VietNamNet Bridge - PEGA, the owner of HKBike electric bicycle brand, announced that 35 percent of bicycle components are made in Vietnam by 30 Vietnamese companies, drawing public attention to the development of support industries.

At the product launching ceremony held in late April, PEGA’s CEO affirmed that the company doesn’t intend to compete with foreign brands by reducing selling prices, but it controls the production cost by increasing the localization ratio of products. 

This is also the way for PEGA and other companies to generate jobs for Vietnamese, and to compete with foreign brands.

Experts, while applauding PEGA, commented that there are not many other companies doing the same in Vietnam, and that despite many preferences, Vietnam’s support industries have not made considerable progress.

More than 10 years ago, Vietnamese agencies and enterprises realized the significance of the support industries development. However, it has not been successful.

Tran Van Quang, a senior official from the Ministry of Science & Technology (MST), admitted that Vietnam’s support industries are in the early development stage and still cannot satisfy the needs of the manufacturing and assembly industry.

More than 10 years ago, Vietnamese agencies and enterprises realized the significance of the support industries development. However, it has not been successful. 

Some enterprises, instead of organizing production domestically and looking for Vietnamese partners and component suppliers, now tend to outsource to foreign enterprises.

Le Van Chinh, technical advisor of Soncamedia, said Vietnamese enterprises tend to outsource to Chinese companies instead of making products in Vietnam, because outsourcing allows them to make products at lower costs.

Soncamedia’s products, for example, are made at many Chinese factories in accordance with Soncamedia’s technology and design, and under supervision by the company’s engineers.

In mid-2015, according to Quang, MST had a meeting with representatives of big Vietnamese enterprises which owned famous brands, including BKAV (the smarthome solution provider), the Hai Phong Electrical Mechanical JSC, Vinacomin Machinery JSC and Chien Thang Automobile.

The representatives admitted that they had to outsource to foreign enterprises because it was costly to make products domestically, while the quality of domestically made products is not high.

Chinh explained that Vietnamese enterprises are capable of making products to orders, but the production cost is always high because of the low number of products. 

Le Hoai Quoc, head of the HCMC High-Tech Zone Management Board, while commenting that outsourcing to China reflects the real domestic production level, warned that mishaps may happen when doing business with Chinese factories.

Quoc commented that Vietnam has to solve the ‘chicken or egg’ question when developing industry. If you cannot prove production capability and product quality, then you will not find customers. However, few people dare to invest big money first before looking for customers.

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