(VietNamNet) Since July 1st, FDI enterprises are allowed to import goods directly to retail, which creates new difficulties for electronic enterprises with 100% of domestic capital.
 
“That FDI enterprises are allowed to import electronic products as a unit will save them intermediary expenses (formerly, they had to import through mandators). Therefore, it is probable that price of imports will be 5-10% lower than price of the same type products manufactured in Vietnam and the number of imports will be much more various than domestic ones. In addition, price of electronic products of enterprises with 100% of domestic capital is currently rock-bottom and it is difficult to reduce their price any more, thus, this will be a fierce competition for domestic electronic enterprises,” said Mr. Tran Quang Hung, General Secretary of Vietnam’s Electronic Enterprise Association.

“Recently, import tariff on electronic products in AFTA (Asean Free Trade Area) felt to 5%, several enterprises asked permission for importing products as a unit but the number of their imports has been still small and not had considerable impacts on domestic market. But the fact that FDI enterprises are allowed to import electronic products as a unit will create many new changes. Imports directly from firms with firm warranty and massive promotion campaigns will create fierce competition on electronic market in the coming time,” said Mr. Nguyen Thinh, Director of Informatics Electronics Development Assistance Co. Ltd. (Hanoi).

The biggest worry of electronic enterprises with 100% of domestic capital is that they will resist massive promotion campaigns of FDI enterprises. “AFTA tariff on electronic products imported as a unit has fallen to 5% for more than one year. Electronic enterprises have imported items as a unit to Vietnam and the price was lower. Items imported from outside AFTA are levied import tariff of 40% added to VAT of 10%, which is a remarkable high tariff making them difficult to compete with products assembled in Vietnam. For example, a 32-inch LCD television that has imported price of 500 USD and is put import tariff of 40% added to VAT of 10% and other expenses will has selling price of 770 USD (about 13 million Vietnam dongs) in Vietnam but a similar VVC television has selling price of 9 million Vietnam dongs only,” said Mr. Pham Thanh Tri, Director of VVC Electronic Company.

Therefore, domestic enterprises still have competitive price. However, if FDI ones only launce massive promotion campaigns, it will be difficult to forecast anything. Vietnam’s electronic enterprises have such limited potential that they can not resist this competition.

At the end of 2006, FDI enterprises and distributors created a big shock in domestic market aiming at making impression on consumers and many difficulties for small domestic electronic enterprises such as Viettronic Tan Binh, Bien Hoa, Thu Duc, and so on. In the forth quarter of 2006, these enterprises faced many difficulties because the number of consumed products decreased, inventory increased, and workers had to leave their jobs.

In the first six months of 2007, production of domestic electronic enterprises also faced many difficulties: items were consumed slowly; financial potential of these enterprises is weak so they can not launch promotion and reducing price campaigns to appeal customers. Several enterprises had to expand their business into other fields such as real estate, finance, even selling sim cards of mobile phones to reach required turnovers.

Deputy Director of a Vietnamese electronic enterprise told in next time, domestic ones can not help narrowing or changing their production because Vietnam’s naturally small electronic market and risky manufacturing investment in company with significantly profitable import will of course make production be reduced.

It is likely that FDI electronic enterprises will launch huge promotion campaigns at the end of 2007. This movement will not only help them sell their goods and shine their brands but also put Vietnam’s electronic enterprises in a new difficult situation once more time,” some traders forecasted.