FDI leads in electronics exports

Monday, May 18, 2015 08:00

A worker checks products at Stronics Viet Nam in Bac Giang's Dinh Tram Industrial Zone. — VNA/VNS Photo Vu Sinh
HA NOI (Biz Hub) — Foreign direct investment (FDI) accounted for most of the nation's total electronic export turnover, according to a report from Viet Nam Electronic Industries Association.

At the same time, the number of FDI enterprises represent only one-third of electronic enterprises in Viet Nam.

The country's quick development in the electronics industry has mostly occurred due to the efforts of the FDI sector, the Thoi Bao Kinh Doanh newspaper (Business Times) said, quoting Luu Hoang Long, Chairman of the Viet Nam Electronics Industries Association.

Export turnover of telephones and spare parts was US$24.1 billion last year, increasing by 13.4 per cent compared to that in 2013. However, export turnover of telephones and spare parts within the FDI sector accounted for 99.6 per cent.

Further, the value of exported electronics, computers and spare parts last year totalled $11.6 billion. Yet, of this number, the FDI sector accounted for 98.8 per cent.

Some electronics FDI giants accounting for a large proportion of market share in the total export turnover of Viet Nam's electronic industry, including Samsung, with factories in the northern provinces of Thai Nguyen and Bac Ninh, along with its electronics spare parts manufacturers from KSD Vina Company, Morips Vina and Orientech Vina.

Canon and LG are also increasing their investments in Viet Nam, turning Viet Nam into one of the largest manufacturers of mobile phones, as well as printing and photocopy machines for their brands.

Experts have said that FDI enterprises expanding their scale of production in Viet Nam will be a premise for Vietnamese spare parts and service providers to build large and long-term business plans.

Of the 90 satellite enterprises producing spare parts for Samsung, only six to seven Vietnamese enterprises produce such parts. These enterprises provide mostly printing and wrapping products.

Vu Quoc Huy, deputy head of the Ministry of Planning and investment's Department for Economic Zones Management, said that Vietnamese enterprises account for only 10 per cent of the total providers.

The participation of Vietnamese enterprises, in association with Canon, is unremarkable, involving mainly sectors that require simple technology. Spare parts and components requiring high degrees of accuracy are imported from other countries or produced by FDI enterprises, Huy added.

According to statistics from the Japan External Trade Organisation (JETRO) on the comparison of domestic spare parts and raw materials and ancillary materials provided for industrial products, while China and Thailand account for 50 – 60 per cent of the industrial production value, Viet Nam accounts for only 27.8 per cent. Therefore, the added value of Vietnamese products only stand between 15 and 30 per cent.

Further, customers who purchase a mobile phone from Sony see that only earphones are labeled as being "Made in Viet Nam". Other parts are produced by foreign producers.

According to experts, Viet Nam's domestic electronics enterprises are weak in competitiveness in both domestic, regional and international markets.

One of the reasons the electronics industry remains weak is that import taxes on spare parts remain high, while import taxes are lower (five or zero per cent) for completely built products, which encourages enterprises to import the latter, instead of selling domestically- produced ones.

Despite the launch of the "Vietnamese Use Vietnamese Goods" campaign, enterprises, especially state-owned enterprises, always face technical and non-technical barriers.

To increase added value and the gross domestic product (GDP) of Viet Nam through the electronics industry, the country should not increase labour costs, which will make the nation lose its initial competitive advantages, said Long.

He advises domestic enterprises to boost the manufacturing of spare parts for FDI providers. Boosting Vietnamese enterprises that manufacture electronic products, information and technology for other producers will increase the value-added proportion of products made in Viet Nam.

To enhance the competitive capacity of electronics enterprises, companies should carry out synchronous measures, from production to distribution, as well as creating government policies supporting enterprises, said Long. — VNS

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