The mechanical industry is still considered as the “backbone” of the economy, the foundation and driving force supporting the development of other industries. This is even more meaningful in the context that Vietnam is accelerating industrialization and modernization of the country and deepening international integration.
However, after 20 years of development, especially after 10 years since the Development Strategy of Vietnam’s mechanical industry was promulgated (in 2002), along with a series of supporting mechanisms and policies, but so far This industry has not met expectations, the level of technology and production equipment is still backward compared to the world, the content of domestic added value created in the industry is very limited, enterprises do not participate in this industry. into the global supply chain…
So, what is the cause and how to revive this important industry?
There are still many bottlenecks
Mr. Dao Phan Long – Chairman of Vietnam Association of Mechanical Enterprises
In our view, Vietnam still has to build and develop the nation’s mechanical industry. “I know this is a very difficult job, but Vietnam cannot help but do it, because when the country has a mechanical production that is not inferior to other countries, it can be independent and self-reliant in production, ensuring safety and security. security – defense for socio-economic development in a volatile world situation”.
In fact, over the past time, with the Party and State’s policy to encourage open economic development, the Vietnamese mechanical industry has still been able to produce a number of products with good quality equivalent to foreign ones and can compete with others. with imported products.
Specifically: Fabrication of hydraulic systems to build Son La, Lai Chau hydropower projects and many other hydropower plants; to form a number of domestic mechanical enterprises to invest in the production and assembly of a number of trucks, buses, and cars with less than 9 seats to meet the domestic and export markets; autonomously building many types of ocean-going ships of large tonnage;
Mastering the manufacturing technology of a number of high- and low-voltage motors, power transformers, instruments and wires, especially completed the manufacture of quality 500 KV, 3-phase transformers to serve the industry. Alternative electricity must be imported from Korea, China and self-backup for operating power plants…
Despite some achievements, Vietnam’s mechanical engineering industry develops slowly, even lagging behind other countries in the region, affecting the productivity, quality and efficiency of the industry. economy.
The reason the mechanical industry could not “turn on” in the past time was due to many bottlenecks. Specifically, market bottlenecks, any manufacturing industry without a product consumption market, first of all, the domestic market, cannot develop. Meanwhile, Vietnam has not yet taken appropriate measures to protect and exploit the domestic market for the mechanical industry.
The next bottleneck is from the micro factors that are the capacity of the business. Accordingly, the level of production and business administration of Vietnamese mechanical enterprises is mostly still low, after more than 20 years of development, there are still not many enterprises that reach the level of production and business management approaching the time. 3rd industrial revolution period and very far from 4th industrial revolution. In addition, investment in technological innovation is duplicated, scattered, causing great waste and poor production and business efficiency. …
For the bottleneck from macro factors is the state management. In the past time, the Government and local authorities have issued many policies and mechanisms for mechanics, but those policies have not really come to life; The State’s system of policies on management of economic and industrial development, including mechanical engineering, has not been synchronized.
In order to build and develop Vietnam’s domestic mechanical industry, it is not only the sole duty of mechanical enterprises to rise up to compete and survive in accordance with the market regulation of the “invisible hand” that other mechanical engineering firms have. Mechanical enterprises always need “the visible hand of the Government” to act as a midwife through the policy system as other countries have been doing.
Need a “launcher” for the mechanical industry
Mr. Truong Duy Nghia – President of Vietnam Association of Thermal Science and Technology
From now to 2030, at least Vietnam must put into operation 3-4 coal-fired power plants of 1,200 MW size, corresponding to the need of 6-8 billion USD for coal-fired power (according to current investment prices). After coal-fired power, there will be gas-fired thermal power plants.
It is estimated that by 2050, 116,000 MW of coal power will be needed, equivalent to 96 coal-fired power plants of 1,200 MW, with an investment of about 200 billion USD (price in 2019); 45,200 MW of gas power, equivalent to 60 gas thermal power plants of 750MW size, with an investment of about 50 billion USD. Thus, on average, each year, about 8-9 billion USD is needed to invest in building new power plants. This is a huge opportunity for the power plant manufacturing industry.
Faced with the great requirements of the country in the construction of all kinds of power plants, in our opinion, it is necessary to exploit the capacity and experience of mechanical and assembling enterprises in the process of participating in the manufacturing process. creating and assembling construction items of all kinds of thermal power plants in Vietnam, adding weak mechanical manufacturing capacity to existing enterprises, then Vietnam will completely have a manufacturing industry. create a complete thermal power plant.
To do this, we recommend the Government to set up a research committee to build the power plant manufacturing industry in Vietnam. This committee is responsible for conducting surveys on the power plant manufacturing industry in other countries, assessing the current status of Vietnam’s mechanical industry.
From there, propose investment scale and investment forms so that in the next few years, a coal-fired power equipment manufacturing industry will be formed. This is an industry that is always in demand, with a domestic market to develop.
Having a power plant manufacturing industry can be considered as a “launching pad” to promote the development of other industries such as metallurgy and mechanical engineering. In which, in the immediate future is to meet the needs of overhauling and repairing hundreds of power plants.
