Developing of Supporting Industries through the new generation FTAs

For decades, Vietnam has exhibited an impressive potential as ASEAN’s hub of supporting industries, especially in the electronics manufacturing segment. As the country becomes more engaged with trans-national free trade agreements such as TPP, RCEP, ASEAN +6, etc.; it has become clear that understanding the opportunities and benefits of these new generation FTAs will benefit the industrial professionals in Vietnam.

Truong Thi Chi Binh, Director of Supporting Industry Development Enterprise Center (SIDEC), Industrial Policy and Strategy Institute, shared about the opportunities and challenges for Vietnam’s electronic industry in global arena: “The implement of new FTAs will create a greater market access for Vietnam, one of examples is RCEP which is intended to take effect in 2017, 65% of product lists which is about 8,000-9,000 kinds of products will be reduced tax. It will open up opportunities for Vietnam to export more components and spare parts”. “At the same time, more FDI attracted to manufacturing industry which means greater chance for Vietnamese enterprises to enter global supply chain. In another way, Vietnam’s manufacturers also have to prepare to face with higher competition from similar markets while the quality standards, original content, trade protectionism will be more strictly in term of non-tariff barriers. Labor cost must be concerned as well while labor benefit will be more focused & controlled under of the TPP’s agreement”, she added.

Le Anh Van, Director of Centre of Law Consultancy and Human Resource Development, Vietnam Association of Small and Medium Enterprises (VINASME) said: “In supporting industry, most of Vietnam’s manufacturers are SMEs. The Government has issued many supporting documents to promote supporting industry such as: Decision 12/2011/QD-TTg on 24/2/2011 of the Government as policy to support some industries; Decision No.1483/QD-TTg on 26/08/2011 for the list of priority products to be developed; Decision No. 1556/QD-TTg dated October 17, 2012 of the Government approving the project “Support small and medium-sized enterprises in the field of supporting industry”; and especially, Decree 111/ND-CP dated 03/11/2015 of the Government on the development of supporting industries”. “The Decrees set out a series of business development solutions, particularly support for business start-ups industrial and innovative enterprises. However, in order to support the business in a most efficient way, it’s necessary to put development programs on the content of the Supporting Law to create uniformity”, he added.

Luu Hoang Long, Chairman of VEIA shared the development reality of Vietnam’s electronic industry: “In 1996, Vietnam’s electronic industry exported the first consignment with value less than 100 million USD. In 2015, export value has reached more than USD 57billion; it leads all the export sections in the country with growth rate of over 30% annually. But, this value is mainly created by FDI companies with low localization rate currently at 20-30%. He thought that, in the context of global integration, Vietnam’s electronic industry in general and Vietnam manufacturers in particular can catch the chance to develop the infrastructure and technology while the import tax is exempted for goods imported.

Pham Tuan Anh, Deputy General Director of Division of Heavy Industries – MOIT said: “The companies which are doing business relating supporting industry can gain more preferential policies from Government, such as Circular 21/2016/TT-BTC, supporting industry’s products will enjoy priority in tax declaration monthly, annually, quarterly temporary declaration, those companies can pay corporate income tax at just 10% in 15 years. However, those companies can get exemption in terms of rent, usage and tax for land use, and also enjoy rates from state credit. Especially for SMEs companies, they are eligible to borrow to 70% of their charter capital as well.”

Isara Burintramart, Managing Director of Reed Tradex emphasized: “The new generations of FTA have broader scope and contents are beyond commitments on trade, services and partially investment. Joining the FTAs, Vietnam has an opportunity to restructure export and import and avoid heavy dependence on one market. With more FTAs, Viet Nam’s exports will increase but now Viet Nam will also face anti-dumping and anti-subsidy lawsuits. It is necessary to bring about powerful changes to reform and apply suitable technology to be able serve to countries which have highly supplementary structure of export and import, such as Japan, Australia, New Zealand, and South Korea. Accordingly, trade promotion activities, assistance of enterprises in finding business partners, new markets, new products, penetrating into distribution channels, participation in fairs and exhibitions can be done immediately". He also informed that, from 6 – 8 October, at Saigon Exhibition and Convention Center (SECC), NEPCON Vietnam 2016 will return to be a platform for international technology providers to jointly drive the growth of the electronics industry in Vietnam whose potential is attracting global electronics investment. The events will be showcase stage of technology from more than 500 brands of 25 countries. It will be co-located with METALEX Vietnam 2016 – an international exhibition on machine tools and metalworking solutions for production upgrade.

MP