iii) mobilizing capital to support SI development; (iv) development of SI zones/clusters; (v) building linkages between SI enterprises and final product assemblers; (vi) Development of human resources for SI development; (vii) Promote roles of industry associations CHAPTER CURRENT SITUATION OF SUPPORTING INDUSTRY DEVELOPMENT IN HANOI CITY 3.1 Overview of supporting industries in Hanoi city 3.1.1 Situation of industrial development in Hanoi city In 2016, value of industrial production in Hanoi (at constant prices in 2010) was estimated at VND 435 trillion, an increase of 7.2% compared to 2015 Production value of manufacturing sector was VND 423 trillion, accounting for over 97% of the total industrial production value In the period of 2011 - 2016, production value of the entire Hanoi industry grew at an average rate of 8.4% /year, higher than average growth of the whole country (8.2% /year) Hanoi industry contributed significantly to development of Vietnamese industry In 2016, value of industrial production in Hanoi accounted for about 8.2% of the total industrial production value of the country Table 3.1 Production value of the whole industry of Hanoi in the period 2010 - 2016 Year 2010 2011 2012 2013 2014 2015 2016 Average growth rate (%) Whole industry Manufacturing Production Continuous Production Continuous value (bill VND) growth rate (%) value (bill VND) growth rate (%) 267,659 259,898 293,443 9.63 284,854 9.60 317,028 8.04 307,343 7.89 350,918 10.69 340,058 10.64 374,110 6.61 362,461 6.59 405,495 8.39 393,317 8.51 434,730 7.21 422,661 7.46 8.42 8.44 Source: [11] Structure of production value of major industries in Hanoi was unchanged in the period of 2010 - 2016 The main reason is that industrial enterprises in Hanoi have gradually come into stable operation under the industrial development plan of Hanoi city Hanoi industrial zones have been operating stably However, under fierce competition of both domestic and foreign enterprises, it is required that industrial enterprises of Hanoi improve their competitiveness to develop Number of industrial enterprises in Hanoi in the period of 2011 - 2017 developed relatively fast with an average growth rate of nearly 3% per year, number of other industrial enterprises grew faster than 5% per year, but enterprise number was relatively small (accounting for more than 6% of total industrial enterprises in Hanoi) Although growth rate of industrial enterprises in Hanoi increased only 3% per year, the growth rate of industrial production value increased by more than 8% per year Decline in number of industrial products was mainly due to reduction in orders from partners and a fall in purchase of SI products which affected output of the final products However, production value of Hanoi's industries was still relatively good, which indicated that industrial enterprises have invested in developing their products in order to increase quality of their products for export Industrial development has created jobs for many workers in the city as well as people from other provinces to work In the period 2010 - 2016, the industry created nearly 01 million jobs in its industrial zones In 2016, number of employees working in the industrial sector in Hanoi was over 757 thousand employees, average growth rate in the period 2010 - 2016 reached 2.1% per year Of which, manufacturing and processing industry employed nearly 720 thousand workers, accounted for about 95% of the total labor force in the whole industry Investment in Hanoi industry was still comparatively small but increased remarkably In the period 2010 - 2016, investment in new industrial development increased by only over 9% per year, approximately equal to growth rate of industrial production value Hanoi industry has been attractive for investors The Hanoi government implemented many policies, creating a favorable environment for businesses to invest in the city industrial sectors Table 3.2 Investment in industry of Hanoi city Indicators Total investment - For industry - For manufacturing - For other industrial sectors 2010 148.1 38.3 19.8 18.5 2013 176.2 50.6 19.9 30.7 Unit: trillion VND (the constant 2010 price) Average 2014 2015 2016 growth (%) 192.7 208.9 233.3 7.9 50.4 57.4 65.1 9.2 20.4 23.4 27.7 5.8 30 34 37.4 12.4 Source: [11] Currently, the city has developed 19 industrial zones and high-tech zones with the total area of 4,100 hectares, of which there are key industrial zones Hanoi city was building three hi-tech zones, along with 110 industrial clusters with an area of more than 3,000 hectares By the end of August 2016, Hanoi industrial zones have attracted 616 projects (323 FDI projects) with registered capital of USD 5.22 billion, disbursed 3.28 billion, the investors mainly from Japan, Korea, China, Singapore 293 domestic projects Leather - shoes industry 17 19 23 29 31 35 115.54 Source: [12] In the period 2011 - 2016, number of workers working in SIs increased from 36,000 in 2011 to over 46,000 in 2016 The number of employees working in SIs accounted for over % of total employment in industry Therefore, SIs sectors had a better quality of labor than the general level of industrial enterprises Proportion of SI employees accounted for over 6% of total number of employees in the industry, but production value accounted for about 10% of the total industry Most of the enterprises employed less than 100 workers Enterprises with over 200 workers accounted for a very low proportion, focusing mainly on enterprises producing spare parts Although the production value was high, these enterprises face many difficulties in finance and renovation of production technology, so remuneration and bonus system for workers, especially high-quality workers were still limited Retention of experienced and qualified workers was difficult On the other hand, it is difficult for Hanoi SI enterprises to compete for high-quality workers with large enterprises, big corporations