Vietnam engineering growth stymied

Đao Phan Long, deputy chairman and general secretary of the Vietnam Association of Mechanical Industry (VAMI), said after 15 years of growth, the engineering and metallurgy industries only have a competitive edge in Vietnam’s neighbourhood in manufacturing structural steel and assembling construction machinery.

The industry is capable of building large ships, transformers, electric motors, small capacity petrol engines, and agricultural machinery like grinders and harvesters of rather good quality, he said.

Many domestic firms are part of the motorbike and automobile production chains, but they mainly assemble imported parts, he said.

An industry insider said the mechanical engineering sector’s exports topped US$15 billion in 2014, but imports were over US$26.5 billion.

Nguyen Van Thu, VAMI chairman, told Lao Đong (Labour) newspaper that major projects mostly hire foreign general contractors, especially Chinese, though domestic businesses have the capability.

These contractors bring not only old machinery but also their workers to Vietnam, leaving the local mechanical industry out in the cold, he said.

The industry is worried about losing market share in the domestic market, especially when the Trans-Pacific Partnership agreement takes effect.

Le Van Tuan, general director of Vietnam Lilama Corporation, said Vietnam’s partners in the TPP are developed countries and therefore require high product quality standards.

To enter these markets, Vietnamese companies must offer consistent quality, timely delivery, and reasonable prices, he said, but many do not meet these requirements.

Not much progress has been made by the mechanical engineering industry over the past years due to low investment and unplanned development, Long said.

Besides, each locality developed the industry on its own terms without following a master plan, he said.

These factors mean resources, research and training in the industry have been spread too thin, he said.

He said the Government should have comprehensive and precise plans to encourage investment in the industry.

The country should identify certain key mechanical engineering products for development to improve the industry’s competitiveness and keep pace with the latest development and technologies, he said.

Focus should be on a small group of industries like shipbuilding and steel, he said.

The Government should continue to encourage domestic firms to take part in automobile assembly and manufacturing, with a focus on light and medium trucks, agricultural vehicles, special purpose vehicles, passenger cars and buses of international standards with over 5% local content, he said.

But they should not produce passenger vehicles with fewer than 16 seats because it would be hard to take on established global companies, he added.