Vietnam's New Target In Electronics Exports By 2017
The government gives special Incentives to lure large foreign Electronic Investors
Vietnam has given large foreign investors, especially those in the electronic field, preferential incentives for their investment expansion in the country - namely Intel in 2006, South Korea’s Samsung Group in 2010, and in recent years: Nokia, Bosch, and another South Korean giant, LG Group. Even though the government loses out in tax collection for the corporate tax exemption in many years, there are more benefits in granting these special incentives than just tax collection, said Nguyen Mai, Chairman of the Vietnam Association of Foreign Invested Enterprises to Vietnam Investment Review.
Minister of Planning and Investment Bui Quang Vinh also told the paper, “Giant foreign investors have the right to ask for good conditions for their investments. We have to weigh what we benefit, if we give such preferential incentives to foreign investors, and what benefits they gain. Overall, if the investment plans are good for the country, we should encourage them to invest here through offering preferential incentives.” He also advocated not assesing the overall impact of giant investment projects to the country through tax collection alone.
The benefits that come with foreign investors like Intel, Samsung, Nokia and LG are:
- job creation;
- potential in expansion;
- help attracting more and more investments from the hi-tech electronics firms;
- help attracting foreign part suppliers and using local suppliers;
- and lastly, help for Vietnam in moving from low-value-added FDI to high-value-added manufacturing projects.
President urges firms to tap potential in world markets, including electronic products
President Truong Tan Sang recently called on Vietnamese businesses to tap the potential in domestic and international markets and to continue promoting the country and people in his speech at a meeting of entrepreneurs who received the 2012 National Trademark Award, report Tuoi Tre newspaper. President Sang said great efforts had been made by the National Brand Program Council and the Ministry of Industry and Trade to popularize the country's brand names. The program has attracted active support of the local business community, hoping that it will help them build and enhance their brand names on both local and international markets, said Minister of Trade and Industry Vu Huy Hoang to the paper. The 54 firms initially selected to join the program operate in electronics, engineering, textile and garment, leather and footwear, financial services, IT, energy, and food products industries.
The new target to double the number of Vietnam's electronic exports by 2017 to $40billion is doable, in our view. However, to increase the number of local electronic companies for exporting overseas, especially under Vietnamese brand names, will be quite a challenge. More efforts must be placed in: bettering the quality, strategies to better advertise products, establish after-sales services and better distribution network. Some of Vietnam's leading electronic brands are: Viettronic (a brand developed by the Dong Da Electronics Company), Da Lan, Chau Electronics (producing DVD players). They were put under competetive pressure now as foreign products dominate the market and the electronic parts are more expensive for them to stay competitive. Many of these companies bosses chose to change careers and make money in some other ways, like real estate as they see that competition will be fierce and profits are likely to become more and more contrained. The real growth in this sector seems to be more open for small to medium companies who are performing services or supplying parts to the bigger players. These companies have had a very tough last two years because of restricted access to credit, inflation and rising wages but are hoping that 2013 and especially 2014 will be brighter years for them.
The government set new target for Vietnam's electronics exports: US$40 billion by 2017, reported Vietnam News. However, Vietnam's electronic industry is still facing challenges in its development. Although the sector's export value is high, 90% was recorded by the foreign direct investment (FDI) sector while only the remaining 10% by domestic companies. In order to increase export from local Vietnamese companies, Le Ngoc Son - chairman of Vietnam Electronics Industries Association commented to the paper that it would require international support in market expansion, human resource training, competitiveness and cooperation for the development of support industries and finally more fuller participation in the global value chain.
According to the Vietnam General Statistics Office, the export revenue from mobile phones, computers and components reached about US$20 billion in 2012 out of the country's total export value of US$114.5 billion.
Over the years, many foreign electronics giants have increased their investments in Vietnam. Just to name a few are:
Intel invested over US$1 billion in southern Ho Chi Minh City with an export value of more than US$1 billion annually.
Samsung Vietnam's export value in 2012 doubled to US$12.7 billion, leading the company to build a 2-billion dollar plant in northern Thai Nguyen province.
Japan's Panasonic spent US$3.95 billion in building an electronics and electric component production plant in southern Binh Duong province.
China's Winter invested US$870 million in a touch display production plant in the northern Bac Giang province.