Electronics Industry Seeks Opportunities from TPP, EVFTA

VEIA President Luu Hoang Long said, at a forum titled “TPP and EVFTA impacts on supporting industries of Vietnam - What businesses need to know” held in Hanoi, that joining the TPP and new-generation free trade agreements (FTAs) will bring opportunities and challenges for Vietnamese suppliers and exporters of electronic components. The presence of many global electric and electronics producers coupled with localisation encouragement policies has helped raise the average localisation ratio of electrical and electronics products made in Vietnam to increase by 20-40 per cent.

 

He said that although this figure is below expectations of manufacturers, it is still an encouraging result in the process of integrating more deeply into global value chains. The TPP and EVFTA will play important roles in supporting their member states to promote the formation of value chains and enable Vietnam to compete and create the opportunity of making high quality products.

 

Sharing this point of view, Ms Phung Thi Lan Phuong, Head of FTA Committee under the WTO and Integration Centre - VCCI, said that the TPP and EVFTA have positive impacts on Vietnam in export of electronic products. The average most favoured nation (MFN) tariff on electronic products from four TPP partners with which Vietnam has not had FTAs is 1.6 per cent (United States), 1.2 per cent (Canada), 3.5 per cent (Mexico) and 1.3 per cent (Peru). This tariff on Vietnam’s electronics products is 7.9 per cent. Tariffs on most of electronic products and components will be abolished as soon as the TPP takes effect. EVFTA will also repeal duties on a majority of electronic products right after it comes into force. Currently, the average MFN tariff on electronic products is 7.9 per cent while the average tax on electronic products in the European Union (EU) is 2.8 per cent. Vietnam has the opportunity to import raw materials and components and export products but it also faces challenges due to rising competitive pressures.

 

Dr Nguyen Thi Tue Anh, Vice President of the Central Institute for Economic Management (CIEM) under the Ministry of Planning and Investment (MPI), also said that the TPP and EVFTA will open up opportunities for Vietnamese enterprises to invest in electronic component industry and export low-priced products. At the same time, when FTAs enter into force, new foreign direct investment (FDI) flows are expected to roll into Vietnam to take advantage of opportunities generated by the TPP and EVFTA. The strong involvement of world-leading electronics corporations in Vietnam will create more jobs, open up more cooperation opportunities, and facilitate participation in global production value chains.

 

Before these opportunities, Vietnamese enterprises hold a great opportunity to become "a new production base" if they successfully catch the strong wave of FDI inflows, according experts.

 

She noted six important contents to electronics support companies, namely rules of origin, tariffs, labour - environment, small business, intellectual property, and non-tariff measures.

 

Regarding small business content, Tue Anh stressed that most of Vietnamese electronic support companies have small and medium scales and they will have to compete on a global scale when Vietnam enters into the TPP and EVFTA. For that reason, they should spend time on learning provisions of such pacts to take advantage of exceptions for small and medium businesses.

 

In addition, they must internationalise their competitiveness by optimising manufacturing processes, reducing production costs, reducing time and bringing products to consumers as quickly as possible.

 

VEIA President Luu Hoang Long also said that, to make high quality products, Vietnamese enterprises must apply advanced technologies, promote research and development (R&D) on new products to increase competitiveness against other TPP members.