Key Industrial Products - Investment without Taking the Market into Account

PC's have been added to a list of key industrial products for support under Decision N⁰ 37/2000/QD-TTg dated March 24, 2000 by the Prime Minister. However, after four years, in the domestic market, this product is still being overrun by foreign-made ones and there isn’t yet any sign that the product may surpass foreign-made products as a Vietnamese key industrial product.

One per cent of the market

The Vietnam Electronic and Informatics Corporation (VEIC) is the enterprise to be assigned as the focal point in implementing a project on manufacturing PCs as a key industrial product. VEIC has invested in an industrial production line for PC assembly, building a PC Linux operating system in Vietnamese and completing the building of 14 standard sets for desktops, and building a laboratory for testing PCs. The two projects were capitalised at VND9.6 billion. However, the result of these projects’ implementation remains far below expectation. The number of PCs made by VEIC accounts for about one per cent of the domestic market. In terms of price, a PC made by VEIC costs more than the market’s average price.

This, according to VEIC, is due to popular trade fraud in importing PC parts and underdevelopment of the support industry, not to mention weaknesses in value added tax policies before July 2003. Also, agencies and industries have yet to pay attention to using locally-made PCs. VEIC suffers losses in the initial period of its projects due to large amounts of investment capital with a long payback period. In addition, the State’s product support policies are not strong enough to help the corporation to improve the competitiveness of its products.

Solutions

According to experts and PC manufacturing and assembly enterprises, the domestic market has great potential with increased expenditures of households on buying this product. However, offices and enterprises are the main potential customers for PC manufacturers. "PCs are necessary tools in every industry and socio-economic field, especially during the computerisation and modernisation process under the Government’s policies,” said Pham Chanh Truc, head of the Ho Chi Minh City Export Processing Zone Administration (HEPZA).

Therefore, PC manufacturing and assembly enterprises have to target ministries, agencies and enterprises, or the State budget when making efforts to find markets for their PCs. To that end, VEIC, the Vietnam Information Technology Association, the HEPZA, and PC manufacturing and assembly enterprises have proposed that there should be a mechanism on ‘practicing thrift by using locally-made products, especially key industrial products.’

Such hope for local enterprise can be seen in the latest draft document on support policies for key industrial products in information technology by the Ministry of Post and Telematics, apart from adding mobile phones to the list of key industrial products, the buying and using of information technology equipment in governmental agencies will be given a priority in using locally-made products. The Ministry of Post and Telematics and other relevant agencies and ministries are developing this policy to submit to the Prime Minister for approval. Apart from the market, other support measures have been mentioned in the draft document. These include priorities in import, corporation income tax for high income earners, and the extension of import tax exemption for production lines until December 31, 2007. These will be applied to all economic sectors but not to VEIC as in previous years.

• P.V