Is the mechanical industry forgotten?

The mechanical industry needs a “hand”. Picture: Hà Phương

Having mechanism

The Decision No. 186/QD-TTg on the strategy on the development of Vietnam’s mechanical engineering industry till 2010, with vision 2020; the Conclusion No. 25-KL/TW of the Politburo Committee on the strategy on the development of Vietnam’s mechanical engineering industry create a huge motivation for the whole engineering industry. Many enterprises say that the period 2002-2007 is the high period in the engineering industry as the Government has special mechanisms for that “backbone” industry.

That has created “the gravity”, attracting many investment projects in the engineering industry such as automotive assembly, shipbuilding, construction machines, investments of FDI enterprises and private enterprises. Especially, mechanical defence forces have invested deeply in renovating high-tech equiments to produce many items, supplied in the domestic market and exported with high prestigious in the foreign markets along with the tasks of national defense.

Not stop there, with the determination to develop the domestic engineering industry, the Government has continued to issue many other policies such as the Decision 10/2009/QD-TTg, the Directive No. 494/CT-TTg on the use of materials, domestically produced goods in the bidding for State-financed projects, the Decision No. 1791/2012/QD-TTh approves the pilot mechanism design and manufacturing domestic equipment for thermal power plants in the period 2012-2015.

According to the Vietnam Association of Mechanical Industry (VAMI), these resolutions are practical and timely to support mechanical enterprises, improve the production capacity and create favourable competitiveness for mechanical enterprises to boldly invest for development,

So far, many mechanical products such as synchronous equipment, shipbuilding, automotive assembly, agricultural machinery, electrical equipment, construction machinery, mechanical parts have a brand in the domestic market and nationwide. The statistics of the VAMI show that the revenue from mechanical products has increased by 20% for 10 years. High-tech mechanical products have also appeared such as hydraulic equipment design and manufacturing, the design of cement plant equipment, 90m self-raising old rig design and manufacturing and the initial state of the coal-fired thermal power plant equipment design and manufacturing.

Lower starting point

Despite the initial success, according to experts, Vietnam’s mechanical industry has a low starting point, following the development of the world’s mechanical industry for several centuries. Meanwhile, since 2007, after participating in the WTO, we have lost the incentive mechanisms needed such as subsidies, funding, nominated contractor, leading many difficulties to the mechanical industry.

Mr. Dao Van Long, vice chairman of the VAMI say, after 15 years, due to many subjective and objective causes, investment for mechanical development has not equivalent to other industries, the state management in the mechanical industry has been inadequate, leading the limitations and weaknesses of the mechanical-metallurgical industry compared to the region, and weak competitiveness and integration. Moreover, the process of mechanical production in Vietnam has hardly met the basic principle of “deep specialisation and wide cooperation in the process of organising production” to bring high efficiency. “This is the result of the “split, division” among state-owned mechanical engineering, civil engineering, central engineering, local engineering, mechanical engineering, FDI engineering”, Mr. Long says.

In fact, the mechanical market share is held by the world's financial and industrial groups, the narrow doorway to mechanical products just like other industries, which suffer from the case of subcontracting, outsourcing. Our mechanical products are still products with low technology content, low value added. Notably, there is still mechanical enterprises concern about their workers have not yet accumulated much for themselves. Therefore, the VAMI Vice Chairman says that Vietnam's current mechanical production is only at processing level, not enough to "self-produce some products" which not compete in the international market and lose at its home, leading the trade deficit of USD billion from importing equipment and supplies for the other industries and the mechanical manufacturing itself.

Mr. Nguyen Chi Sang, Director of the National Research Institute of Mechanical Engineering thinks that the Party and State have many mechanisms, policies for the development but there are still many problems in the implementation. The consistency of the policy, from the policymakers to the implementers, is not good, so we do not get what we want. In addition, with the limitations of production technology, the link between enterprises, the quality of human resources ... thus, when looking back, we still do not have a mechanical manufacturing industry which produces equipment, auxiliary accessories completely.

What is the direction for the future?

With low starting point, according to Mr. Sang, the first factor to create success is whether or not we own the market. He analyses, the market for the mechanical industry today is very big, but the important thing is what the target market is. In addition, it is necessary to analyse what the domestic market is, which areas have a large capacity to focus on. For example, Vietnam Military Telecommunications Group analysed customers to supply package customers and their output with revenue of $US 5 billion. Or as the steel market is also very large, European and American manufacturers are unable to compete with Chinese steel manufacturers. But Hoa Phat Group, Hoa Sen Group are still doing well because they have a good market analysis and good policies to develop the steel industry.

According to the VAMI, currently, as the world is entering the industry 4.0, the production level of the Vietnamese mechanical industry is at an early stage due to the shortages of new technology, skills and information, infrastructure. However, this does not mean that Vietnam's mechanics can not keep up with this trend if we overcome the shortcomings as enhancing production cooperation among domestic mechanical enterprises, avoiding overlapping investment, combating wastefulness…

As the Association takes an example, Vietnam Engine and agricultural Machinery Corporation (VEAM) expects to invest nearly 6,000 billion VND in the period 2016-2020 to renovate technology and improve production capacity. In particular, it will focus on its export target to, head to the export revenue expected to be equivalent to the domestic revenue after 5-10 years. Or as Truong Hai Auto Joint Stock Company plans to build Chu Lai Truong Hai Automobile Industrial Park to be put into operation in 2018 by investing in laser welding technology, advanced spray coating technology, and along with the plan to connect domestic enterprises to increase the localization rate, develop Chu Lai to become the center of mechanical diversity in the Central.

Of course, to develop the mechanical industry, many experts agree with the view, the effort of the business is not enough, it also needs a "hand" of the State in creating a market, creating output for the products. "We are now deeply integrated and are "afraid" of protection. But in the US, they want to protect the market they have to impose the protection. When protecting the big market, we have a lot of benefits, besides the general contractors get profits, the mechanics and auxiliary enterprises in the country will have the opportunity to supply their goods”, Mr. Sang comments. Because, if the general contractors are foreign enterprises, the auxiliary equipment in Vietnam is hardly being put into their chain. Normally, foreign enterprises often require enterprises having the ability, the process of doing projects, testing ... but Vietnamese enterprises "have not done yet to meet these demands". Therefore, it must be done from small projects then Vietnamese enterprises can access larger projects of foreign contractors.