Resources and Outcomes of Industrial Development Support in Bac Giang Province, Vietnam

The present study utilized data sets from the Ministry of Industry and Trade, the Department of Industry and Trade of Bac Giang province, and primary data from 118 enterprises. The correlation analysis of key indicators in analyzing resources and outcomes of industrial development support in Bac Giang province revealed that both domestic and foreign suppliers play a significant role in supporting industrial development. The market is a crucial factor influencing decisions regarding the quantity of raw materials used. Support enterprises in Bac Giang mainly cater to the domestic market, accounting for 37%, which is double the export proportion. Analysis of the results supporting industrial production reflects a high annual growth rate of 25% in the overall industrial sector and specific areas.

Introduction

The industrial sector, both in general and specifically the supporting industry (SI), is considered the cornerstone of basic material production and is regarded as a leading sector in the economy (Le, 2020). As a result, the government has shown a strong commitment to the development of the SI. This commitment is reflected in various policies, including the development policy for certain supporting industries, the priority development list for supporting industries, the action plan for the development of the electronic industry in alignment with Vietnam’s industrialization strategy, and Government Decree No. 111/2015/ND-CP dated November 3, 2015. To foster SI development in Bac Giang Province, the province has implemented specific policies. These include Resolution No. 23-NQ/TW issued by the Political Bureau on March 22, 2018, outlining the direction for building a national industrial development policy until 2030 with a vision to 2045. Additionally, Plan No. 54-KH/TU, dated October 9, 2018, from the Provincial Standing Committee outlines the strategic development plan for the province’s industry until 2030, with a vision extending to 2035. Moreover, Plan No. 259/KH-UBND, dated November 30, 2018, issued by the Provincial People’s Committee, focuses on the implementation of the strategic development plan outlined in Plan No. 54-KH/TU on October 9, 2018.

Currently, there is a noticeable upward trend in the number of SI enterprises within the province. According to the statistics from the Department of Industry and Trade of Bac Giang Province (2018, 2019, 2020, 2021, 2022), there are 200 SI enterprises, predominantly foreign-invested enterprises engaged in product processing. However, the SI sector in Bac Giang faces challenges, including a shortage of industrial land, difficulties in land clearance compensation, and an insufficient and uncoordinated development of industrial infrastructure. This article aims to assess the level of SI development in Bac Giang Province based on two perspectives: the current state of resources and the results of development efforts.

Literature Review

Concept of Supporting Industry Development

Scholars present various concepts regarding the development of the supporting industry. According to, industrial activity is the creative process of generating material wealth, and the direct result of industrial activity is industrial products. Industrial development is understood as the process of promoting the industry’s growth in scale, changing its structure, improving its level and quality, and contributing to socio-economic development. The industrial development process originates from the development of social production and the social division of labor. The second social division of labor separated industry from agriculture, establishing it as an independent production sector, initially in the form of small-scale manual production. Alongside the development of science, technology, and industry, industrial production continuously evolved from small-scale, manual production to a modern production system. Industrial development encompasses not only the increase in scale but also qualitative changes in the industry, progressing from manual to automation, from simplicity to sophistication, and from low skill levels to high skill levels.

When considering the supporting industry as a sector within the economy, its development can be summarized as follows: Supporting industry development involves an increase in production scale, accompanied by changes in industry structure and advancements in the capabilities of supporting industry enterprises. This is demonstrated through production capacity, capital scale, technological proficiency, workforce, and the ability to participate in the global production chain. It is also reflected in the level of integration with suppliers and customers, along with the correlation between the supply and demand of products (Ngo, 2020). Contributing to enhancing national competitiveness when participating in free trade agreements.

Thus, within the scope of a province and from an economic management perspective, the development of the supporting industry in the province encompasses all solutions aimed at increasing the number of enterprises, developing the structure of supporting industry enterprises, establishing suitable industry structures, improving the quality of supporting industry production, increasing the value of supporting industry production, promoting sustainable development, and contributing to the growth in both quantity and quality of the industrial sector within the region.

Role of Supporting Industry Development

Role of Supporting Industry in Economic Development

Supporting industry serves as the foundation for the economy. Alongside the development of industrial goods comes the formation of connections between industry and other economic sectors, resulting in an effective chain reaction that stimulates economic growth. Industrial products not only meet consumer needs but also play a crucial role in satisfying production demands by serving as production materials.

By providing modern machinery and transportation, storing resources in agriculture and industry, and supporting industry, it contributes to increasing labor productivity and enhancing the value of agricultural products. Furthermore, with the support of the processing industry, agriculture no longer faces challenges after harvesting, providing more opportunities for industrial development in response to the significant input demands for the industrial sector.

