Vinaxuki’s demise reflects problems in economy

Last update 08:00 | 18/03/2017

VietNamNet Bridge – Ninety-six percent of Vietnam’s enterprises are small businesses, with the majority having 10 workers or less. Only 2 percent of enterprises are large in size, while another 2 percent are medium size. 

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Vu Thanh Tu Anh from Fulbright Economics Teaching Program (FETP), speaking at an international workshop on industry development in 2025-2035, emphasized the underdevelopment of supporting industries, saying this is a barrier that hinders the development of Vietnam’s industry.

The car maker Vinaxuki and other enterprises had to close because of the lack of supporting industries.

In the automobile industry, for example, the localization ratio is surprisingly low, though Vietnam has been developing the sector for the last two decades. Engines make up 40-45 percent of car value, but still cannot be made in Vietnam.

Ninety-six percent of Vietnam’s enterprises are small businesses, with the majority having 10 workers or less. Only 2 percent of enterprises are large in size, while another 2 percent are medium size. 

Vinaxuki is a typical example which shows that having aspirations is not enough to create cars. The goal needs to be empowered with resources, favorable conditions and reasonable policies. It needs an ecosystem of businesses, including manufacturers and supporting industries.

Established in 2004, Vinaxuki was a ‘made-in-Vietnam car dream’. However, the company had to sell workshops and machines to pay huge debts of up to trillions of dong.

A report released in May 2015 by Hanoi inspectors showed that Vinaxuki still owed VND9.8 billion in social and health insurance premiums.

In fact, the government of Vietnam has been aware of the need to develop supporting industries for many years, but no proper solution has been found.

Addressing the issue, Anh said the problem is the lack of medium size enterprises.

“The development of supporting industries needs to be associated with the development of an ecosystem. And one of the important factors of the ecosystem is the existence of medium-size enterprises,” he said.

Anh stressed that medium-sized enterprises play a very important role in the economy. They have resources and capability to connect to bigger enterprises, and they can help small enterprises join supply chains.

“How the 2 percent of medium size enterprises can connect with the 96 percent of small enterprises and the 2 percent of remaining enterprises in the economy is the question that Vietnam’s industry needs to solve,” he said.

In related news, members of the Vietnam Automobile Manufacturers’ Association (VAMA) sold more than 17,600 cars in February, down 13 per cent from the previous month. This is the second month this year that the association has witnessed a drop in sales, although its members continuously reduced prices of their products.


Sale of cars down despite price drop

Domestic car sales ahead of estimate

Thanh Lich

This entry was posted in Doanh nghiệp - Enterprises, Doanh nghiệp lớn - Large enterprises, Doanh nghiệp nhỏ - small enterprises, Doanh nghiệp vừa - medium enterprises, Economics - Kinh tế and tagged , , by Trần Đình Hoành. Bookmark the permalink.

About Trần Đình Hoành

I am an attorney in the Washington DC area, with a Doctor of Law in the US, attended the master program at the National School of Administration of Việt Nam, and graduated from Sài Gòn University Law School. I aso studied philosophy at the School of Letters in Sài Gòn. I have worked as an anti-trust attorney for Federal Trade Commission and a litigator for a fortune-100 telecom company in Washington DC. I have taught law courses for legal professionals in Việt Nam and still counsel VN government agencies on legal matters. I have founded and managed businesses for me and my family, both law and non-law. I have published many articles on national newspapers and radio stations in Việt Nam. In 1989 I was one of the founding members of US-VN Trade Council, working to re-establish US-VN relationship. Since the early 90's, I have established and managed VNFORUM and VNBIZ forum on VN-related matters; these forums are the subject of a PhD thesis by Dr. Caroline Valverde at UC-Berkeley and her book Transnationalizing Viet Nam. I translate poetry and my translation of "A Request at Đồng Lộc Cemetery" is now engraved on a stone memorial at Đồng Lộc National Shrine in VN. I study and teach the Bible and Buddhism. In 2009 I founded and still manage on positive thinking and two other blogs on Buddhism. In 2015 a group of friends and I founded website CVD - Conversations on Vietnam Development ( I study the art of leadership with many friends who are religious, business and government leaders from many countries. In October 2011 Phu Nu Publishing House in Hanoi published my book "Positive Thinking to Change Your Life", in Vietnamese (TƯ DUY TÍCH CỰC Thay Đổi Cuộc Sống). In December 2013 Phu Nu Publishing House published my book "10 Core Values for Success". I practice Jiu Jitsu and Tai Chi for health, and play guitar as a hobby, usually accompanying my wife Trần Lê Túy Phượng, aka singer Linh Phượng.

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