HCM City Promoting Mechanical, Electronic and Chemical Industries

HCM City Promoting Mechanical, Electronic and Chemical Industries

Industrial production in Ho Chi Minh City saw a growth rate of 15.1 per cent in 2004 with total value of VND102,063 billion (US$6.459 billion). This figure was not higher than that of 2003. However, in the context of complicated developments in the prices of materials, fuel and banking interest rates, which resulted in higher input costs, to maintain a growth rate of over 15 per cent required a great effort from Ho Chi Minh City.

Growth, but unsustainable

Among 26 major industries in Ho Chi Minh City, ten industries gained a growth rate of over 15 per cent. These include garment, wood processing, paper, petroleum, chemical, rubber, plastics, construction material, metal, electric equipment and shipbuilding. The garment industry’s growth rate reached 17.1 per cent but was still lower than that of 25.2 per cent in 2003. Ho Chi Minh City is losing its advantage in the industry as enterprises have moved their investment to other localities with lower labour costs. The chemical, rubber and plastic industries, after several years’ earning a high growth rate due to an expansion in the Russian and Eastern European markets, gained a growth rate of 33.6 per cent. However,  a lot of these industries’ materials are imported. The situation is similar for chemical and metal industries. The mechanical industry has concentrated on repairing and manufacturing small-sized equipment. The footwear industry implements subcontracts. Only food and drink industries have gained a high growth rate thanks to a shift to the production of safe and clean products with clear origins, meeting the markets’ demand. Famous enterprises in the industries, including Vissan, Cau Tre, Vinamilk, Foocosa and Cholimex, have increased their shares in both the Vietnamese and foreign markets.

However, the biggest pressure on most industries in Ho Chi Minh City is that they have yet to develop a solid foundation for input. Many enterprises still depend heavily on materials imported from foreign countries or bought from other localities. Industries, which account for a large proportion within the industrial sector, still include food and drink processing, textile and garment making, footwear, chemical, plastic and rubber. Mechanical, electric and electronic industries still account for a low proportion. Material production and support industries remain underdeveloped. As a result, local enterprises remain dependent on imported materials. This is a real concern for Ho Chi Minh City, showing that its industrial sector has yet to develop properly, with industries, which account for a large proportion of its outputs having lower profits and therefore being easier to compete against.

Last year, Ho Chi Minh City attracted 106 projects to the processing industry with a total investment of US$91.9 billion. Export turnover of industrial products saw an increase of 17 per cent.

Solutions for 2005

Nguyen Van Lai, director of the Ho Chi Minh City Department of Industry, said that the industrial sector would see its effectiveness drop without efforts to improve its competitiveness. The city will develop detailed master plans, and solutions for three major industries, including mechanical, electronic and chemical industries, based on the link up with the southern key economic zone. The city will develop three parks for the mechanical, electronic and chemical industries to call for investment. The city has developed a list of projects calling for investment in the three industries until 2010. Accordingly, the engineering and metal industries will have 28 projects. Apart from projects on building new factories, the city’s authorities will encourage investment in expanding the existing factories. In the chemical industry alone, the city has developed projects on upgrading the existing establishments for basic chemicals and some consumer chemical products, such as medicines, plastics and rubber.  Electronic and information technology have 22 projects on manufacturing accessories, circuits, industrial equipment, telecommunication, optical disks, medical equipment, electronic toys and software products.

For the city’s major product programme, the local authorities will officially recognise products, qualified to become major products, before April 30, 2005 and continue to seek other products for production and market development assistance. Support industries will be encouraged to develop to increase the proportion of locally-made products in textile, garments, electronics, mechanical and chemical industries with priority policies. Accordingly, enterprises are encouraged to modernise and upgrade their technology and equipment to increase the quality of their products, and boost the building of trademarks and trade promotion.

Ho Chi Minh City will promote co-operation with other localities within the southern key economic zone to exploit effectively material supplies, machines and equipment, human resources, as well as to expand markets.

• Thuy Tien