In the industrial development process, supporting industries act as inputs, ensuring an active role in the complete industrial production. Supplying raw materials, components, and finished products domestically makes the industrial sector proactive, reducing dependence on foreign countries and global economic fluctuations. If supporting industries do not develop, the primary industries will lack competitiveness, and their development will be limited to a few sectors.

Due to the constant need to import raw materials and components for domestic assembly, most developing countries experience trade deficits. The development of supporting industries contributes effectively to utilizing domestic resources, reducing imports of raw materials, and limiting the export of resources and raw processed products. The development of supporting industries will be one of the important measures to address the trade deficits of developing economies, ensuring a balance in the trade balance.

Enhancing the competitiveness of primary industrial products, along with proactive sourcing, significantly reduces the cost of industrial products due to reduced transportation, storage, and the utilization of inexpensive labor and resources.

Enhancing the Added Value of Industrial Products

Each product can be divided into three main stages: upstream, including research and development. Design and the production of essential components; midstream, including assembly and processing; downstream, involving branding, marketing, establishing distribution networks, and market access. The upstream and downstream stages are the areas that generate high-added value, precisely the stages addressed by supporting industries. While midstream activities such as assembly and processing contribute the least added value, a country can create added value for industrial products when the upstream region, including raw materials and component clusters, is supplied domestically. Therefore, the development of supporting industries contributes effectively to exploiting domestic resources, reducing imports of raw materials, limiting the export of resources, and raw processed products.

Role of Supporting Industry in Accelerating Industrialization and Modernization

Supporting industries play an extremely important role in the economic development of any country. They are the main source of industrial competitiveness. Supporting industries maximize internal factors, develop human resources and industrial links, and use advanced technology, increasing the added value of industrial products. In the current context of globalization and international integration, it flexibly and timely meets the changing demands of industrial manufacturers in terms of features, designs, models, production lines, and technologies due to increasing consumer preferences and intensifying competition. Moreover, the development of supporting industries contributes to improving the investment environment, enhancing investment attractiveness in industrial sectors that supporting industries lead the way, creating opportunities for “opening the way”. Therefore, the development of supporting industries will enhance the competitiveness of industrial products, the industrial sector in particular, and the national economy, ensuring sustainable growth and development.

In recent years, the Party and State of Vietnam have always been concerned about creating favorable conditions and promoting the improvement of the business investment environment, attracting investment for industrial development. Since officially joining the WTO in January 2007, the Vietnamese economy has increasingly integrated deeply with the region and the world. The opening of the economy has become a crucial driving force for promoting economic growth, especially attracting investment in industrial development, contributing to maintaining high economic growth for many years in Vietnam. The industry is the driving force of economic development; in 2022, the industrial production index increased by over 9%, and the internal industrial sector continued to undergo positive transformations, with total export turnover reaching USD 732 billion (Vietnam Chamber of Commerce and Industry, 2022).

The industrialization and modernization process is also the process of developing the country into an industrialized and modernized nation. In other words, to transform the country into an industrialized and modernized nation, it is necessary to carry out industrialization and modernization, and completing industrialization and modernization is also the process of turning the country into an industrialized and modernized nation (Nguyenet al., 2023). Vietnam is in the process of accelerating the industrialization and modernization of the country to build and develop a market-oriented, socialist-oriented economy. The development of supporting industries plays a crucial role in the country’s development strategy. Practical experiences in some countries around the world and in Vietnam have proven that the proper development of the supporting industry is a significant prerequisite contributing to the process of developing the national economy. In particular, the development of supporting industries in enterprises is a decisive factor in the development of domestic industry. Supporting industry development contributes to increasing the localization rate, reducing imports, reducing the cost of products, reducing dependence on FDI sources, and ensuring the initiative for the economy. Therefore, one of the current tasks of Vietnam is to develop the supporting industry, focusing on the development of domestic supporting enterprises, which is an important factor in promoting production and enhancing the competitiveness of enterprises, especially assembly enterprises (Phi, 2014).

The development of the supporting industry has been particularly prioritized and identified as one of the priority industries for sustainable development by 2025 in the Resolution of the XIII National Party Congress. The Resolution emphasizes the goal of “having a modern industry and high average income” by 2030 and “ensuring stable macroeconomic conditions, vigorously innovating the growth model, restructuring the economy, promoting industrialization, and modernizing the country” (Vietnam Government, 2021).

Research Method

The research utilizes second-level data sets provided by the Ministry of Industry and Trade Vietnam (2020) and the Department of Industry and Trade of Bac Giang Province (2018, 2019, 2020, 2021, 2022) during the 2018–2022 period. In addition, we use a survey data set of 118 enterprises in Bac Giang to supplement data to clarify the resources and results of supporting industrial development in Bac Giang province about the market, investment, and material usage of supportive industry enterprises in Bac Giang Province. Simultaneously, the correlation coefficient is used to evaluate the relationship between the number of supporting industry enterprises and production value over the years. The correlation between production value of supporting industries and revenue of businesses according to survey results in 2023; Correlation between total investment capital of projects in supporting industrial production in the manufacturing industries of panels, metal parts, and electronic components.

