Electronics Industry Yarns for Reform

Besides wholly foreign invested businesses that produce exports, the majority of local electronic companies are small and medium in size with a limited finance. Reality shows that these businesses usually use the technology and equipment 10-15 years lagging behind the level in other countries in the regional and the world.

There are around 300 businesses operating in the electronics industry, mostly in Hanoi, Ho Chi Minh City and several other big cities. Foreign-invested units account for around 30 percent of total. Over 60 percent of electronic companies are based in Ho Chi Minh City.

The deputy director of the Central Institute for Economic Management, Dr. Vo Tri Thanh, said electronics is a hi-tech industry with quickly-changing technology, so that most of electronic items have short life-span. Technology is vital to electronic companies. However, many local electronic companies do not establish technology as paramount.

Reality shows that many electronic companies fail to keep pace with the vigorous science and technology development in the region and the world, particularly in technology innovations. Besides wholly foreign invested companies that mostly produce exports, the majority of local electronic businesses have limited finance, so that they often have to use obsolete technology and equipment several generations behind the level in other countries in the region and the world.

Local electronic companies spend only 0.3-0.5 percent of their revenue on technology reforms, a quite low level. The figure is around one percent in some big companies, meanwhile in some other regional countries it stays high such as five percent in India, and 10 percent in both the Republic of Korea and China.

As a result of backward technology, most of local electronic items are labor consuming with a low added value. Besides, local electronics industry remains weak in the area of research and development. Most of the products are made under foreign designs while the products that are made using local designs remain few, resulted in low competitiveness.

Dr. Vo Tri Thanh said alongside limited finance, impractical state policies on science and technology and low state investment into local electronics industry development have attributed to the industry’s poor performance in the past years.

In addition, though the workforce working in the electronics industry is viewed by foreign investors as having high skills and compatibility to latest technologies, they are far from sufficient in number. Around 100,000 people are working in the electronics industry presently, according to preliminary statistics. The number of workforce raises 10 percent on average annually. The electronics industry is particularly short of experienced scientists, technical engineers and specialists working in research and development of new added value items.

In the words of Dr. Thanh, to innovate technology and bring advanced techniques into production, businesses need capital. The process of equitizing state-owned enterprises is now in upswing and joint stock companies could now list their stock in the securities market to raise capital.

Under current law, joint stock companies can sell their stock to foreign investors. This could help them not only create additional capital sources, but also acquire modern management expertise with the participation of outside investors who are their stockholders.

Benefited from the state open policies, private companies have enormous opportunity to take off in both quantity and service quality.

State management organizations are then required to continue improving local business environment and pay more heed to human resource training, meanwhile local electronics companies need to be more active in mapping out their development strategies to remain competitive in their area./.

Tags: Vietnam Electronics Industry