or FDI enterprises Development of production value of support industries Although production value of Hanoi SI enterprises in the period 2011 - 2016 gained considerable achievements, the value of Hanoi SI was still low, accounted for about 10% of the total production value of the industry Growth rate of production value in the period of 2011-2016 was over 9% per year, higher than the growth rate of production value of industry (over 7% per annum) Table 3.6 Production value of supporting industry enterprises in Hanoi Unit: VND trillion (the constant 2010 price) Indicators Total Production of spare parts - Mechanical components - Electronic components - Plastic - rubber components Textile and garment industry - Yarn making - Production of woven fabrics - Finishing of textile products - Knitted fabrics and nonwoven fabrics Leather - shoes industry 2011 2012 2013 2014 2015 2016 28.84 26.62 12.39 10.45 3.78 4.35 2.19 1.78 0.24 30.92 28.6 13.56 11.03 4.01 4.71 2.29 1.98 0.27 34.11 31.73 15.12 12.49 4.12 4.89 2.35 2.02 0.33 37.25 34.76 16.43 14.01 4.32 5.19 2.45 2.17 0.37 40.97 37.94 17.55 15.8 4.59 6.37 2.98 2.68 0.48 46.41 42.9 19.5 18.5 4.9 7.25 3.45 2.95 0.56 Average growth (%) 9.98 10.01 9.49 12.10 5.33 10.76 9.52 10.63 18.47 0.14 0.17 0.19 0.2 0.23 0.29 15.68 0.03 0.03 0.03 0.04 0.05 0.06 14.87 Source: [12] Production of SI products requires high technology and high investment, while the products prices increased significantly Because the profit was low, enterprises were less willing to invest in modern technology for SI production Figure 3.3 Average production value per worker of SI enterprises in Hanoi Source: [12] 12 The average production value per worker in the supporting industry increased from over VND 800 million in 2011 to nearly VND billion in 2016 With this growth, the city's supporting industries contributed job creation for large numbers of workers in the city and from other localities, along with increased incomes and a stronger increase in production value, contributed significantly to economic growth of the city 3.2.2 Quality of supporting industry development Product quality of supporting industries Recently, localization ratio of motorcycle parts reached over 80% Some complicated parts such as engine gears, motorbike crankshaft were produced by Japanese FDI firms in Hanoi instead of imported ones Electronic component parts of information technology industry meet not only the domestic market but also for export Some Hanoi companies have actively invested in technology to produce SI products As a result, the level of technology has improved A number of SI products were able to compete with imported products (such as the products of the Mechanic Equipment Export Joint Stock Company, Hanoi Plastic Joint Stock Company, Thang Long Metal Joint Stock Company, shares in East Anh chain ) Contemporarily, there are a few companies in Hanoi to break out of stagnation by investing in equipment, raising the scale Competitiveness of SI was low, there was lack of coordination, specialized distribution between production facilities and almost lack of coordination, distribution of production, linkage between main producers with subcontractors, between subcontractors, between FDI enterprises and domestic enterprises Notably, lack of qualified human resources has made the SI enterprises more disadvantageous Hanoi SI companies were generally at a low-level development, with a large gap compared to other countries in the region Therefore, SI companies were unable to participate actively in value chain, and if so, they can only make simple components for FDI enterprises FDI companies in Hanoi were difficult to find suppliers which were domestic SI enterprises Although it is desirable, becoming a supplier for FDI enterprises is still a difficult playground capacity and technology of majority Hanoi SI companies were still limited In Vietnam in general and in Hanoi in particular, it is necessary to develop bodies that certify standardized products, certify safe and environmentally friendly production Especially, to meet the international quality standards, it is necessary to have skilled human resources who specialize in quality control Human resources of supporting industries Although there were significant number of employees working for Hanoi SI companies, the quality of labor was a big challenge for SI development Human resources of the industries were both low quality and quantity Table 3.7 Workers' training level of supporting industry enterprises in Hanoi Indicators High school, unskilled Elementary vocational training Intermediate vocational training College University Post-graduate 2011 2012 2013 2014 12266 12206 11273 10308 13048 13103 14201 15382 5403 5738 5932 6103 3204 3627 3821 4194 1943 2102 2301 2635 31 81 91 143 13 Unit: number of workers Average 2015 2016 growth (%) 11230 11431 98.60 15983 18743 107.51 6493 6918 105.07 4680 5392 110.97 3291 3581 113.01 362 538 176.96 Sources: [10], [12] Majority of the workers had primary education, or elementary vocational training From 2011 to 2016, the trend of trained workers increased significantly, as shown in the Table 3.7 3.2.3 Efficiency in supporting industry development Growth rate of supporting industry development In the period 2011 - 2016, production value of the Hanoi SI increased significantly From 2011 to 2016, production value of Hanoi SI rose nearly 10% per year In which, growth rate of footwear industry was the fastest, followed by textile and garment industry and SI for spare parts industry Table 3.8 Growth index of industrial production value and supporting industries, 2011 - 2016 (at constant 2010 prices) Unit: % Indicators Whole industry Whole supporting industry - Production of spare parts - Textile and garment industry - Footwear industry 2011 9.63 5.34 5.41 4.32 0.00 2012 8.04 7.21 7.44 8.28 0.00 2013 10.69 10.32 10.94 3.82 0.00 2014 6.61 9.21 9.55 6.13 33.33 2015 2016 8.39 