Power plant manufacturing plants are large, with complex technology, but that doesn’t mean that Vietnam can’t reach them, Vietnam’s scientific and technical staff is now complete. can be met and taken care of.
Creating conditions for domestic businesses
Mr. Le Van Tuan – General Director of Vietnam Machinery Installation Corporation
In order to encourage and promote the domestic mechanical engineering industry, it is necessary to implement some urgent solutions.
Accordingly, it is necessary to clearly regulate and closely and strictly supervise the implementation of investment projects in Vietnam regardless of capital sources from the state budget, private capital or foreign investment capital… if the The part of mechanical manufacturing that can be manufactured in the country, compulsory production by domestic mechanical enterprises.
This must be considered and approved right from the stage of formulation, planning and approval of investment projects.
In order to achieve the goal in the Strategy for the development of the mechanical industry to 2035 according to Decision 319/QD-TTg dated March 15, 2018 of the Prime Minister, we would like to propose a number of incentive mechanisms and policies, support.
In which, considering the reduction of corporate income tax with a roadmap to 2035 with the tax rate for export goods and products to 2025 is 0%, from 2025 to 2030 is 5%, after 2030 is 10%. . Consider personal income tax exemption for mechanical enterprises operating in the field of agriculture and rural development.
In addition, consider reducing land rent with a roadmap for manufacturing facilities: Land rent exemption for the first 10 years for newly established facilities, partial reduction of land rent for facilities new setup after 10 years and already established manufacturing facilities are in operation.
In particular, it is necessary to issue a decree stipulating that all goods, equipment and supplies that can be produced by domestic mechanical enterprises must be used in the country, not allowed to be imported, applicable to all investment capital sources. (State, private, foreign investment…).
Regarding credit, banks, consider bank credit packages with low and stable interest rates, apply long-term loans to invest in facilities and use short-term to operate production and manufacturing…
Investment policy is not effective
Mr. Tran Tuan Anh – Minister of Industry and Trade
In recent years, with the attention of the Government, Vietnam’s mechanical industry has achieved certain results. According to the General Statistics Office, by the end of 2017, the number of mechanical enterprises operating and having business results is about 25,014 enterprises, accounting for nearly 30% of the total number of manufacturing and processing industry enterprises. ; with a net revenue of production and business activities of VND 1,465,008 billion and job creation for about 1,123,545 employees, accounting for nearly 16% of the total number of employees in processing and manufacturing enterprises.
In the country, there is a system of mechanical factories of all sizes, large and small. In some localities and economic regions, the cluster model of manufacturing industry (such as Chu Lai – Quang Nam mechanical complex…). In addition, the mechanical engineering industry has also formed a number of businesses with potential for development on a regional level.
However, Vietnam’s mechanical industry still has many limitations. Vietnamese mechanical products only have very few domestic brands. Popular domestic mechanical enterprises are small-scale, low-competitive, and have not yet mastered complete core technology.
Product quality is not good, product cost is high, product competitiveness is poor, there are almost no key industrial products in the mechanical industry capable of competing with imported products.
In addition, Vietnam does not have large mechanical enterprises of regional and international stature playing a leading role in the industry. Research and product development largely depends on foreign firms.
The mechanical engineering industry only meets more than 32% of the domestic demand for mechanical products. It is very difficult for domestic mechanical manufacturing enterprises to become subcontractors to supply machinery and equipment for large investment projects that have been implemented a lot in the past period (thermal power industry, steel, chemicals, infrastructure). traffic…).
The ratio of net sales value of production and business of mechanical enterprises compared to the whole processing and manufacturing industry is quite low and tends to decrease over the years (more than 18%). This proves that the investment efficiency of the entire mechanical engineering industry is not high in general, and has not shown its role as a foundation for industrial development.
The level of mechanical engineering (which is the mainstay of industrial production), especially precision mechanics, is still two to three generations behind many countries. Most of Vietnam’s mechanical enterprises have not mastered the source technology, and lack of specialized machinery for production specialization. The content of domestic added value created in the mechanical industry is very limited…
The cause of the above limitations is due to the large natural barriers due to the characteristics of the industry such as: requiring a lot of capital, large initial investment, long capital turnover time, slow capital turnover; requires high scientific and technological qualifications, workers with knowledge, skills, and labor discipline; The industry’s products are not easily distributed and consumed like products of many other industries.
In addition, the macroeconomic environment is not really stable, creating conditions and encouraging businesses to invest in the mechanical industry. The promulgation and implementation of policies to implement and implement the Party’s guidelines, the Government’s strategies and programs on the development of the mechanical industry is slow and ineffective…
From the current situation of Vietnam’s mechanical industry, in order to institutionalize the Party’s guidelines and policies on the development of the mechanical industry, the development strategy of Vietnam’s mechanical industry to 2025 with a vision to 2035 needs to be affirmed. determine the viewpoints and goals for the development of the mechanical industry in the new period.