Results and Discussion

Resource Development for Supportive Industry Growth

The resources for development play an extremely crucial role in overall development, particularly in the supportive industry sector. The quantity and quality of local resources have a significant impact on the development of the industrial sector within the region. Human resources act as a regulating factor for other input resources such as technology, capital, and materials.

According to the survey data from the Ministry of Industry and Trade Vietnam (2020), raw materials and input materials for the supportive industry in Vietnam were supplied 66.3% by foreign sources, with 4.6% entirely sourced from abroad. The remaining 29% consisted of domestically sourced and imported raw materials (Table I). In Bac Giang, based on the survey results of 118 enterprises conducted by the author (Table II), in 2023, 19% of enterprises used domestically sourced raw materials, only 12% used entirely imported materials, and the majority, 69%, sourced materials from both domestic and international suppliers.

Table I. Proportion of Raw Materials and Input Materials in the Supportive Industry in Vietnam in 2020

Criteria	Percentage (%)
1. Foreign suppliers	66.3
2. Completely purchased from abroad	4.6
3. Domestic and imported	29

Table II. Market, Investment, and Material Usage of Supportive Industry Enterprises in Bac Giang Province

Criteria	Number of enterprises	Percentage (%)
1. Market where enterprises supply products	118	100.00
Domestic	37	31.00
Export	18	15.50
Both markets	63	53.40
2. Machinery and equipment capacity	118	100.00
Below 50%	26	22.40
50%–80%	53	44.80
-Above 80%	39	32.80
3. Raw materials used by enterprises	118	100.00
-Domestic	22	19
-Imported	14	12
-Both markets	82	69

The market is one of the factors influencing decisions regarding the quantity of materials used. Supportive enterprises in Bac Giang mainly supply the domestic market, accounting for 37%, which is double the export market share (18%), with the remaining 63% supplying both markets. Significant investment in production lines has come from China, South Korea, and Japan.

In general, supportive enterprises in Bac Giang differ from those nationwide in terms of raw material choices. In Vietnam, the primary usage is of partially or entirely imported raw materials. However, in Bac Giang, there is a significant use of both domestically sourced and imported materials, with the majority of enterprises relying on both sources. The reason for this choice is that supportive industry enterprises mainly supply the domestic market and cater to both domestic and export markets. The production lines are primarily invested in China, South Korea, and Japan.

Industrial Production Support Results

The results of production are a reflection of the scale and level of development, where the quality of businesses is analyzed to research production outcomes using production value data based on the 2010 comparison prices. This analysis aims to examine the increase in industrial production support results in the Bac Giang province, mitigating the influence of other factors. Additionally, the study utilizes correlation coefficients between production value and types of businesses, revenue, and capital investment to understand the growth rate.

Table III indicates that the production value of support businesses constitutes a significant portion, accounting for 80% of the entire industrial sector each year. Specifically, the production value of electronic components contributes over 90% to the production value of support businesses. During the 2018–2022 period, the average annual growth rate in the production value of businesses in the solar energy panel sector is 26.22%, and for those in the electronic components sector, it is 25.93%. The production value of businesses in the metal parts sector increases at the lowest rate, at 5.25% annually.

Table III. Industrial Production Value and Support Industry Stage 2018–2022 (Based on 2010 Comparison Prices)

Indicator	2018		2019		2020		2021		2022		Average Increase (%)
	Value (Billion VND)	Ratio (%)	Value (Billion VND)	Ratio (%)	Value (Billion VND)	Ratio (%)	Value (Billion VND)	Ratio (%)	Value (Billion VND)	Ratio (%)
Entire industrial sector	133,082	100.00	183,662	100.00	220,987	100.00	133,082	100.00	183,662	100.00	25.54
Industrial support	106,465	79.9	146,930	80.00	176,789	79.9	106,465	79.9	146,930	79.9	19.14
Solar energy panels	4,876	4.58	7,244	4.93	9,334	5.28	4,876	4.58	7,244	5.28	26.22
Metal parts	2,672	2.51	4,114	2.80	3,536	2.00	2,672	2.51	4,114	2.00	5.25
Electronic components	98,917	92.91	135,572	92.27	163,919	92.72	98,917	92.91	135,572	92.72	25.93

In general, the production value of the entire industrial sector and specific sectors is increasing at a high rate of 25% per year. Only metal parts exhibit a lower growth rate during the 2018–2022 period.