7.21 9.99 13.28 9.15 13.07 22.74 13.81 25.00 20.00 Source: [12] Main Hanoi SI products and strengths of the city were producing spare parts, which grew substantially Only production value of manufacturing spare parts industry accounted for over 92% of total production value of SI in 2011 and remained unchanged until 2016 Proportion of value-added in production value Another challenge is that percentage of high value-added products is low Only from one to 10% of the city's SI products satisfied requirements of high value-added industries such as high technology industry, electronics, automobile manufacturing Moreover, in Hanoi, there was unavailable SI companies involved in high technology industries Addedvalue created by the SI industry in the past was relatively low Although outputs of Hanoi SIs increased significantly, the industries lacked of high value-added, good quality and complicated products as well as increased efficiency in SI development Table 3.9 Value-added ratio on production value of supporting industries in Hanoi city, 2011 - 2016 (at the constant 2010 price) Unit: % Sectors Whole supporting industry Production of spare parts Textile and garment industry Footwear industry 2011 50.73 46.69 50.32 36.33 2012 49.90 46.26 46.48 36.67 2013 46.79 43.62 43.12 37.33 2014 2015 2016 44.24 43.98 41.87 40.94 40.35 38.88 43.03 42.24 37.64 42.50 38.00 35.17 Sources: [59], [10], [12] Science and technology application and product localization The technology that spare parts companies in Hanoi are using technology and machineries mainly from Japan, China, Taiwan and some upgraded domestic machineries However, localization ratio of products requiring high technology, high accuracy requirements was relatively low In automobile industry, due to lack of auxiliary equipment, automobile industry in Hanoi was unbale to reach its targets Localization ratio was below 20%, especially producing cars and specialized vehicles With the low localization ratio, 14 Vietnam's automobile industry found it very difficult to compete, survive and develop in line with import tariff reduction schedule Table 3.10 Supply capacity of components manufacturing industry of Hanoi supporting industries Unit: % Sectors Motorbikes Automobile Synchronous equipments Agricultural machines Electronic appliances Information technology, telecommunications High tech industry Mechanical components 85 – 90 10 – 20 30 – 40 50 – 60 50 Supply capacity Electric - electronic components 70 – 80 10 40 30 Plastic - rubber Components 85 – 95 20 30-35 30 15 15 10 5 Source: [59] Linkage of supporting industries In order to develop Hanoi SI, the City People's Committee assigned Hanoi Department of Industry and Trade and other relevant departments to regularly organize trade conferences, trade promotion, exhibitions, and support for the enterprises The IS exhibitions were to create favorable conditions for SI enterprises to connect together or cooperate with industrial enterprises in Hanoi or from overseas, especially Japanese, Korea, Thailand, etc Hanoi SI companies learned experiences from the domestic or international counterparts Some Hanoi SI companies joined the global value chain, creating high added value for industrial production, such as: Hanoi Plastic Joint Stock Company provides molds for Honda Vietnam, Toyota Vietnam, LG Vietnam, Piaggio Vietnam exporting their products to Japan; Mechanical Equipment Export Joint Stock Company, exporting to European market; Dong Anh Chains Joint Stock Company producing over 1,000 small metal parts for Honda, Suzuki and Yamaha motorbikes Besides, these companies also suppled SI products for domestic and international markets such as Japan, Europe and other countries 3.3 Factors affecting the development of supporting industries in Hanoi 3.3.1 State policies and mechanisms Survey results show that enterprises evaluate the State policies that support enterprises in developing their production and business activities It can be seen that policies are in line with the development strategy of enterprises Particular attention has been paid to the requirements of environmental standards that enterprises need to meet Businesses also strongly agreed with economic development but must ensure good environment With regard to tax, capital and interest rates, businesses evaluated above average level of 4.20 on the Likert scale of The business combination between economic policy and environmental policy was unreasonable Table 3.11 Evaluation policies for supporting industry enterprises Variables CS1 CS2 CS3 Survey questions Mean Policies designed are consistent with the development strategies of SIs Rules and standards of environment are high Business support policies are adequate (capital, interest rate, tax ) 4.42 4.55 4.20 15 Standard deviation 1.80 1.72 1.68 CS4 CS5 Investment policies of the State are useful 4.15 1.59 Combination of economic policy and environmental policy is good 3.95 1.74 Sources: Data analyzed by the author, 2017 3.3.2 Global and regional linkages, influences of multinational corporations One of the most concerning points for the whole manufacturing industry was lack of linkage between large producers and supporting enterprises, between foreign invested enterprises and domestic ones Many businesses still think "sell what they have, not what the markets need." The linkage was inadequate, making it difficult for the enterprises to access many cheap materials or expand their markets to other countries The enterprises have paid attention to the linkage, but limitation was that the enterprises were unable to use all the potential of the trade relationship between Vietnam and other countries in the world Table 3.12 Evaluating linkages of supporting industries Variables QHLK1 QHLK2 QHLK3 QHLK4 QHLK5 Survey questions Mean Standard deviation Profound integration of Vietnam with the world helps businesses 4.08 1.61 access abundant, cheap, and good quality