17:06 | 11/02/2017 Industry
(VEN) - Some 70 percent of raw materials in support industries for engineering sector are imported due to weak development policies. Therefore, local businesses have faced many difficulties.
According to the Vietnam Association of Mechanical Industry, the country currently has around 3,100 engineering businesses with 53,000 manufacturing bases. However their capacity has not meet demand because Vietnam has to spend annually several tens of billions of dollars to import machinery and equipment. According to estimates, engineering products manufactured in the country have only met seven percent of market demand.
Truong Thanh Hoai, the director of the Ministry of Industry and Trade’s Department of Heavy Industry said that engineering support industries for the automotive sector has seen modest development with an average local rate for nine-seat passenger cars of around 7-10 percent, far lower than the targets of 40 percent by 2005 and 60 percent by 2010.
Almost all automotive components are imported, so automotive manufacturers in Vietnam have to incur additional costs such as packaging, shipping and import duties. Total production costs for the entire car in Vietnam are higher compared to regional countries such as Thailand and Indonesia. Therefore, engineering support industries for the automotive sector is hard to develop.
19-8 Mechanical Joint Stock Company Chairman of the Board of Directors Tran Tuan Anh said that the company invested VND25 billion in producing car springs in 2005. With a capacity of 30,000 tonnes of pieces a year, the company could provide for 10,000 trucks of all kinds. The company’s product quality is equivalent to German standards, which are higher than Vietnamese standards. These products have been exported to Germany, Italy, France, Australia, Thailand, Malaysia, Indonesia and Myanmar. “However, it cannot be sold for domestic truck manufacturers due to higher prices compared to Chinese products. The company currently produces about 6,000 tonnes of car springs a year and most of them are exported,” Tran Tuan Anh said.
Promoting links to increase efficiency
Support industries must be strong to support the development of engineering sector. Nguyen Thi Xuan Thuy from the Ministry of Industry and Trade’s Industrial Policy and Strategy Institute said that engineering businesses put high expectations on the development of support industries in order to get products that are equivalent to the prices of imported items, stable in quality and able to be used at a large scale.
Engineering businesses need to rebuild the production model towards promoting links with each other. Vietnam Association of Mechanical Industry Chairman Nguyen Van Thu said that member units in the association have worked together in the implementation of contracts with large volumes.
They have also proposed recommendations to the government to build the development strategy for the engineering sector in the next period.
To be able to manufacture components and spare parts for multinational corporations, a system of comprehensive
mechanisms and policies and the detailed planning to encourage economic sectors to further invest in support industries for
engineering sector are required.