Mechanical industry development: the key determinant is market.

Sir, there is a view that, the mechanical industry is being forgotten. On the enterprises' view, what do you think about this opinion?

Over time, the Government has had many mechanisms and policies for mechanical industry such as the appointment of contractors, support mechanical products and designs… These are important encouragements for the mechanical production. However, the reality is not as expected. For example, to invest in a 600 MW thermal power plant, it needs about several $US billion. But if we appoint it to a foreign investor, such as Chinese, we have nothing to do and do not think about profits. This is paradoxical and the paradox here is that the more investment in technology is, the more benefits foreigners get.

More than that, we also lose the employment conditions of workers. An electricity centre worth $US 5.5 billion, if we use domestically produced products with about 30%, we have about $US1.5 billion, equivalent to 30,000 billion vnd. That money is enough to solve problems of jobs for the mechanical workforce.

Besides, all the industrial revolution that the world has experienced, even the industry 4.0 must be based on the mechanical industry. Thus, we hope the Government to attach much unimportant to the mechanical industry development.

What is the most difficult thing for the industry?

The mechanical industry has made much progress and initially created confidence with domestic enterprises. For example, Xuan Thanh Group invests in the world’s largest kiln with 12,500 tonnes clinker/day produced by Vietnam enterprises. With such orders, the mechanical industry has gradually asserted its position and it can do it well when having orders. As the Government orders, the enterprises in the industry are able to meet the quality and progress.

However, the most difficult problem of the mechanical industry is capital. Loans to invest into the mechanical industry is low, enterprises can hardly invest in machinery and equipment. But the more important thing, I think that the State should have policies to create orders and markets for the mechanical industry. Our country will invest around $US 189 billion to buy machinery for thermal power, cement, chemicals, fertiliser plants til 2055. If we spend 70% of that money (prices of equipment), we will have $US 200 billion. In that $US 200 billion, we only need to localise about 30%, we will have $US 70 billion – that number can pay for million workers.

Enterprises do not require too much in the policies such as land tax, capital, that they need is a market. There should have policies to protect the domestic market to create jobs for mechanical workers. Over time, the mechanical industry’s weakness has not been the fault of enterprises, they tried their best. The mechanical development depends on the State, not only enterprise. Even now, the US also tends to protect its markets in some sensitive areas. Vietnam is too easy with foreign enterprises, thus, we are unable to protect our domestic market, and can not support the mechanical labour force.

We have had policies for the mechanical industry, but during the process of implementation, many projects still fall into the hands of foreign contractors. Does the Directive No. 13/CT-TTg replace the Directive No. 494 solve this problem?

It must be said that the Directive No.13/CT-TTg on enhancing the use of domestically produced materials and goods in bidding for development investment projects and regular procurement using the State capital has met the long-time expectations of mechanical contractors in the country. Compared to the Directive No. 494/CT-TTG, the Directive No. 13/CT-TTg has many contents such as: division of bid package, only makes international competitive bidding when having not the domestically produced products or not meeting the demands… That means responsibilities of the investors, the bid solicitor in dividing the bid package are clearer and tighter.

However, to implement the Directive No. 13 or Directive No.494, it not only depends on investors but it also needs a visible "hand" of the State in creating capital. Most directors and project investors have to borrow foreign capital so the capital pressure forced them to accept what the contractor set out. The Directive No. 13 points out a problem of the investor but not resolving the root of the problem is where the capital is, what the source of funds is, and what the mechanism used to it to make the investor does not depend on the foreign general contractor.

In order to make the Directive No.13 come to practical, what does the Association propose, sir?

After issuing the Directive No.13, enterprises, Association must find out projects using the domestic capital for international competitive bidding, not used in accordance with the Directive No.13. However, the issue of sanctions in the Directive No.13 is not available. It only has contents odd banned bidding, the financial mechanisms are not shown and unclear. I think we should give more comments to make the Directive No. 13 come to practical.

From the contents of the Directive No.13/CT-TTg, it also gives a big requirement for mechanical enterprises and the Association. Specifically, the mechanical enterprises should proactively propagate in introducing their products when producing new products. In fact, we have many strong mechanical enterprises such as: Dong Anh Electrical Equipment Corp. JSC, Hai Duong Pump Manufacturing JSC… had many high-quality products to export, but these enterprises rarely propagate and introduce their products, thus, many domestic customers have demand but they do not know about these products.

The Association is also collecting financial mechanism, license and advice for the Government to point out the domestically produced products. For example, the Association has proposed, before all projects invested with State budget capital, government bonds are submitted to the Ministry of Industry and Trade (MOIT), they must be approved by the consultation group chaired by the Association to choose the equipment which must be made the international competitive bidding, and the ones which are the domestically produced products. When having list to submit to the MOIT, the Association will take responsibility with its proposed, then the MOIT will make a decision.

Thank you, Sir!

Mr. Tran Ngoc Ha, General Director of Vietnam Engine and Agriculture Machinery Corp. (VEAM):

The VEAM’s agricultural automotive, and auxiliary machinery brandsand its members are not well known in the foreign market. At present, VEAM’s export market research and development is carried out bu its members. The exports of engine products, agricultural machines and generators are very few, there are not many distributors in foreign markets, only a small amount of are sold through Vietnamese intermediaries, but the enterprise is always under price pressure. Especially, when having market, many enterprises import Chinese products to sale at its openned markets, instead of the VEAM’s products.

One of the most important factors for maintaining export markets and boosting export is through distributors, agents and collection of export market responses through market surveys to help the VEAM has enough information to improve its product quality. This is one of the key determinants of maintaining and accelerating market expansion. Thus, we will strengthen our brand, product and service promotion, and make a difference to our competitors.

Mr. Duong Van Hong, General Director of Construction Machinery Corp. (COMA)

We have actively cooperated with foreign organizations such as Germany, Austria, Japan… to take part in manufacturing and supplying synchronous equipment for both domestic and foreign projects. The COMA has started investing in a number of modern equipment chains, participating in the prodcution of components for the assembly of household appliances, electronics as well as manufacturing models serving other industries.

Through the implementation process with foreign elements, we have learned some experiences in the , from the stage of project management, the management of the works' quality (technical design, design control, manufacturing supervision) to the acceptance and final settlement

Foreign companies often have large investment capital, high quality requirements, fast construction progress. While domestic companies are often unable do all the work themselves, they have to cooperate, take joint venture to do, each unit takes a part of work which is suitable with their ability. High demand for product quality requires the application of new construction technologies and equipments, followed by the improvement of the level of staff to carry out the work.

Mr. Tran Quoc Toan, General Director of Saigon Transportation Mechanical Corp. (SAMCO):

One of the factors highlighted recently when an tnerprise wants to improve its competitiveness is to make a difference. Customers feel the difference of the enterprises based on its behaviour, business principles, commitment and professionalism.

The Industry 4.0 is witnessing cutting-edge techonologies creating new products and services, improving production efficiency, promoting creativity, and keeping product quality under strict control. With the strength of the Industry 4.0, the SAMCO has long been oriented and is continously improving its products design, collaborates with universities to train the design, research team to manufacture products which are suitable with Vietnamese market and diverse demands of customers, especially towards environment-friendly products for sustainable development.

By Diep Anh.