Time for Vietnam Construction Firms to Eye Global

Remarking on challenges facing the Vietnamese construction industry, Dr Pham Van Chat, Arbitrator at the Vietnam International Arbitration Centre (VIAC), said competitiveness for domestic construction firms will be tougher when the AEC takes shape by the end of 2015. Import tariff reductions will place growing pressures on domestic companies. In the construction sector, Vietnamese building materials, internal decorations and construction machines will face fierce competition from rivals from Europe, Japan, the United States, South Korea and even China. Import duties on key construction items like clinker, cement, ceramic tiles, sanitary ceramics and construction glass from ASEAN countries will be slashed to 5 percent. Although many domestic firms can manufacture products of international standards, prices on the local market are usually higher than those of imported products from other countries in the region. For this reason, when the market is opened as committed, domestically-made building materials will be certainly “underdogs” and lose competitive advantages. He stressed, “Hence, Vietnamese companies have to face the risk of being pushed out of the industry and losing the domestic market to ASEAN businesses. This is really a big challenge for domestic construction material manufacturers when they compete with imported products.”

 

More importantly, the formation of the ASEAN Economic Community will allow the free mobility of skilled labour and facilitate professionals and skilled workers from ASEAN countries engaged in cross-border trade and investment to enter Vietnam. Not only with the ASEAN Economic Community, but other free trade agreements (FTAs) will also remove restrictions on labour mobility among signatory states. As Vietnamese labour-intensive construction firms will have to face many challenges ahead. Apart from competitiveness, other problems are that marketing and production capabilities of local firms remain weak and their labour productivity is low.

 

Not holding pessimistic views as Dr Pham Van Chat, Mr Le Viet Hai, Chairman of Hoa Binh Construction & Real Estate Corporation, said some economic sectors of Vietnam have good development prospects, including the construction industry. Currently, some Vietnamese firms can compete well against foreign contractors. This really is a good sign for the local construction industry. When the construction industry has strong competitiveness, it will bring opportunities and profits for other sectors and help upgrade the national competitiveness.

 

Sharing with Mr Hai’s opinions, Mr Nguyen Ba Duong, Chairman of Cotec Construction Joint Stock Company (Coteccons), also appreciated the level of big domestic private construction contractors. He said after Coteccons won Ho Tram Strip project, it hired contractors from Japan, China, Singapore and other countries to carry out the project.

 

However, he noted that Vietnamese construction firms also need to reach out to international markets, send their construction forces abroad to learn advanced construction management methods, study and apply new technologies to edge up their competitiveness and safeguard the domestic construction market before the massive intrusion of foreign contractors. Doing so, Vietnamese construction businesses will not only keep the domestic market but also conquer the ASEAN construction market with over 600 million people and reach out the world market.

 

To survive and develop in the context of fierce competition when the ASEAN Economic Community is officially formed, experts present at the seminar recommended Vietnamese construction firms to access more ASEAN market information and utilise resources to develop their strengths. The government needs to issue policies in support of domestic construction companies to train high-level human resources to sharpen their competitive edge to compete on par with foreign contractors. This is also one of indirect methods to improve the national economic capacity.