raw materials The integration also creates opportunities for developing markets 3.87 1.59 in other countries in the region Vietnam's participation in trade organizations helps businesses 4.67 1.58 easy to access international market information It is easy to access opportunities to attract investment into 3.87 1.59 production The integration process also creates competitive pressure for the 4.19 1.64 enterprises Sources: Data analyzed by the author, 2017 3.3.3 Markets of supporting industry enterprises Table 3.13 Evaluating markets of supporting industry enterprises Standard Variables Survey questions Mean deviation TT1 Output markets has stable growth, sustainable development 3.72 1.58 TT2 Enterprises are always active in finding new markets 4.04 1.74 Enterprises focus on ensuring the prestige and quality of products, TT3 4.35 1.58 and always provide good services to the customers The State has maintained good macroeconomic measures to TT4 3.86 1.54 stabilize markets and create conditions for businesses to develop Enterprises have implemented good measures to promote and TT5 3.64 1.77 market products to expand the markets Sources: Data analyzed by the author, 2017 Growth rate of domestic market in Vietnam was relatively low with a very small market size Participation in regional and international cooperation organizations and arrangements provides Vietnam with favorable opportunities to become a strategic investment destination for MNEs and many SMEs 3.3.4 Technological advances Domestic technology for SI production was outdated and slow to develop, majority of machines and tools for SI industry in Hanoi were imported, especially technology for manufacturing industry Survey results also show that enterprises have underestimated science and technology, especially the ability of applying advanced science and technology in 16 production line of enterprises The problem was mainly due to lack of accessing to advanced technology Investment costs were too large, unsuitable for investment ability of the enterprises In addition, the enterprises were inactive, less interested in investment for research and application of science and technology Table 3.14 Evaluating technology of supporting industry enterprises Variables KHCN1 KHCN2 KHCN3 KHCN4 KHCN5 Survey questions Standard deviation 3.64 1.54 Mean Machineries and equipment are environmentally friendly Production line of enterprises are applied high level of science and 3.59 1.55 technology Enterprises have invested and paid attention to application of 3.73 1.54 science and technology Application of science and technology creates competitive 4.62 1.46 products and limits pollution Enterprises create more conditions to access advanced science and 3.82 1.37 technology in production Sources: Data analyzed by the author, 2017 3.3.5 Financial resources Enterprises operating industrial sectors are facing several difficulties in accessing formal credit On the other hand, the related policy of the State was a motivational propaganda, the State has not invested sufficient resources including budget and human resources for SI development Policy formulation in Vietnam was limited to the government, with little involvement of donors, experts or scientists Table 3.15 Evaluating finance of supporting industry enterprises Variables NV1 NV2 NV3 NV4 NV5 Survey questions Mean Standard deviation 1.41 1.51 1.40 1.52 Own capital of SI is always available 3.46 Enterprises are supported in terms of interest rates 3.71 Enterprises find it easy access to credit 4.28 Enterprises are able to mobilize a variety of financial resources 3.73 Enterprises find it easy access to information about the financial 4.58 1.58 system Sources: Data analyzed by the author, 2017 The most disadvantage of accessing capital was difficulty in accessing credit sources when banks were increasingly tightened in loan regulations, followed by the weak ability of enterprises to mobilize sources diversified through many channels This made the SI companies, which heavily depended on formal credit resources, difficult 3.3.6 Human Resources Table 3.16 Evaluating human resources of supporting industry enterprises Variables NNL1 NNL2 NNL3 NNL4 Survey questions Unskilled human resources for business activities of enterprises are abundant General human resources for production and business activities are good quality Employees are enthusiastic, satisfied with the current jobs High quality human resources are easy to be employed in businesses 17 Mean Standard deviation 4.82 1.50 3.63 1.49 3.71 1.44 3.56 1.70 NNL5 Enterprises have owned initiatives to train and develop skills of 4.43 1.48 human resources Sources: Data analyzed by the author, 2017 Enterprises found it difficult to employ highly-skilled workers, which implied an imbalance between training of high quality and unskilled human resources Number of engineers working in advanced factories was limited, while students trained from universities were unable to find suitable jobs Unskilled workers in Hanoi were not highly regarded in terms of qualifications, productivity, professionalism This shows the limited aspects of vocational training for the workers 3.3.7 Infrastructure Surveyed respondents evaluated infrastructure at low level This shows that the current infrastructure constraints were significant, making it difficult for businesses to operate Table 3.17 Evaluating infrastructure environment for supporting industries Variables CSHT1 CSHT2 CSHT3 CSHT4 CSHT5 Survey questions Mean Standard deviation 1.75 Infrastructure ensures smooth production and business 3.69 Infrastructure is favorable for customers to access and select 3.58 1.69 products Infrastructure is invested synchronously, efficiently and receives 3.37 1.70 the attention of the state Enterprises find it easy to meet the requirements of the local 3.85 1.62 government Businesses always focus on favorable infrastructure factor for 3.92 1.73 doing