Vietnam's Building Material Sector Sharpening Competitive Edge

One of the heaviest pressures on the Vietnamese construction material industry prior to the WTO entry is the competition from the reduction of import tariffs, the eradication of non-tariff and technical barriers and the commitment of market opening. At present, Vietnamese construction materials have exposed inferiorities of quality, styles and trademarks to imported ones.

 

Although the export of the Vietnamese building materials has increased in quantity, quality and market size, the revenues are still small compared with the aggregate export earnings of Vietnam. The statistics showed Vietnam earned US$82.858 million in 2004 and some US$100 million from building material export in 2005. The export earnings mainly come from tiles and construction stones. Additionally, the domestic market expansion is still weak.

 

Dr Doan Ke Bon of the University of Commerce said the quality of Vietnamese construction materials, especially those made by foreign-led joint ventures, has been improved considerably in recent years but the quality is very different. A few of high-grade products can be used for big projects. Remarkably, floor tiles, ceramic sanitary wares and construction terracotta can meet export mechanical, physical and chemical requirements but they don’t satisfy aesthetic tastes of most customers.

 

Many said that Vietnam holds advantages of lower labour costs and available local raw material sources over others countries; hence, the Vietnamese building materials have low selling prices and this is a competitive advantage. However, in reality, several Vietnamese products with the same quality as products of regional countries are sold at higher price rates. For example, Thailand’s VTL2 basin is sold at US$6 in Cambodia while Vietnam is offering at US$6 on the FOB Ho Chi Minh City basis.

 

Currently, many trademarks like INAX, TOTO and VIGLACERA are very popular but many companies lack strategies to develop their reputation and trademarks. They are short of advertisement and promotion strategies to popularise their products and company images; therefore, their names are completely new to foreign customers.

 

Another shortcoming of the Vietnamese construction material sector is the unprofessional distribution network. For construction material products, the exploitation of the domestic network is the most efficient. However, agent selection, responsibility obligation, commission and agent control have exposed a lot of shortcomings. Sales and after-sales services like delivery, payment, arbitration settlement, warranty and installation services remain weak. The aforementioned weaknesses can lead to market shrinkage of the local construction material industry when Vietnam joins the WTO in the near future.

 

One of the urgent solutions of construction material companies is to manufacture competitive quality products. According to Dr. Thai Duy Sam from the Institute of Construction Material, production lines must be equipped with state-of-the art technologies, modern and synchronous equipment. Importantly, it is necessary to have a complete equipment measurement system to oversee production technological parameters and quality.

 

Mr. Pham Minh Thuy, chief of the Price Analysis and Forecast Department under the Institute for Price and Market Science Research, said, building material enterprises need to exert all measures to reduce input costs like regular costs (material, labour and management costs) but also need to apply new technologies to manufacture products with low price and high quality to meet market requirements.  

 

In addition, enterprises also need to uphold market research activities and define targeted markets. According to Mr. Doan Ke Bon, in the domestic market, they should attach special importance to both urban and rural markets. Regarding export markets, apart from traditional ones, they should expand export of construction glass, floor tiles, sanitary ceramics, tiles, cement and steel to China, Laos and Cambodia where the demand for these products is high and there are favourable commercial conditions.

 

In particular, local enterprises should turn to making high-grade products, improve aesthetic criteria, change styles to diversify categories, introduce customer care programmes dedicated to specific product groups and markets, and focus on services of delivery, installation, warranty, payment and others.

 

The Government, according to experts’ viewpoints, should set up an overall development plan, especially for production factories to ensure supply and demand equilibrium in coordination with material zone and market consumption market planning, introduce policies to attract investment, especially for important projects, to build and upgrade building material production factories to meet export requirements. At the same time, the Government should shift from direct support into trade promotion activities, set up market surveying groups, and support market information, R&D activities, and labour training.