Vietnam electronics industry: FDI sector taking lead
At present, Vietnam is the 12th world’s largest electronics exporters and the third largest exporter in ASEAN. However, 95% of export value is coming from the Foreign Direct Investment (FDI) sector, while the domestic enterprises have not contributed much to this gain.
According to the Central Institute of Economic Management (CIEM), the export value from electronics products reaching tens of billions of USD per year is showing the significant contribution of this industry for the economy. In reality, thanks to the presence of Samsung, the Vietnam electronics industry has been transformed in a positive way.
In period 2005 – 2014, the number of electronics enterprises have increased from 256 to 1,021, while the number of workforce in electronics industry also increase 7 folds in 8 years, from 46,000 in 2005 to 327,000 in 2013, and 500,000 in 2016. It is expected that by 2017, the trade value of electronics products will exceed the threshold of 70 billion USD. However, 95% of the trade value is coming from the FDI sector.
As such, in 2016, total value of smartphones and related accessories for export was 34 billion USD, the contribution of FDI enterprises has contributed to the majority of more than 90%. With this being said, the majority of domestic enterprises are still only take part in assembling, providing simple services and component, resulting in low added value, lacking competitive edge and unclear strategy for development.
Information from the Supporting Industry Enterprise Development Center of the Ministry of Industry &Trade showed that, the main contribution for electronics products export in Vietnam are FDI enterprises. Moreover, the industry has to import nearly 77% of the product value, while the localization rate is still low.
One of the reasons for this problem is that the majority of Vietnamese enterprises in electronics industry are small and medium enterprises (SMEs), which do not have sufficient financial capabilities to invest in modern production chain. In some case, the investment in this industry often do not yield profit in short term without the government support in production consumption, as well as in technologies investment. Comparing with FDI enterprises, domestics enterprises do not have the support from government with preferential treatment in land and tax. Besides, the import of accessories are facing difficulties in administrative procedures, especially in importing accessories to produce specialized products under 0% import tariffs.
In order for electronics industry to become the spearhead industry of the economy, Vietnamese enterprises have to improve their competitiveness to graps opportunities from the local market, as well as in international markets through FDI enterprises operating in Vietnam. However, for Vietnamese enterprises to cooperate with FDI sector, domestic enterprises have to improve their production chain and technologies, while the government should have policies to support these enterprises taking an advanced role in the supporting industries.
As such, in the coming time, the Ministry of Industry & Trade will give more support for enterprises in enhancing technological capabilities to compete with foreign enterprises. At the same time, administrative agencies will create channels for enterprises to facilitate trade and investment, as well as to approach foreign enterprises.
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