businesses Sources: Data analyzed by the author, 2017 In addition, there were restrictions related to satisfying the customer's ability to access SI products Main reason for the restrictions related was lacking of facilities to meet the activities of advertising, product introduction in a focused way for approaching the customers 3.3.8 Cultural and political environment Table 3.18 Evaluating cultural and political environment for supporting industries Survey questions CTVH1 CTVH2 The political environment is always stable 4.48 The macroeconomic situation is stable 4.75 Consumption habits of Vietnamese have good 3.85 1.55 impacts on business activities of enterprises Exchange rates are always flexible 4.57 1.55 Business security is guaranteed 4.56 1.59 Sources: Data analyzed by the author, 2017 CTVH3 CTVH4 CTVH5 Mean Standard deviation 1.42 1.59 Variables Along with stable political condition, cultural factors also affected development of SI enterprises Consumers in the country now have preferences of appreciating quality and design of foreign goods or buying goods associated with famous brand, thus making domestic enterprises have difficulty in maintaining the domestic markets On the other hand, resources of domestic companies were weak and unable to conduct marketing and advertising activities 3.3.9 Factors affecting the development of supporting industries in Hanoi 18 After calculating the Cronback Alpha Correlation Coefficient, all variables were guaranteed to be run in Exploratory Factor Analysis (EFA) After running EFA, 40 variables were grouped into influencing factors, and the selected variables have factor loading> 0.5 The TT5 variable has a loading factor of less than 0.5 and was rejected Continuously running the EFA with the remaining 39 variables were matched, the KMO coefficient> 0.8 for the Figen values was greater than 1, variance was 71.03%, indicating that groups of factors with 39 variables were suitable, perfectly consistent and statistically significant Verifying the results and grouping of groups of factors are consistent with the above analysis - The coefficient R2 = 0.670, which represents variation of the independent variables in the model, accounting for 83% of SI development a good indicator showing fitness of the model between theory and reality - Coefficient Sig=0.000 in the ANOVA test indicates that the reliability of the regression analysis is consistent with the low error - Coefficient Sig of factors in the regression table is also lower than 0.1, which confirms the factors that influence on the dependent variable is the development of SI - Residual distribution graph shows normal distributed residue, the mean value near zero (-1.45e-15) and the standard deviation of (0.984) - Coefficients of VIF of the factors in the model are less than 2, indicating the factors that not occur multicollinearity The regression expression for this relationship as follows: Y = 0,229 + 0,146 X1 + 0,227 X2 + 0,172 X3 + 0,129 X4 + 0,278 X5 + 0,195 X6 + 0,085 X7 + 0,110 X8 +ui Table 3.19 Outputs of regression analysis (Constant) Unstandardized Coefficients B Std rror 0.229 0.238 CTVH 0.146 0.045 NNL 0.227 QHLK Variable Intercept Cultural politics Human Resources Relationships, linkange Policy Finance Science and technology Infrastructure Market R2 F Sig F Symbol Standardized Coefficients Beta t Sig 0.964 0.336 0.186 3.281 0.001 0.048 0.090 1.613 0.080 0.172 0.032 0.093 2.219 0.027 CS TC 0.129 0.278 0.043 0.052 0.020 0.202 0.433 3.432 0.066 0.001 KHCN 0.195 0.037 0.117 2.581 0.010 CHST TT 0.085 0.110 0.050 0.044 0.269 0.141 4.458 2.504 0.000 0.013 0.670 61.959 0.000 Sources: Data analyzed by the author, 2017 All coefficients are positive, which means that the factors that influence on management result, should improve any factor contributing to the development of SI In factors influencing, coefficient of financial factor is the highest (0.278), then quality of human resources (0.227); followed by science and technology (0.195); relationship and 19 linkage (0.172) The lowest is the coefficient of infrastructure variable (0.085) This result, in our opinion, is also consistent with the results of field surveys in the city 3.4 Overall assessment of supporting industry development in Hanoi 3.4.1 Achievements in supporting industry development First, in terms of output performance, Hanoi SI grew faster rate than the average of industrial sector Production efficiency was reflected in the following aspects: employment, profits, and good contributions to the budget Second, some SI companies in Hanoi have become a part of the linkage in the product value chain of multinational corporations Hanoi has established industrial parks specializing in SI, associated with FDI enterprises such as Bac Thang Long Industrial Zone, Noi Bai, Quang Minh Hanoi IS enterprises supplied to not only domestic markets but increasingly exported to markets of other countries Third, Hanoi industry has been gradually developing Foreign direct investment inflows have increased, state-owned enterprises are reformed rapidly Fourth, it can be said that the recent increase in the number of FDI projects was due to the continuous improvement of the investment environment, especially as increasing awareness of the SI importance and having paid much attention to development of this new industry Fifth, the state has issued a number of legal documents to promote development of SI as mentioned from previous chapters 3.4.2 Limitations and reasons Limitations First, Hanoi IS was at its early stages of development with several weaknesses The number of Hanoi-based enterprises was low and low level of development in terms of quality and quantity Second, Hanoi SI was fragmented, underdeveloped, insufficient supporting services to the enterprises, backward technology and weak competitiveness Hanoi IS products was poor in types, designs, monotonous design, and the prices were generally higher than