Vietnam Government Orders Export Promotion Measures Amidst $60 Billion Electronics Trade Deficit

The Vietnamese government has directed relevant ministries and businesses to implement export promotion measures in response to a significant trade deficit in the electronics sector. The deficit has exceeded $60 billion in the first eight months of the year, posing a concern for the country's export-led growth model. During a meeting on September 8, Standing Deputy Prime Minister Pham Gia Tu presented a directive to the Ministry of Industry and Trade. He mandated the ministry to collaborate with other ministries and localities to work with enterprises experiencing substantial discrepancies between their import and export turnovers, particularly those with large trade deficits. The objective is to clarify the structure and purpose of their imports and their contribution to domestic production and exports, thereby identifying suitable solutions to promote production and exports without interfering in the companies' operational activities. According to the Ministry of Industry and Trade's report, exports of computers, electronic products, and components reached approximately $101 billion in the first eight months, a 51% increase year-on-year. However, imports for the same period surged to $161.6 billion, a 68.3% increase, resulting in a trade deficit of about $60.5 billion. A significant portion of these imports consists of components such as chips, memory, processors, displays, and circuit boards essential for domestic production, assembly, packaging, testing, and product integration. Vietnam views the growing global demand for AI, data centers, servers, and electronic devices as an opportunity to expand production and attract investment. Nevertheless, the electronics and semiconductor industry remains heavily reliant on foreign supplies of components, semiconductors, and high-tech equipment, with limited domestic value creation. The Deputy Prime Minister emphasized the need to enhance the internal capacity, autonomy, and resilience of the electronics industry against international trade fluctuations. Consequently, the Ministry of Industry and Trade will review the list of supporting industrial products, prioritizing electronic components and materials with high demand and domestic production potential. The Ministry of Finance will consider tax incentives for businesses manufacturing electronic components, materials, and supporting industries. The State Bank of Vietnam will research credit policies for supporting industries to invest in technology, automation, and digital transformation. The Ministry of Science and Technology will support enterprises in mastering technologies in semiconductors, microchips, and electronic materials, and in assessing Vietnam's actual value creation within the global electronics supply chain. For electronics and semiconductor enterprises, especially those with large export turnovers, specific plans for domestic production of products, components, and materials are required. Foreign-invested enterprises are encouraged to expand their domestic supplier networks and share standards and processes to facilitate Vietnamese companies' integration into the supply chain. However, the Deputy Prime Minister stressed that localization goals must align with the actual capabilities of Vietnamese enterprises, advocating for the development of supporting industries that meet the real needs of foreign-invested enterprises rather than imposing administrative measures.