As a rule, when Vietnam joins the World Trade Organisation (WTO), many goods items will see their prices down thanks to Vietnam’s commitments on import tax cuts. However, prices of electronic goods do not follow the rule.
Economic experts say prices of electronic items will hardly fall in the future as prices asked by electronic shops are equal or lower than prices in other countries in the region and WTO members.
Taking a step ahead
Recently, the purchasing power of electronic goods has seen a downfall as Vietnamese consumers may think of better prices after Vietnam joins WTO. There has been a risk that many electronic manufacturers will fail to reach their plans. Refrigerators, for example, witnessed a growth rate of between 35 and 40 per cent in 2005 but in 2006, manufacturers may not reach a growth rate of 25 per cent as they had expected. LCD televisions gained sales of 12,000 units, equal to two per cent of the market share, despite a six fold increase in demand.
Many electronic manufacturers such as Sony, Toshiba, Sanyo and LG in Vietnam, declared there would be no price cuts in the future despite Vietnam’s implementation of its WTO commitments in 2007. So, why will prices of electronic goods not fall?
According to Vietnam’s commitments, import tax of main electronic goods, such as televisions, refrigerators, air-conditioners and washing machines, will be cut from 50 per cent to 40 and 38 per cent. However, an import tax cut may not mean a cut in prices. The reason is that Vietnam overcame price competition for electronic goods two years ago, when the country began to implement its commitments for the ASEAN Free Trade Area (AFTA). Accordingly, the import tax rate for electronic goods is put at 5.2 per cent.
Import tax rate according to WTO commitments is even higher than Vietnam’s existing import tax rate. Let’s take import tax rates of some main electronic items for example. The existing import tax rate of DVD players is 40 per cent while that for WTO commitments is 45 per cent. The figure is put at 30 per cent and 40 per cent, respectively for Hi-fi players; 10 per cent and 20 per cent, for cameras and camcorders; 40 per cent and 45 per cent for MP3 players. Only televisions have Vietnam’s existing import tax rate equal to that of WTO commitments, which is 40 per cent.
On the other hand, on July 28, 2006, before Vietnam’s accession to WTO, the Ministry of Finance issued Decision 39/2006-BTC, making adjustments to import tax rates of some electronic items. Accordingly, the import tax rate was cut from 50 per cent to 40 per cent for televisions; from 50 per cent to 40 per cent for DVD players; from 40 per cent to 30 per cent for Hi-fi players; from 20 per cent to 10 per cent for digital cameras and camcorders; and from 50 per cent to 40 per cent for MP3 players. The Ministry of Finance, therefore, took a step ahead, introducing a new tariff line just before Vietnam’s accession to WTO to facilitate Vietnam’s international integration.
In context, only electronic goods imported from Europe and the US will witness a price cut. Prices of products made by Asian countries will remain unchanged. This will not cause any damage for local consumers as products from the US and Europe cannot compete with products of the same kind from the Republic of Korea, Japan and Thailand. Most famous brands in Vietnam, such as Sony, Panasonic and Samsung, come from Asian countries. Transportation costs of products of the brands will be much lower than transportation costs of products imported from Europe and the US.
A gradual cut
Throughout 2008, Vietnam will have no commitments on import tax cuts for electronic goods. In 2012, import tax rates will be cut by five per cent for DVD players and 10 per cent for Hi-fi players. Import tax rate committed for digital cameras is 15 per cent in 2009, just five per cent higher than the existing rate. This implies no cuts for prices of electronic goods after Vietnam’s accession to WTO. Only information technology items, such as laptops, desktops and CD and DVD/CD drivers will witness a tax cut from 2009, with a cut of between one and three per cent per year, from the existing five and 10 per cent, to 0 and five per cent in 2012.
Huong Ly
Vietnamese