that of imported products The technology level of the majority of enterprises producing supporting products in our country has just reached average level of the region and many countries in the world Third, growth rate of IS spare parts in the domestic market was relatively low, especially high-quality industries such as automobiles, electronics Enterprises were reluctant to import domestic SI products for assembly Fourth, competitiveness of SI products was relatively low Technological and management capacity of SI enterprises were week, applications of modern management standards was nominal Fifth, there was unavailable focal point for state management of SI to propose and implement policies to encourage SI development in a concrete and realistic manner Reasons for the limitations First, the most challenged issue for SI development in Hanoi is insufficient capability of the enterprises themselves Second, enterprises operating SI sectors have several difficulties in terms of accessing to capital, technology and markets Market size for some SI product was too small and difficult to expand in the short-run Third, human resources for SI were inadequate for development in terms of quantity and quality Fourth, lacking connection between large enterprises and small businesses, between domestic enterprises and foreign-invested enterprises in producing SI products 20 Fifth, Hanoi city was lack of inadequate databases of domestic companies, FDI companies, electronic component assemblers and lack of information about different linkages between assemblers and domestic suppliers As a result, the relationships were unstable and short-term Sixth, shortage of skilled human resources was mainly associated with limitations of vocational training in the country Currently, specialized institutions for training SI techniques are unavailable Seventh, programs and policies on supporting SI were abundance, but overlapping, ineffectiveness to SI development Abstaining the government supporting activities or policies were inadequate, many cumbersome procedures, making it difficult for enterprises to invest in SI CHAPTER SOLUTIONS FOR DEVELOPING SUPPORTING INDUSTRIES IN HANOI CITY 4.1 Contexts for supporting industry development 4.1.1 International contexts The trend of globalization and international economic integration has been increasingly profound and strongly affecting activities and economic sectors; Technological development and globalization have substantial impacts on production, especially for developing countries Vietnam is approaching ever closer with the Industry 4.0; There is an increasing trend of FDI projects in supporting industries to developing countries; Following the AFTA commitment, member countries have to reduce import tax 4.1.2 Domestic contexts Restructuring some priority industries in Vietnam takes place on the basis of new awareness and comprehensive content; Strategic development of cutting-edge industries goes along with the delopment of related SI systems; Development strategy of SI has become increasingly urgent as Viet Nam is losing its cheap labor advantage in labor-intensive industries compared to other Asian countries 4.1.3 Hanoi city context After 10 years of SI development policy implementation, Hanoi currently has 59 products of 46 enterprises whose products have been recognized as the key industrial products of the city The city government has issued “the certificate of industrial key products" Hanoi's key industrial sector has achieved a certain number of development steps The city's SI industry has not developed adequately with the city’s potentials and its products are not diversified The is unavailable products and absence of SI companies involving in high technology 4.2 Development orientations and objectives of supporting industries in Hanoi 4.2.1 Development orientations Development orientations of supporting industries in Hanoi: (i) It is necessary to have policies to encourage the development of Hanoi SI, especially to promote the role of supporting development enterprises such as Hanoi Supporting Industries Business Association (HANSIBA); (ii) Distribution of industrial space in SI has been gradually arranged and streamlined in line with the Hanoi master plan for industrial development; (iii) It is necessary to promote supply linkages between Hanoi and provinces in the northern key economic region; (iv) Funding should be available to support for technological innovation; (v) It is important to support for training and technology transfer 4.2.2 Development objectives Growth rate of SI is expected to increase by 10-15% annually In the period of 2025 2035, production value of Hanoi SI is projected to account for about 25% of the total 21 industrial production value of the city; Growth rate of the city SI production value is expected to increase by 15-20% Development of Hanoi SI will focus on three key sectors: manufacturing spare parts; SI for hi-tech industry; and textile and garment industry 4.3 Solutions to promote the development of supporting industries in Hanoi Policies for supporting industry development: (i) Implementing procedures for certification of preferences for projects, manufacturing SI products on the list of SI products prioritized for development; (ii) The city authorities disseminate information, guidance and review of administrative procedures to facilitate enterprises and investors in accessing privileged policies for projects on production of SI products on the list of SI products prioritized for development; (iii) Reviewing, adjusting, supplementing and finalizing strategies, master plans and plans for development of SI; (iv) Reducing administrative procedures related to investment licensing for SIs, downstream enterprises; (v) Reforming credit mechanisms and policies towards improvement of procedures, shortening the time for reviewing and approving loans to small and medium enterprises, ensuring