Under the plan of Vietnam's AFTA integration, the government will implement tax exemptions and reductions from July 1 for 600 imported industrial items to ensure that tariffs on them do not exceed 20 per cent, Khu said.

Most of the affected items currently attract high tariffs - between 40 and 100 per cent. They include electrical products, vehicles and chemicals.

The tariff cut means domestic industrial enterprises will not enjoy government protection any longer. That will leave the industrial sector in a serious situation: only a handful of enterprises can compete with foreign rivals in the domestic market.

Khu said most domestic industrial enterprises have failed to make appropriate preparations for the country's regional and global economic integration.

Consequently, many of them have limited competitiveness and do not have strong brands. Some still rely on the state's subsidies and protection.

The reality is that industries such as sugar, paper, garments and textiles and steel will find it much harder to compete with foreign rivals because their production technology and equipment are outdated and materials they use for production are mainly imported.

Industrial enterprises have also to cope with a serious shortage of capital to develop large scale projects Khu also mentioned external obstacles that will affect domestic industrial enterprises' AFTA integration. He said the United States' recent approval of quotas for Vietnamese garment and textile products would limit the industrial sector's export to that market. He also said the domestic tourism sector has yet to recover after SARS, which has affected the consumption of industrial products in the domestic market.

To overcome new challenges and to maintain high growth, Khu said, domestic industrial enterprises need to closely combine production with its product consumption, and focus on investment to ensure that new projects are developed on schedule.

He suggested that domestic enterprises pay more attention to export processing, especially at quota-control markets, and make further inroads in non-quota markets.

In addition to business efforts, Khu added, the Ministry of Industry has outlined plans to assist enterprises in developing projects, diversifying their range of products and saving raw materials to cut production cost.

Trade promotion, brand building and business renovation are also key objectives of the ministry's support schemes.