Vietnam Electronics under AFTA Pressure

Vietnam Electronics under AFTA Pressure

Worrying problems

At present, Vietnam's electronic product market is faced with two worrying problems, namely the "invasion" of ASEAN-originating imports and the "boom" of private-owned electronic assemblers. More and more electronic products originating from ASEAN countries are imported and distributed in Vietnam. Beside new trade brands recently introduced to the local market, well-known electronic trademarks have seen considerable transformation in the product origin. For example, imported Toshiba's products previously originated from Japan, Mexico and Brazil. But now, its products in Vietnam are mainly from Thailand and Singapore and enjoy tariff preferences under the AFTA framework.

With a larger supply, the price of imported household electronic products has sharply fallen. The price reduction as recorded in electronic centres and supermarkets in Ho Chi Minh City is 10-15 per cent as compared with the same period in 2003. This phenomenon has greatly boosted the demand for electronic products imported from ASEAN countries.

While the heat of ASEAN products' invasion is still being felt, the electronics market has been hit by the "boom" of private-owned electronic assembly establishments.

Insufficient statistics suggest that there are about 200 private electronics enterprises and assembly workshops in Ho Chi Minh City, most of which operate without business registration, thus their products' quality is not guaranteed.

Why is the price of audio equipment over the recent time so "dirt-cheap"? And why do private-owned electronics enterprises only focus on manufacturing audio equipment rather than other items, such as T.V. sets?

According to experts in the sector, privately-owned electronics enterprises are mostly interested in audio equipment as the market demand for these products are on the rise. And it should be noted that most of the spare parts for audio equipment are cheaply imported from China.

Faced with the incoming "waves" of ASEAN imports to Vietnam's markets to benefit from the preferential tariffs under AFTA, 6 domestic electronic joint-assemblers have recently asked the Government and the Ministry of Finance to reduce import tariffs on electronic spare parts from 5-10 per cent to 0 per cent so that they can cut down on product price and boost their competitiveness with other countries in the region as the tariffs within the CEPT/AFTA roadmap have been dramatically removed.

Reality has shown that the competitiveness of Vietnam's electronics is fairly low as there aren’t strong spare parts manufacturers to support assemblers.

Though many efforts have been made to raise the domestication proportion, local electronics assemblers still have to import over 50 per cent of foreign spare parts due to under supply from local manufacturers.

Experts in the sector hold the view that in order to develop the manufacture of spare parts, Vietnam has to reach the minimum assembly output of 5 million products per year. At present, however, the annual demand for T.V. sets in Vietnam falls short of one million products. This modest figure has discouraged private-owned enterprises as well as big corporations from investing in this area.

Electronics companies should consider measures to boost exports, especially when Vietnam fully joins AFTA, their exports to other countries in the region will also benefit from preferential tariffs. They should seize this opportunity to increase exports to ASEAN countries. And once Vietnam’s electronic products gain a foothold in the ASEAN market, competition among regional countries will become more balanced.