Vietnamese Mechanical Industry Integrating into World Economy
After many years seeking a way forward, Vietnam's mechanical industry has begun improving. However, problems remain in manufacturing important parts of machines to serve production demands of the economy.
Achievements recorded
As a result of economic restructure policies and State incentives, Vietnam's mechanical industry has been improving after several difficult years. In 2003, the industrial value of the sector was VND300,000 billion, up 16 per cent compared to 2002. The average growth rate now stands at 12.4 per cent a year. A number of firms are updating their equipment and technology. In particular, the ship-building industry has made big strides forward, led by VINASHIN with its construction of a 12,000-tonne ship, the largest project undertaken in Vietnam to date, as well as several other ships meeting international standards. The transport mechanics sector has seen increased investment in modern equipment and is capable of assembling railroad cars with a 70 per cent domestic parts ratio and buses with a 30 per cent ratio. These achievements have opened up new opportunities for the automobile manufacture and assembly industry which had failed to meet domestic commitments for the past decade. The mechanical sectors of the agriculture, forestry and processing industries have upgraded equipment and technology and assembled production lines for processing agricultural products and pharmaceuticals for home consumption and export. The motor sector is now capable of producing 30,000 motors a year with capacity of 30 h.p. each, of better quality than in the past and those some regional countries manufacture. Vietnamese-made motors are meeting the domestic demand, substituting imported products and will eventually start exporting. More importantly, the design, technology and management of the sector have been upgraded to international standard.
In particular, manufacturing of integrated equipment has made a turning point in producing large equipment for projects in hydro and thermo-power, chemicals, food processing, cement plants, engineering machines and industrial and agricultural pumps. The products are of high quality and hold an important market share in Vietnam. Instead of acting as sub-contractors for cement projects, Vietnamese mechanical enterprises can now implement projects in EPC form such as Hoang Thach cement plant (Thai Nguyen), Uong Bi power station (Quang Ninh), Thanh Hoa pulp plant, and Dung Quat refinery.
Challenges in store
The main weakness still challenging the sector is its scattered network. The management of organisations typically has too many levels. Equipment and technology are outmoded. Investment in the past year has been inefficient especially in the metallurgical sector. Many enterprises failed to mobilise their internal resources to develop in the new economic conditions. Problems may also be attributed in part to the slow reform of macro management and absence of adequate investment.
In the face of opportunities and challenges, Vietnam’s mechanical industry should review its development orientation. First of all, to make products of high quality and competitiveness in the conditions of international economic integration, the mechanical sector needs to realise that the State can only provide a technical foundation and limited protection and that they must be proactive in business activities. They must design new products appropriate to demand and with low production costs.
Due to a lack of general engineers for design projects, mechanical enterprises must make joint efforts in designing and manufacturing products. They may hire leading experts and buy software to promote their production. Related State-owned enterprises must increase business efficiency and unite the sector to implement the division of labour and co-operation within the sector.
Investment should be concentrated in Haiphong and Hiep Phuoc (HCMC) centres to implement sub-contracts manufacturing large parts for integrated equipment. Finally, the performance of the Steering Committee must be improved to meet the demand of the economy striving to supply 45-50 per cent of domestic demand by 2010 including 30 per cent in export value.
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