Decree 205/2025/ND-CP: New Driver for Supporting Industry Development

The new policy is expected to help supporting industries integrate more deeply into global supply chains and contribute to Vietnam’s progress toward industrialization and modernization goals.

By enhancing professional skills and expertise, Vietnam can move from low-cost manufacturing to high value-added production

Promoting technology transfer

Decree 205/2025/ND-CP focuses on supporting research, development, and technology transfer in supporting industries. Organizations and individuals engaged in the production of prioritized products are entitled to incentives from the National Technology Innovation Fund, the National Foundation for Science and Technology Development, and the Vietnam National High-Tech Development Program. In particular, collaborative projects between businesses and science-technology organizations are eligible for up to 50% support for expenses related to machinery, equipment, prototypes, software, training, consulting, inventions, and intellectual property. Capacity-building activities for experts and technology consulting units can receive up to 70% of total funding.

These incentives enable businesses, especially small and medium-sized enterprises (SMEs), to access advanced technologies to improve product quality and increase competitiveness in international markets. However, to take full advantage of these incentives, they must enhance their technical and financial capabilities. Transparent resource allocation mechanisms are also essential to prevent misdirected support and ensure meaningful impact on supporting industries.

Uplifting human resources

To meet the demand for high-quality labor, the decree provides funding support for domestic and overseas training programs for outstanding students, lecturers, researchers, technicians, and technical workers in supporting industries. Funding is mobilized from the Supporting Industry Development Program and national training programs.

These training policies aim to address the shortage of highly skilled labor - a major barrier preventing many Vietnamese companies from participating in global supply chains. By improving professional skills and expertise, Vietnam can shift from low-cost manufacturing to high value-added production, thus aligning with Industry 4.0 megatrend. Nonetheless, the effectiveness of these policies depends on close coordination among businesses, training institutions, and local authorities in developing practical training programs, as well as implementing talent retention strategies to prevent brain drain.

Environmental protection and quality assurance support

The decree adds three provisions relating to environmental, legal, and quality assurance support, aimed at fostering sustainable industrial development and improving product standards. Development projects for supporting industrial parks or industrial clusters are eligible for environmental protection incentives in accordance with current laws. Manufacturers of prioritized products also receive similar support, proving Vietnam’s commitments to green industrial development.

In terms of quality assurance, businesses are eligible for up to 50% support for such activities as renting of testing laboratories, product testing, inspection of new goods, copyright registration, intellectual property, barcodes, measurement, and measurement calibration. These supports enable businesses to meet international standards - a prerequisite for participating in global supply chains in such industries as electronics, automobile, and precision engineering.

Legal assistance and investment incentives

Legally, SMEs manufacturing prioritized supporting industrial products are entitled to assistance under the Law on Support for SMEs, including legal consulting and simplified administrative procedures. This helps reduce regulatory burdens on small businesses, which often face difficulties in complying with complex legal requirements.

Regarding investment, projects manufacturing prioritized products are eligible for land and water surface rent exemptions or reductions, along with tax incentives in accordance with the law. These policies create a favorable environment to attract both domestic and foreign investment, helping Vietnam compete with Thailand, Indonesia and other countries to become a regional manufacturing hub. However, strict supervision is needed to prevent abuse of incentives and enhance management capacity to effectively support investors.

Despite offering many opportunities, the enforcement of Decree 205/2025/ND-CP may face challenges because businesses, especially SMEs, have limited financial and technical capacity. Transparent resource allocation, clear implementation guidelines, and inter-sector coordination are essential to make sure that policies are effective and reach the right subjects.

The decree provides a foundation for Vietnam’s supporting industries to integrate into global supply chains through policies on support regarding technology, human resources, environment, legal frameworks, and investment. The success of the decree depends on effective implementation and close cooperation among the government, enterprises, and relevant stakeholders, aiming to upgrade supporting industries and facilitating the country’s industrialization and modernization.