Vietnam Mechanical engineering: The "backbone" industry but slow operation

VCN- Capital is considered as the "backbone" of the economy, but over the years a series of limitations, weakness from the mechanism, management policies as well as the business itself has made the mechanical engineering industry development quite weak,  not meeting the requirements set out.
vietnam mechanical engineering the backbone industry but slow operation
Fields, large corporations, such as oil and gas should take the initiative; pay more attention to the mechanical investment. Picture: Nguyen Thanh.

The number of enterprises increased rapidly

According to the Ministry of Industry and Trade, the mechanical engineering industry plays an important role in the manufacturing and processing industry, which is considered as the "backbone" of the economy as it is the fundamental industry supporting other industries, providing tools and materials for domestic consumption.

In the past few years, Vietnam's mechanical engineering industry has achieved certain results. Specifically, the number of mechanical enterprises increased rapidly, from about 10,000 enterprises in 2010 to more than 21,000 enterprises in 2016, accounting for 28% of total processing enterprises. In recent years, typically in 2016, export turnover of mechanical products reached over $ 13 billion, mainly household appliances and spare parts for cars and motorcycles. Including iron and steel, the export turnover of mechanical products reached over $ 16 billion.

Regarding the development of the mechanical engineering industry, Deputy Minister of Industry and Trade Do Thang Hai added, many imported products from Vietnam have step by step been replaced. The production lines in the factories were synchronized. Enterprises have a number of technologies and the rate of automation is increasing. In addition, some domestic firms have engaged deeply in the supply chain of FDI enterprises and global supply chains of some multinational corporations.

Mr. Pham Tuan Anh, Deputy Director of the Industry Department (Ministry of Industry and Trade) further stated that: Currently, Vietnam's mechanical engineering industries are concentrated in three sub-sectors, including motorcycles and motorcycle spare parts; home appliances and tools; automobiles and auto parts. Statistics show that these three sub-sectors account for nearly 70% of the country's total mechanical engineering output.

Very few inventions and patents are registered

Although the industry has achieved certain results, according to Mr. Tuan Anh, it still has many limitations and weaknesses. The first is about the market. Vietnam's mechanical engineering industry is quite diverse in terms of products, but is increasingly competitive with imported products. The market expansion is still difficult due to lack of market information, and domestic competitiveness is not strong enough. Even in the domestic market, enterprises find it difficult to participate in investment projects to install steel equipment, chemicals, energy, mainly due to lack of control system of product quality according to international standards. In addition, the companies as well as mechanically engineered products in the country have not built a brand that many customers know.

Besides the market, the level of science and technology is considered as the second typical weakness of Vietnam's mechanical engineering industry. Mr. Tuan Anh stated: The domestic industry has very few inventions with registered patents. Equipment and technological level of the whole industry are still slow to innovate. The mechanical enterprises are short of outputs of mechanical products, so they have no opportunity to accumulate and invest in technology innovation. This is a vicious circle in the development of Vietnam's mechanical engineering industry. In addition, the technical barriers in Vietnam’s mechanical sector have not developed enough to protect consumers in the country when import quality is inappropriate. In addition, Mr. Tuan Anh pointed out, the limitations of the industry is also expressed in terms of raw materials that are mostly imported; lack of human resources and weakness in both quantity and quality; The role of the professional association has not been effective.

Around the story of the development of the mechanical engineering industry, Le Thuy Trung, Deputy Director of the Department of Industrial Economics (Ministry of Planning and Investment), said that: In accordance with Decision 186/2002 / QD-TTg of the Prime Minister, the mechanical sector has made many changes in some fields. However, up to 2013, the industry met about 34.5% of the country's engineering demands, failing to meet the objectives set out in the Strategy, (issued target for this sector is 45-50% of demand for mechanical products in the country). "Engineering mechanism development policy is limited, inconsistent. The roles of management and policy development mechanism by the state management agencies have not been promoted. State-owned enterprises slowed down. Meanwhile, small-scale private enterprises are less interested in investing in the mechanical engineering industry. Investment in the sector is undistributed, closed for each enterprise …," said Trung.

Deeper analysis from Nguyen Van Thu, former Chairman of the Vietnam Association of Mechanical Business, over the past 15 years, the line of assembled mechanical products, steel structure products, lifting equipment and assembled cars, much of the machine manufacturing sector’s lack of momentum is due to low investment, creating slow development. After more than 15 years, Vietnam has not built a new machine engineering plant. This leads to the fact that the mechanical engineering industry in Vietnam has deviated and the key and important parts have not been invested and developed by the managers. "The technical level of the mechanical engineering industry is still below the level medium. Embryo-manufacturing and supporting industries-two key areas for development have not been properly invested," he said.

Focused investment

Looking at the "picture" of the mechanical engineering industry, Thu said, to remove the bottlenecks, open the way for this industry to develop in the development strategy for the next phase, it needs to select key mechanical products instead. The government should focus on revising some key mechanical products which have both market and material facilities to develop and enjoy preferential policies. For example, shipbuilding, bus, passenger cars and light trucks 5T. "Investment in the development of the industry is indispensable for the visible hand of the State to influence and nurture by creating orders for mechanical products. The government should have a synchronous policy system with capital, planning, competitive product selection and combining for national economic defense. Investment cannot be rampant and not in accordance with national development planning." he suggested.

Some experts say that large industrial corporations should also take the initiative in paying more attention to their chain of mechanical forces. For example, the oil and gas industry concentrates on drilling rigs, building large ships, but it should continue to invest in production and production facilities for the oil and gas industry such as with pressure pipes, high pressure tanks, pumps, industrial valves; Coal and mineral industries should focus on investing in the production of ore mining machines and mineral fertilizers.

Deputy Minister of Industry and Trade Do Thang Hai, affirmed that in order to promote the development of the mechanical engineering industry, the Ministry of Industry and Trade will continue to coordinate with the concerned agencies in studying and submitting to the Government for promulgation of new policies and solutions to solve difficulties and problems for enterprises. Specifically, it will develop a decree to the Government on the development of the mechanical engineering industry for coordinating with the business community and industry associations to adjust the list of key mechanical products; To form and promote the role of the Industrial Support Center in order to create favorable conditions for enterprises with a view to renovating appropriate equipment and technologies, encouraging mechanical enterprises to apply technologies of the Industrial Revolution 4.0 into production ...

According to the Prime Minister's Decision No. 319 / QĐ-TTg dated March 15, 2020 approving the Strategy for Development of Vietnam's Mechanical Industry, the objective is: By 2035, Vietnam's mechanical engineering industry will be developed with most of the major advancements in technology, product quality up to international standards, more deeply participate in the global value chain ... Exports, in the period up to 2020, export outputs are to reach 35% of total products of the mechanical engineering industry; the period to 2030 is to reach 40%; By 2035, it will account for 45% of the total mechanical production.

The strategy states that by 2025, it will focus on the development of a number of sub-sectors of automobile mechanics, tractors, agricultural machinery, construction equipment, industrial equipment and electrical equipment. Basically meeting the requirements of the economy and for exports; Workers of basic mechanical engineering are to be qualified to meet the demand of modern production.

By Đức Quang/Bui Diep

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