Export industries still depend heavily on processing

Vietnam’s electronic products are exported to over 50 countries, with main markets such as the EU, the US, Japan, South Korea… Picture: S.T.

Foreign investors get the large profit

The electronics industry (including telephones and accessories, computers, electronic products, and components) in recent years has continuously developed, becoming a key of the export sector, making an important contribution to the export’s achievement of the whole country. The Vietnam's electronic industry marked an important turning point since 2013 when it surpassed Vietnam's textile and garment industry for the first time and has held the No. 1 position.

According to the General Statistics Office’s data, by the end of September 2017, the export turnover of the electronic industry reached about $US 49 billion, in which telephone and accessories were $US 31 billion, computers and components reached $US 15.5 billion, rose by 40.8%. The Vietnamese electronic goods have been exported to over 50 countries in the world, some of them are the EU, the US, South Korea and Japan.

Is Vietnam on the right track as it concentrates on high technology, process industries?

If it is only about the exports, this is true. But in the contrast, the number that we import products of this group is quite large. Specifically, the import of computers and accessories in 9 months in 2017 reached $US 25.8, increased by 28.3% compared to the same period in the last year. South Korea continues to be the largest supplier of these products to Vietnam, followed by China, Taiwan, and the US. In the group of phones and accessories, in the first eight months in 2017, the import reached $US 10.7 billion, rose by 41.3% compared the same period in the last year with the main suppliers such as China, South Korea…

Looking at the import and export data of the electronics industry, it can be seen that the basic weakness of the electronics industry in particular and Vietnam's industry, in general, is that too depends on processing heavily, so the value added for the country is very modest. Moreover, the profit is dependent on some FDI investors such as Samsung, Canon, LG, Panasonic, Nokia.

Ms. Truong Thi Chi Binh, vice president and general secretary of the Vietnam Association of Supporting Industries (VASI), said that if we look carefully at the analysis of import data for many years, we will see the import value of electronic components is extremely big. The localization rate of domestic electronics enterprises is only 12%, the rest is 88% imported from abroad, imported from high-end components to mechanical parts, plastic, and rubber.

And Ms. Nguyen Thi Tue Anh, deputy director of the Central Institute for Economic Management, said that Vietnamese enterprises do not participate in the supply chain or value chain of FDI enterprises. Thus, though it is called as a high-tech industry, the "high" is not in Vietnam but in other countries.

Focus on the supporting industries

The growth of FDI enterprises in the electronics sector is giving a challenge for domestic enterprises. Vietnamese enterprises have contributed not only to the export but mainly to the processing and assembly of foreign companies, with major markets such as Japan, Korea, Singapore, Malaysia and Taiwan (China) and the ASEAN countries. Therefore, the value added of Vietnam electronics industry is not high compared to other countries in the region and the majority of profits belongs to FDI enterprises, especially the domestic enterprises are more difficult to participate in this field.

Besides, the fourth industrial revolution is considered as a chance for the export industries such as textile, footwear and electronic accessories. However, this opportunity is only possible as our enterprises apply advanced science and technology to improve the productivity and quality. Meanwhile, this is the weakness of domestic enterprises.

Facing such challenges, in order to develop the electronics industry, according to the recommendations of some experts, it is necessary to have policies in line with the reality, otherwise, the electronics industry will die out, especially in the context the tariff barrier will be removed completely by 2018. Perhaps the first policy that needs to look forward is the development of supporting industries for the electronics industry.

Ms. Kasinee Phantteeranurak, the Project Manager of Reed Tradex (Thailand), said that Viet Nam should pay more attention to improving productivity and promoting the value chain rather than depending on its available advantages. Each domestic company needs to define its objectives in upgrading its technology to meet global standards, as well as developing human resources to operate the new system. Vietnamese Government also needs to encourage domestic enterprises to invest in technology, research, and development and seek new technologies to meet the market demand.