transparency and simplicity; (vi) It is necessary to continue to plan industrial parks and support industrial clusters; (vii) There should be special incentive mechanisms (for loans, investment support, land rent incentives) for investment in the development of hi-tech supporting industries - Attracting investment in industry and supporting industries: (i) The city budget will invest in infrastructure, which provides facilities for investors and enterprises to operate their business, build ready-for-lease workshops that are suitable for SMEs to produce SI products in priority SI sectors; (ii) Continue to improve the investment and business environment in a more open way, reform administrative procedures for consulting and helping enterprises, reduce the difficulties for enterprises; (iii) Hanoi should set up a dedicated financial fund for SIs; (iv) Encouraging the formation of industrial zones and clusters for manufacturing components, spare parts and auxiliary materials for industries; Building industrial parks and export processing zones in a concentrated way; (iv) Support and encourage investment for domestic investors; (v) Encourage incubation activities, SI seed nurseries through supportive mechanisms to facilitate land acquisition, tax exemption, investment in industrial parks; - Enhance support for industrial enterprises to support market development: (i) Periodically organize surveys of SI enterprises and make a list of potential suppliers, develop SI database; (ii) The city should pay attention to allocating budget and have a better mechanism to support businesses in terms of information, knowledge market, improve competitiveness, better linkages between enterprises and other enterprises, business, professional associations in the country and abroad ; (iii) Organize fairs and exhibitions on manufacturing products, organizing "reverse" fairs, serving as a bridge between enterprises producing final products and producing SI products; (iv) Department of Industry and Trade, Department of Planning and Investment regularly cooperate with related provinces in cooperation programs between the city and provinces to form regional linkages, especially the raw material area planning, sector development planning, IS product development planning - Capacity building for supporting industry enterprises: (i) Encourage, support training by demand of employer, vocational training; (ii) Assessment of capacity, demand and ability to apply management systems and tools of Hanoi SI enterprises There is a need to develop support programs and projects suitable to the needs and capacities of each target group It is expected that management systems and tools should be trained and consulted; (iii) Training, consulting, technical support are to develop and apply some management systems in SI production SI enterprises shall be considered, partly supported the costs, the application of advanced management systems according to international standards; (iv) 22 Assisting enterprises in conducting internal audits connecting enterprises with accredited rating agencies and issue quality certificates - Technology for development of supporting industries: (i) Developing a system of product quality standards according to international standards, branch standards and basic standards as basis for development orientation; (ii) Creating favorable conditions for FDI enterprises to carry out technology transfer projects and encourage the transfer of advanced technologies into production in Vietnam; (iii) Supporting the costs of research and development, pilot production of SI products, especially SI for hi-tech industries; (iii) Developing mechanisms to encourage technology transfer activities, strengthen the linkage between the three houses: Business - Scientist - State - Improving quality of infrastructure for development of supporting industries: (i) Focusing on speeding up investment in construction, research and implementation of mechanisms and measures to support investment attraction, to fill the Hanoi South industrial park; (ii) At the same time, to attract investment in SI development into specialized zones, clusters; (iii) For some projects with favorable socio-economic conditions, priority shall be given to the government for granting incentives for land lease term (up to 70 years), rent exemption land (up to 20 years); To implement the pilot mechanism to allow deduction of all compensation expenses and ground clearance of infrastructure investors who have voluntarily entered land rents on the principle of preserving capital for investors CONCLUSIONS AND RECOMMENDATIONS Conclusions Through research on the topic "Development of Supporting Industries in Hanoi City", the author draws some following conclusions: 1) SI is a technical and economic sector, including production of intermediary products, supply of hardware, accessory of machinery, equipment, raw materials and production support services following certain processes to assemble the final product There are several authors who studied SI at macro-level, which have been unable to reveal implication of SI from an economic perspective or have focused only on SI for a particular industry (machine, automobile, textile, ) To evaluate the development of SI, the authors have used the following criteria: First, SI development was evaluated in terms of development scale as follows: (i) Evaluate development of number and scale of enterprises in the SI industry; (ii) Evaluate development of SI human resources; (iii) Evaluate development of SI finance; (iv) Evaluate development of SI enterprise production value; (v) Evaluate development of the range of products in the SI industry Second, SI development was evaluated in terms of development quality as follows: (i) Evaluate quality development of SI products; (ii) Evaluate market development of SI products; (iii) Evaluate quality of human resources development in SI; (iv) Evaluated