Accordingly, the development perspective: “Mechanical engineering is a fundamental industry with strategic significance for rapid and sustainable development, improving independence and self-reliance; ensure the economy’s ability to deeply and effectively participate in the global production and distribution network, with appropriate investment attention.
At the same time, focus on developing the mechanical engineering sub-sectors that Vietnam has strengths; develop the industry on the basis of using high-quality human resources and advanced technology, taking global competition as the driving force for development; exploiting existing advantages and international opportunities in the integration process; attach importance to developing a number of specialties and fields of dual-use mechanics in service of national defense and security; develop Vietnam’s mechanical industry on the basis of green growth, sustainable development and environmental protection.
Since then, the overall goal is that by 2035, Vietnam’s mechanical industry will be developed with most majors with advanced technology, product quality up to international standards, and deeper participation in the value chain. global governance, economical and efficient use of energy, fair competition in international integration; professional, disciplined and highly productive workforce, proactive in research, design and manufacture of mechanical products, basically meeting the needs of mechanical products of the domestic market.
Overcome the disadvantage to turn into an advantage
Mr. Toru Kinoshita – Chairman of Vietnam Automobile Manufacturers Association
In the context of the integration of the whole ASEAN region in 2018, when the import tax on complete vehicles (CBU) is 0%, VAMA realizes that there are still some difficulties for domestically manufactured vehicles (CKD).
If before 2018, when import and export taxes on cars from ASEAN countries were still high, domestically produced cars would still be able to compete with imported cars. But since 2018, when there is no longer protection, the ASEAN tax rate of CBU cars is 0%, then CKD cars cannot compete with CBU cars. This is very difficult for car manufacturers in maintaining production in Vietnam.
In the eyes of foreign investors, the advantage of suppliers in Vietnam is that they have good skills, low labor costs, and because they are located in Vietnam, the transportation costs to the assembly plant are high. cheap car assembly.
However, the big disadvantage of many suppliers in Vietnam is the small scale and output due to the small market size in Vietnam, the skills and expertise of workers in complex products, High skill requirements are limited and especially many raw materials for production are completely dependent on imports and cannot be produced domestically.
The reason comes from the weakness of Vietnamese mechanics, the lack of high-quality materials industry, the limited development of supporting industries, the low management and supply, which makes enterprises only produce a few products. accessories that are simple or have comparative advantages such as seats, electrical wiring assemblies, etc.
Details that require higher requirements such as engines and gearboxes need a lot of high-quality components and businesses have not been able to meet them because of the small market size and limited component production capacity.
Although, over the past time, the State has had a lot of active support and the market size is increasing. However, it will take many more years to overcome all disadvantages to turn into advantages.
To do this, VAMA recommends that the Government have policies to support the auto industry. In particular, investment incentives for manufacturers and suppliers so that they can invest in machinery, molds and jigs, in order to localize components, thereby helping to reduce the adverse impact of production scale. short.
In addition, domestic automobile manufacturers themselves also make efforts to support suppliers to improve capacity through human resource training and recruitment.
If you want to be successful, you have to go from small to big
Mr. Phan Tan Ben – Director of Phan Tan Agricultural Mechanical One Member Co., Ltd
Vietnam is an agricultural country, so the application of mechanization in agricultural production is extremely necessary. However, at present, most of the machines for mechanization are imported machines. Domestically produced agricultural machines are almost absent from the market and gradually lose their position in the home field.
In the past, there was a period when Vietnamese agricultural machines were present all over the country. There was even a time when the domestically produced combine harvesters had beaten the line of combine harvesters made in China.
However, that was 10 years ago, and in the past 10 years, Vietnamese agricultural machines are increasingly disappearing, replaced by imported machines that have monopolized the Vietnamese market.
The main reason for this situation is that Vietnam has not yet developed a number of key industries in mechanical engineering in general and agricultural engineering in particular, leading to a lack of orientation and focus in the development of the industry. .
One root cause is the peculiarity of the agricultural machine manufacturing industry, which is the large investment capital, very low profit, and fierce competition from many imported machines such as Japan, Korea, China… so few people bear investment.
In addition, human resources for the agricultural mechanical engineering industry are increasingly scarce because of low income, hard work and hard study, so it is not possible to attract human resources for this industry.
From the above reasons, it is thought that it is time for Vietnam to have a key unit, at the forefront of the pole, to build a real agricultural factory with modern machinery and equipment, know how to take the initiative and associate in production to create a Vietnamese branded product.
To do that, requires support from the State and relevant ministries. In the immediate future, it is necessary to focus on promoting capital and human resources on small manufacturers with development capacity, because it is the small manufacturers who fully understand the difficulties and concerns that the mechanical engineering industry faces. are encountered.
In the process of struggling to find a foothold with modern imported machines, some of these small manufacturers have determined their competitiveness and found suitable products to survive and develop. And obviously, they have their own products and achieved certain successes.
From these small successes, with the attention of the State and ministries and branches, they will surely have great successes…
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