Do Thi Thuy Huong, a member of Viet Nam Electronics Industries Association's executive committee, tells Viet Nam News about the industry's development and challenges.

Can you tell us about the electronics industry in Viet Nam?

Do Thi Thuy Huong

Last year the information and communications technology (ICT) industry achieved growth and a number of important accomplishments. This was considered a highlight of the economy in the context of the economic downturn.

Exports of electronic and ICT products rose to US$35 billion of which computers and components accounted for $11.4 billion and cell phones and parts for $23.6 billion

Viet Nam is now one of the biggest producers of electronic and computer components, printing machines, cell phones.

Foreign companies such as Samsung, Intel, Canon, Panasonic, LG, Foxcon, Nokia accounted for 96.5 per cent of the exports of computers, electronic devices and components produced in Viet Nam.

Despite the tough challenges faced by the economy, the ICT industry has achieved remarkable results, further consolidating its position and growth pace and fulfilling the tasks set in the national strategic plan.

ICT is gradually becoming one of 10 key sectors of the harmonised infrastructure system for turning Viet Nam into an industrialised and modernised country by 2020.

What role do local electronics companies have in the market?

Recently Vietnamese electronics firms have achieved a lot of technological innovations and raised their production to international standards to enhance their capacity to provide for major electronics manufacturers in Viet Nam.

They include Viettronics Binh Hoa, who has for more than 20 years been making parts for large manufacturers from Japan, and 4P, which is already a part of LG Group's supply chain.

What are the challenges?

Despite the growth, the electronics supporting industry is mainly driven by foreign businesses that are part of the supply chains of final equipment producers. According to Samsung Electronics Vietnam, of its 60 supporting companies, 45 are Korean, 10 are from other countries and five are Vietnamese.

Very few Vietnamese enterprises have the capacity to supply parts and services to FDI firms operating in the country.

The domestic supporting industry has fallen short of expectations as it has failed to meet the demands of original equipment manufacturers, resulting in low value addition in the country's electronics sector in comparison with that of other nations.

The biggest concern for Vietnam's electronics businesses today is to get similar Government support as FDI enterprises — like tax and land incentives.

Though there is no discrimination brought about by laws and regulations, most local enterprises have great difficulty benefiting from incentive policies.

Recently at a meeting with the Ministry of Finance on import tax, a representative of Viettel, one of the biggest phone manufacturers, had to ask the ministry for the same policies and incentives as Samsung.

They cited the example of Samsung asking to import a technology chain for production in Viet Nam and the ministry agreeing immediately. They recognised Samsung technology and did not demand authentication by the Ministry of science and technology.

But Viettel had to undergo various assessments by not only the Ministry of Science and Technology but also other ministries for a similar chain.

FDI enterprises often attract a string of satellite companies that also take advantage of the low labour costs and land and tax incentives offered to FDI enterprises.

For example, Samsung has around 60 supporting enterprises, 50 of them Korean, in industrial zones in the northern provinces of Bac Ninh and Hung Yen.

What are the solutions?

First we should recognise that intensive investment by FDI companies has made Vietnam a large processing and manufacturing hub for mobile phones, printers and copiers and their parts. It also provides a good opportunity to develop supporting industries for such manufacturing.

Established in 2000 to serve the interests of electronics enterprises in Viet Nam, the association thinks we should first underline the need to revamp preferential policies, create a full legal framework for the industry as well as all businesses in this field, and finalise and issue Government decrees.

I think there should be tax exemptions for materials and equipment imported to produce key mechanics items. Waiver of corporate tax and land rents for projects that supply supporting products to technology companies should be extended to local enterprises along with FDI firms.

Thus, we still keep our labour costs low as an attraction for most of the foreign enterprises in the industry and to compete with other countries in the region.

By having more local companies taking part in the production of electronic parts, we will participate more actively in the growing industry.

A good supporting industry will be another attraction for investors coming to the country.

The Government should also bolster environmental protection and energy conservation measures to create markets for the environmental, energy-saving and supporting industries. — VNS