As Vietnam looks to move up the global value chain and strengthen its industrial competitiveness, one challenge persists: how to help domestic enterprises participate more deeply in supply chains led by foreign-invested enterprises (FIEs). After more than a decade of implementing policies to develop support industries, Vietnam has identified the industry as a key pillar in its industrialization and modernization strategy. Yet the participation of local enterprises in supply chains remains limited in terms of scale, level of engagement, and value creation.
Bridging the gap
The automotive industry offers a telling example. According to the Ministry of Industry and Trade, localization rates for passenger vehicles with up to nine seats currently averages just 10-15 per cent; far below the targeted 30-40 per cent by 2020 and 40-45 per cent by 2025.
At the same time, examples of successful collaboration between FDI enterprises and Vietnamese firms, from automotive manufacturing to high-tech agriculture, are beginning to reveal both the opportunities and structural challenges facing domestic companies as they seek a greater role in global production networks.
After 30 years in Vietnam, Toyota Vietnam has localized more than 1,000 automobile components for domestic assembly and export to 13 countries and territories, generating cumulative export revenue of nearly $1 billion. The company has long prioritized localization as part of its commitment to supporting Vietnam’s automotive and support industries.
However, the reality of supplier participation remains uneven. Of Toyota Vietnam’s 61 suppliers, only 13 are fully Vietnamese enterprises. Internal assessments also show that more than 75 per cent of local companies struggle with production organization and operational standardization; two essential requirements for joining global supply chains.
Mr. Ryuhei Susaki, Group Head of Purchasing at Toyota Motor Vietnam (TMV), said its supplier selection is not based on tier classification but on core capabilities. “Toyota does not classify suppliers by level, but evaluates them based on core criteria such as quality, cost, and delivery capability,” he explained.
Many Vietnamese suppliers entering the automotive sector originate from the motorcycle industry and are still transitioning to meet the significantly higher standards required for automobile manufacturing. “Some enterprises still face limitations in producing highly-precise and technically-sophisticated components - an area requiring stronger technological standards, quality management systems, and production control capabilities,” he added.
Looking ahead, he continued, the priority should be improving technological capacity, standardizing processes, and strengthening compliance with global quality standards to enable local firms to integrate more deeply into automotive value chains.
One company that has managed to meet such stringent requirements is HTMP Vietnam, a domestic supplier currently providing plastic molded products directly to TMV. Since joining Toyota’s supply chain in 2018, HTMP’s experience has highlighted that technology investment alone is insufficient, as operational discipline and management reform are equally critical.
Mr. Do Van Tien, Deputy Factory Director at the HTMP Mechanical Company, said Vietnamese suppliers need to first understand customer requirements, ensure production stability, and maintain reliable supply capacity. “Customers will evaluate not only what we produce but also our production systems and resources and whether our manufacturing capabilities are stable,” he said. “The ability to supply products consistently is equally important.”
Yet even for successful suppliers, challenges remain, particularly around testing infrastructure and investment costs. HTMP, for example, still sends some products overseas for functional testing due to limited domestic facilities - a process that increases both cost and waiting time. Mr. Tin suggested that Vietnam could establish national-standard testing centers to reduce costs and help domestic enterprises improve competitiveness.
Building partnerships in agriculture
Beyond manufacturing, partnerships between FIEs and Vietnamese enterprises are also reshaping agricultural value chains. Vietnam has set a target of reaching $100 billion in agricultural exports by 2030, making cooperation between foreign investors and local enterprises increasingly important in improving productivity, competitiveness, and sustainability.
One model frequently highlighted is the partnership between De Heus and Hung Nhon, which spans breeding stock, animal feed, farming systems, and export-oriented processing. During a working session with the Ministry of Agriculture and Environment at the end of 2025, the partnership was recognized as a leading model for high-tech agricultural development.
Mr. Gabor Fluit, CEO of the Royal De Heus Group, said collaboration is essential because no company can succeed independently across every segment of the market. “De Heus believes we cannot do everything well alone,” he added. “We need partners, with each side contributing strengths in different market segments to achieve better outcomes together.”
However, he also cautioned that successful partnerships require alignment in long-term vision and expectations. “If one side only thinks short term while the other has long-term ambitions, success is uncertain,” he said. “Partnerships should not only continue during success, they must endure through difficulties as well.”
While acknowledging Vietnam’s tax policies are largely supportive, Mr. Fluit said access to financing remains one of the most pressing constraints for small and medium-sized enterprises (SMEs), particularly those seeking to scale and integrate into global value chains.
For Vietnamese firms, joining hands with FIE partners often requires profound internal transformation. Mr. Vu Manh Hung, Chairman of the Hung Nhon Group, said cooperation with De Heus since 2008 had pushed the company to adapt across multiple fronts, from circular agriculture and digital technologies to corporate professionalism. “To stand alongside De Heus, we had to transform ourselves,” he said. “We changed in agriculture, digital technology, and even in the way we present ourselves professionally.”
Rather than relying solely on technology transfer, Mr. Hung argued that Vietnamese enterprises should prioritize learning through joint operations and practical cooperation. “We have only developed for 20-30 years, while foreign partners have more than 100 years of experience,” he said. “The important thing is to work together and grow together.”
More than capital and incentives
As Vietnam competes for higher-value investment and seeks to strengthen economic resilience, deeper domestic participation in global supply chains will depend on more than investment capital or policy incentives.
The bigger challenge lies in strengthening internal capacity, from technology and governance to workforce quality, while creating an ecosystem that enables domestic firms to scale.
That means policies focused not only on attracting FDI, but also on technology transfer, testing infrastructure, financing access, and practical capacity building for SMEs.
Ultimately, when domestic enterprises become strong enough to serve as reliable links in global supply chains, Vietnam will not only raise localization rates and export value but also strengthen its position in international production networks and build a more sustainable growth model for the years ahead.
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