Cheap imports are pushing Vietnam’s electronic sector, which is dominated by assembly plants, toward bankruptcy, officials from Vietnam Electronics and Informatics Corp have said.
The company’s director general Nguyen Hong Ky said that as Vietnam stepped up its integration into the regional economy, it would face more challenges from Association of Southeast Asian Nations (Asean) competitors.
So far this year the corporation’s production value has fallen by 12% to 800 billion dong (US$51.4 million), generating 30% less revenue as compared to the same period last year. Since adopting the Asean Free Trade Area (Afta) in July last year, the import duty on electronics from Asean countries has been slashed from 50-60% to 20%.
Electronics assembled in Vietnam are losing their grip on the domestic market; in 2002, they accounted for 18% of the market share, but are expected to hold only 7% this year.
The sector’s sharp decline was the result of these firms’ dependency on importing parts from countries and territories outside Asean, the corporation’s business director Nguyen Thinh said.
Vietnam imports most of its parts from non-Afta countries such as mainland China, Japan, Taiwan and South Korea.
As a result, domestic producers suffer from high import taxes, which range from 15-20%. Weighing these added costs, Thinh feared that foreign companies would close their factories or become distributors in Vietnam.
With this in mind, the corporation recently asked the ministries of industry and finance to ease tariffs on all imports. The ministries are currently considering the proposal.
Meanwhile, Asean imports are enjoying smooth sailing Vietnam’s domestic market. A 29-inch television made in Thailand costs 6.1 million dong, while its Vietnamese model costs eight million dong.
Over the past 30 years Vietnam had tried to develop its domestic manufacturing capacity, director general Ky said, but the electronics sector was still dominated by assembly plants.
Parts manufacturing required significant investment, long-term research and viable export contracts, which Vietnam lacked, he said.
In order to expand production, he said the country must focus on software design and product diversification.
Potential lay in coordinating research on home appliances, information technology and telecoms, he said.