To assess the relationship between production value and the number of businesses, production value and revenue, and production value and capital investment to determine the proportionality of businesses and production value, contributing to business revenue and attracting investment, researchers utilized data from the Department of Industry and Trade of Bac Giang Province (2018, 2019, 2020, 2021, 2022) over the years to calculate correlation coefficients. The results are presented in Tables IV–VI.

Table IV. Correlation Between the Number of Supporting Industrial Enterprises and Production Value over the Years 2018–2022

Year	Number of solar panel manufacturing enterprises	Number of metal component manufacturing enterprises	Number of electronic component manufacturing enterprises	Solar panel production value (billion VND)	Metal component production value (billion VND)	Export value of electronic components (billion VND)
2018	5	15	132	4,876	2,672	98,917
2019	7	18	135	7,244	4,114	135,572
2020	8	21	155	9,334	3,536	163,919
2021	9	26	161	9,107	3,526	203,687
2022	10	29	173	12,375	3,279	248,763
R				0.96	0.15	0.97

Table V. Correlations Between the Production Value of the Supporting Industry and Revenue of Enterprises During the Period 2018–2022

Year	Total production value of the supporting industry (billion VND)	Number of enterprises with revenue below 100 billion VND	Number of enterprises with revenue: 100–200 billion VND	Number of enterprises with revenue: 200–300 billion VND	Number of enterprises with revenue above 300 billion VND
2018	106,465	18	6	10	14
2019	146,930	16	18	12	16
2020	176,789	14	8	12	18
2021	216,320	14	6	14	23
2022	264,417	14	10	24	28
R		−0.85	−0.09	0.89	0.99

Table VI. Correlations Between the Production Value of Different Sectors in the Supporting Industry and Investment Capital in Bac Giang Province During the Period 2018–2022

Year	Investment capital for solar panel production	Investment capital for metal component production	Investment capital for electronic component production	Solar panel production value (billion VND)	Metal component production value (billion VND)	Electronic component production value (billion VND)
2018	665	365	13,499	4,876	2,672	98,917
2019	850	483	15,915	7,244	4,114	135,572
2020	1,080	409	18,960	9,334	3,536	163,919
2021	1,042	404	23,315	9,107	3,526	203,687
2022	1,360	361	27,349	12,375	3,279	248,763
R				0.99	0.88	0.99

The correlation coefficient between the number of solar panel manufacturing enterprises and the production value over the years is 0.96; for metal component manufacturing enterprises, the coefficient is 0.15; and for electronic component manufacturing enterprises, it is 0.97. All values are positive, indicating that the number of enterprises is positively correlated with the industrial production value over the years. In other words, the increasing number of supporting industrial enterprises in Bac Giang Province contributes to the high growth of the province’s industrial production value.

The correlation coefficient between the total production value of the supporting industry and enterprises with revenue below 100 billion VND over the years is R = −0.85. For enterprises with revenue from 100 to 200 billion VND, the coefficient is −0.09. All values are negative, indicating an inverse relationship between the two variables. The correlation coefficient between the production value and revenue for enterprises with revenue from 200 to 300 billion VND is 0.89, and for enterprises with revenue above 300 billion VND, it is 0.99. These positive values suggest a positive relationship between production value and revenue for these categories over the years. In other words, enterprises in the supporting industry with revenue below 200 billion VND per year contribute less to the overall industrial production value, while those with revenue above 200 billion VND per year significantly contribute to the industrial production value of Bac Giang Province.

The correlation coefficients between the total investment capital of projects in solar panel manufacturing, metal component manufacturing, and electronic component manufacturing with their respective production values are all positive. Therefore, it can be asserted that the attraction of investment in supporting industrial projects in Bac Giang Province has been increasing over the years, aligning with the rapid growth in production value and contributing to the province’s overall industrial growth.

Conclusion

The research indicates that, in terms of development resources, Vietnam primarily relies on raw materials and materials from foreign suppliers. However, in Bac Giang, both domestic and foreign suppliers play a significant role. The market is a crucial factor influencing decisions regarding the quantity of materials used. Supporting enterprises in Bac Giang cater mainly to the domestic market, accounting for 37%, which is twice the amount for exports. Investments in production lines from countries such as China, South Korea, and Japan contribute to this dynamic. Analyzing the results of supporting industry production reflects a high annual growth rate of 25% for the overall industrial production value and related sectors. To foster the development of the supporting industry in the province, it is essential to improve investment promotion activities, innovate content, and diversify forms of investment promotion. Maintain a leading position among provinces in key competitiveness indicators such as CPI, PAPI, PAR index, SIPAS, and DTI to enhance the overall competitive capacity. These measures are crucial for sustaining the growth of the supporting industry in the province.