To: Deputy Prime Minister (Economy), Vietnam
From: Tien Pham, Advisor
Subject: Key strategic issues to develop Vietnam in the context of regional and global economy.

In addition to the key drivers of the regional economy, the China’s position of No.3 importer, after the US and Japan, makes it a potential market for Vietnamese exporters in several sectors. However, among industries that the Vietnamese government should consider to focus, electronics seems to be shortest way to help Vietnam keep up with the economic development in the world.

Electronics is preferred for a number of reasons. First, because Vietnam is a developing country, the necessary infrastructure for developing a huge amount of goods meeting international standards is a challenge. Electronics is the sector that needs almost human knowledge and skills, while quickly creates high value product in today’s knowledge – based global economy. Second, electronics is the most dynamic in East Asia, in which the China’s demand for electronic components accounting for USD110 billion has been an attraction for the development of electronics industry in Vietnam. Third, in the global vision, electronics has been considered by the review of MIT as a sector among top 10 technologies that may change the world in the 21 century, it is really an engine of Vietnamese industrialization.

In order to compete with the regional electronic suppliers aiming at Chinese market, Vietnamese government should implement four strategic issues in the soonest time: enhancing the infrastructure for electronic parts and component producing, calling for FDI of electronics from prestigious brands in the regional countries, training technical labor force domestically and internationally, and orienting the Vietnamese enterprises targeting Chinese market.

First of all, Vietnamese government should immediately upgrade the infrastructure for electronic production in the country. Shifting from a simple, low-value production to a high-tech industry requires specific stringent condition. The government has to give the guidance to relevant ministries to fully supply key infrastructure like electricity, telecommunications and Internet services in order to facilitate anticipated demand. The transportation system has to be upgraded with new bridges, wider roads, warehouses facilities and ports. Third, law enforcement has to be completely implemented and complied with the regional relevant regulations such as CEPT, Free Trade Agreement, etc.

The second issue is Vietnamese government should generate favorable business conditions and overseas promotion activities to attract FDI electronics and components producers. This action will benefit Vietnam by raising the competitiveness technically and legally. The most beneficial is that Vietnamese technical staffs will have opportunities to learn new knowledge for producing electronic parts and components. Another advantage is that thanks to technical capacity of the foreign companies, the competitiveness of Vietnamese electronics is improved automatically without implementing protectionist policies that violates the Common Effective Preferential Tariff Scheme (CEPT). Learning from foreign enterprises is always the most effective way for a country to strengthen its entry into the new fields.

The third solution to improve Vietnam’s electronics industry is improving its human resources. For developing this new industry, Vietnam must have well-trained science and technology workforce who are knowledgeable enough to design, develop and manufacture software applications. Human brainpower is a key factor deciding the success or failure of electronic commodity goods in the market. The government should send the technical personnel to learn from countries with more advanced electronic technology. One of those could be China, where our workforce could train in order to meet at the highest level the requirements set by the promising importer.

The final solution is that the government should conduct the announcement or campaign for orienting the electronic exporters directly to China. When the competitiveness of electronic products is limited, Vietnam has to sell the goods to intermediary importers like Thailand, Singapore, Malaysia, etc. These campaign or announcement will help the enterprises strategically target their long-term business plan, and stimulate them continuously improve the quality of products for meeting the increasing requirement of the market. In line with this orientation, the government should give priority for exporting electronic goods towards China by simplifying the customs procedures; set up the hotline help those exporters overcome difficulties encountered during their doing business.

In conclusion, Vietnam could develop the national electronics industry by effective and sustainable strategies via attracting FDI, human resource training, infrastructure improvement, and market orientation. Once become a stronger supplier of electronics parts and components, the country could directly export its products to the potential market of China instead of the regional intermediaries. Focusing on electronics development would be a "golden action" for the less developed countries like Vietnam to "leapfrog", go straight into a knowledge economy, develop intellectual talent to create enough competitive products in the process of international economic integration.