VietNamNet Bridge – Tax policies have been designed in a way to encourage the import and discourage local production.

No changes would be found if comparing the electronic hardware industry at this moment and 30 years ago.

Tran Quang Hung, Deputy Secretary General of the Vietnam Electronics Enterprises’ Association, admitted that domestic electronics enterprises do not make great contribution to the development of the industry.

Vietnam reportedly exported $30 billion worth of hardware and electronic products in 2013. However, $20 billion of which came from Samsung’s and some other enterprises’ mobile phones and phone accessories exports. The remaining $10 billion were from foreign invested enterprises’ electronic accessories and computers.

Also according to Hung, foreign groups set up their factories in Vietnam just to take full advantage of the cheap labor force, while they do not intend to make investment in the source technologies.

Despite the large home market, Vietnamese enterprises still cannot sell their products because of the low competitiveness of their products.

Nguyen Ngoc Binh, President of the Technology University under the Hanoi National University, noted that Vietnamese still cannot make electronic components, and that “Vietnam still cannot do the things it wished to do 30 years ago, when the General Department of Electronics and Informatics in 1983.

Meanwhile, Chair of the Radio and Electronics Association of Vietnam (REV) Phan Anh emphasized that designing and manufacturing microelectronics is a very component part of the national program on turning Vietnam into an IT power.

“If Vietnam cannot do this, it would be only the client who uses foreign made products, while Vietnam would not be able to develop into an IT power,” he noted.

Sharing the same view with Binh, Secretary General of the Vietnam Association for Information Processing (VAIP) Nguyen Long has noted that a lot of Vietnamese names in the electronics, supporting industries and automation have disappeared.

The three barriers in home market

According to Hung, very few investors tend to pour money to the hardware and electronics projects.

In principle, Vietnamese manufacturers can be supported by Vietnamese clients. However, government agencies and enterprises tend to refuse Vietnamese products when programming their procurement plans.

In many cases, the investors only accept the contractors with 10-15-year experiences in the high technology electronic manufacturing. Meanwhile, most of the Vietnamese firms remain very young.

Hung has complained that since the day the electronics industry management was transferred to Ministry of Information and Communication (MIC), the policies on the industry development have not been mentioned in legal documents.

Analyst noted that the current policies “forget” a lot of important issues. For example, there is no policy on encouraging the manufacturing of consumer electronics and household use appliances, even though the market is very large.

Regarding the tax policies, Hung complained that the policies are discouraging to domestic investors. The high tax rates of tens of percent have been imposed on the accessories imports for domestic assembling. Meanwhile, the low tax rates of 0-5 percent have been imposed on the CBU (complete built unit) imports.

As such, while macroeconomic policies state that the domestic production is encouraged, the tax policies encourage the import instead of the local production.

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