Added value: A file photo of motorcyles in Hanoi. Two-wheelers assembled in the country have achieved a localisation rate of 85%-95%. — Bloomberg
HANOI: Measures should be taken to bolster the development of Vietnam’s mechanical engineering sector, experts say.
Despite having about 3,100 mechanical engineering companies with 53,000 production facilities, the firms account for just 7% of the domestic market for engineering goods and services, according to the Vietnam Association of Mechanical Industries.
The association said numerous obstacles and issues are still holding the industry back from reaching its full potential as Vietnam imports around US$40bil worth of equipment, machinery, industrial, agricultural, infrastructure, service and defence materials annually.
A recent report by the Industry Department under the Industry and Trade Ministry (MoIT) said the sector mainly focuses on three sectors: motorcycles and motorcycle parts; household mechanics and tools; and automobiles and auto parts, which are all good starting points for building the industry further.
Vietnamese companies can now produce and assemble almost all types of passenger cars, trucks and buses as motorcycle production has achieved a localisation rate of 85%-95%, with major players in the market such as Vinfast, Thanh Cong and Thaco.
The industry has gradually increased the localisation rate, fuelling the development of other industries and the economy while creating jobs for millions of workers.
However, the industry has only met about one third of domestic demand.
Industry experts said, with a population of 100 million, mostly young, Vietnam can become a centre of mechanical engineering in South-East Asia.
Subpar product quality and high costs have been key issues preventing the birth of large mechanical engineering companies with international reach in Vietnam.
The association called for stronger support from the government to help integrate the industry into additional economic sectors, incentives for medium-sized companies to expand production, and human-resource training and financial aid. In addition, attention should be focused on acquiring new technologies with incentives being given fairly among both domestic and foreign companies.
Truong Chi Binh, secretary-general of the Vietnam Association for Supporting Industries, said there has not been sufficient incentive to encourage the industry’s development in Vietnam.
He said a typical new mechanical engineering company does not expect to make profits in the first three to five years.
“There is a severe lack of investment within the industry,” he said.
He said Vietnam could learn from successful examples where countries have developed their mechanical-engineering industry by implementing suitable policies to encourage investment and production.
The department advised the MoIT to continue building downstream industries, including energy and precision mechanics to attract investments from large international corporations.
Meanwhile, the ministry should focus on creating a market to help firms increase production and improve supply chain integration.
Le Hoang Linh, head of the Manufacturing Industry Department under the MoIT, said steps have been taken to encourage the use of domestic mechanical products in public investment projects, state-owned enterprise investments and government procurements.
“We focus on building demand for key sectors such as automobiles, agricultural mechanics and railways,” Linh said.
“The market has been forecast to reach US$300bil by 2030, with automobiles alone accounting for US$120bil. This is a good opportunity for Vietnamese engineering to reach the global market and develop,” he said. — Viet Nam News/ANN
