FDI leads in electronics exports

15:50 | 21/05/2015 Investment

Foreign direct investment (FDI) accounted for most of the nation's total electronic export turnover, according to a report from the Vietnam Electronic Industries Association.

FDI leads in electronics exports

A worker checks products at Stronics Viet Nam in Bac Giang's Dinh Tram Industrial Zone (Photo: VNA/VNS)

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

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 Vietnam Electronics Industries Association.

Export turnover of telephones and spare parts was 24.1 billion USD in 2014, increasing by 13.4 percent compared to that in 2013. However, export turnover of telephones and spare parts within the FDI sector accounted for 99.6 percent.

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

Some electronics FDI giants accounting for a large proportion of market share in the total export turnover of Vietnam'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 Vietnam, turning Vietnam 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 Vietnam 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 percent 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), which feature the comparison of domestic spare parts and raw materials and auxiliary materials provided for industrial products, Vietnam accounts for only 27.8 percent of the industrial production value while China and Thailand account for 50-60 percent. Therefore, the added value of Vietnamese products only stands between 15 and 30 percent.

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

According to experts, Vietnam's domestic electronics enterprises are weak in competitiveness in all 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 percent) 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 Vietnam 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 Vietnam.

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.

                                                                                                                                                                               Source VNA

 

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