Needed: Engineering support industry development

16:23 | 22/04/2018 Industry

(VEN) - Support industry manufacturers serving the engineering industry have to import 70 percent of materials they need, while engineering producers are finding it difficult to identify markets, given inadequate and weak policies.

needed engineering support industry development
Domestic engineering producers haven’t satisfied the domestic market demand

Low competitiveness

According to the Vietnam Association of Mechanical Industry (VAMI), there are about 3,100 engineering enterprises with 53,000 manufacturing facilities nationwide, but they are unable to meet the domestic market need. Although Vietnam annually spends tens of billions of dollars on importing machinery and equipment, domestically made mechanical products have reached a domestic market share of only seven percent.

According to the Ministry of Industry and Trade’s Department of Industry, local content of nine-seat cars, for example, has reached only 7-10 percent, while 40 and 60 percent targets were set in 2005 and 2010, respectively.

A Toyota Vietnam representative said automobile manufacturers have to import most components and parts they need and pay associated packaging, transport and import tax costs, making the automobile production cost in Vietnam higher than that in other countries in the region, such as Thailand and Indonesia.

This problem is also found in support industries serving other production sectors. The gap in quality standards between domestic and foreign engineering enterprises remains relatively large.

VAMI President Nguyen Van Thu said domestically made mechanical products in general have a low technological content and value added. Many engineering enterprises are still struggling and spending most of their time just on maintaining production to meet orders. Support industry promotion policies remain inadequate and inefficient, he said.

Policies and plans

Strong support industries are integral to developing the engineering industry. A representative of the Ministry of Industry and Trade’s Institute for Industrial Policy and Strategy (IPS) said engineering enterprises are looking for support industry manufacturers capable of implementing large contracts and offering products of a stable quality and price similar to those of imported products of the same kind.

Engineering enterprises should develop production models pertaining to linking participants of global value chains. Thu said VAMI enterprises are working with each other to supply products and implement large projects. The Southern Vietnam Engine and Agricultural Machinery Co., Ltd., for example, has been ordering parts and components from more than 25 enterprises for many years, he said.

Thu said consistent policies and specific plans are crucial to developing strong support industries, including attraction of private sector investment. The state should adopt a strategy for development of the engineering industry with specific orientations as soon as possible, he added.

Tax regulations in Law 71/2014/QH13 must be revised at the soonest to ensure equality between domestically made and imported mechanical products.

Lan Anh