the quality of financial development in SI; (v) Evaluate development of science and technology application in SI; (vi) Evaluate the localization rate of SI products; (vii) Evaluate the development of downstream industry responsiveness in SI; (viii) Evaluate linkage for SI development 2) It was estimated that in 2017 Hanoi had about 729 enterprises involved in SI, of which 568 SIs manufacturing with 03 supplying groups, 161 textile and garment enterprises and 04 leather-shoe enterprises Newly-started SIs enterprises were engaged in manufacturing to supply products to hi-tech industry Number of SIs enterprises involved in manufacturing spare parts accounted for 78%; textile and garment and footwear enterprises accounted for only 22% of the total number of Hanoi SI enterprises The SI has been 23 transformed quite rapidly in terms of scale Production value of the Hanoi industry in the period 2011 - 2016 increased considerably, but value of Hanoi SI still accounted for very low proportion of the total production value of Hanoi (about 10%) Growth rate of production value of Hanoi SI enterprises in the period of 2011-2016 was over 9% per year, higher than the growth rate of production value of industry (over 7% per annum) Spare parts industry was the most developed sector in Hanoi SIs In the period 2011 - 2016, the number of workers working in SIs increased from 36,000 in 2011 to over 46,000 in 2016 The number of employees working in SIs accounted for over 6% of total industrial employment Quantity and quality of Hanoi SI products were still low, 60% of SI products of leather-shoe-textile and garment companies, and only 10% of SI products satisfying the requirement of SI Hanoi was lack of high value-added industries such as high-tech industry, electronics, automobile manufacture, and localization ratio of products requiring high technology and high precision requirements was very small Hanoi regularly organizes trade conferences, promotion, exhibition conferences, supporting enterprises to participate in SI exhibitions The activities created favorable conditions for the SI companies to connect with each other or connect linkage between Hanoi SI companies and other industrial enterprises, especially those from Japan, Korea, Thailand, etc The experiences from both domestic and foreign enterprises are good lesson learnt for Hanoi SI development 3) Factors affecting the development of SI in the city were quantified in the regression model based on results of EFA The development of SI in Hanoi is influenced by eight groups of influential factors including: cultural politics; human resources; finance; policy; science and technology; infrastructure; linkages; and market The partial regression coefficients of the factors introduced into the model were not only statistically significant but also positive, indicating that this group of factors correlates well with the development of Hanoi SI 4) To develop SI in Hanoi in the coming period effectively, the authors proposed 06 groups of solutions as follows: (i) Improve the effectiveness of supporting industries development policies; (ii) Enhance investment attraction in industry and SI; (iii) Enhance support for SI to develop markets; (iv) Build capacity for enterprises; (v) Upgrade technology for SI development; (vi) Improve quality of infrastructure for SI development Recommendations a Proposals to the central government - To build laws or regulations that promote regional cooperation to create opportunity for linkage under planning; - To decentralize to Hanoi, which has a special mechanism, proactively promulgated policies related to attracting investment, encouraging development of SI; - To build a national database on enterprises and SI products; b Proposals to ministries - The Ministry of Science and Technology should orient the use of research and technological development funds towards integration and competition with other countries in the region - For the Ministry of Finance and the General Department of Taxation, it is necessary to reconsider application of to 7% of import duty on components and parts, while the import duty on machinery and equipment is usually 0% - Ministry of Finance and the General Department of Taxation to propose the National Assembly to consider and adjust them; exemption of import tax on details, components and spare parts for production of SI products; excluding value added tax on 24 machinery, equipment, spare parts and accessories when being imported for production of SI products 25 LIST OF PUBLICATIONS RELATED TO THE DISSERTATION TOPIC Do Thuy Nga (2017), "About Development of Supporting Industries in Hanoi city", Journal of Economics and Forecasting, April 10, pp 50-52 Do Thuy Nga (2017), "For supporting industry development in Hanoi in the next periods," Journal of Economics and Forecasting, May 14, pp 77-79 Do Thuy Nga (2018), "Development of Supporting Industries in Hanoi city", Journal of Economics and Forecasting, No 01, 01, pp 63-65 Do Thuy Nga (2018), "Current Situation of of Supporting Industry Development in Hanoi city", Journal of Figures and Events, No 01, 01, pp 26-28 Do Thuy Nga (2018), "Factors Affecting the Development of Supporting Industries in Hanoi city," Journal of Economics and Forecasting, March 9, pp 57-60 26 ... global network of labor division Every country wishing to develop should allocate the national labor force into international labor division network With high levels of international labor division... spare parts was relatively large, so this sector played a major role in development of Hanoi supporting industries The products of mechanical, electrical and electronic components, plastic and rubber... of Planning and Investment regularly cooperate with related provinces in cooperation programs between the city and provinces to form regional linkages, especially the raw material area planning,
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