Opening up the industrial sector

Deputy Minister of Industry and Trade Do Huu Hao, who also chairs the Viet Nam Federation of Engineering Associations, spoke to Thoi bao Kinh te Sai Gon (Sai Gon Economic Times)

Please give us an overview of the engineering industry in Viet Nam?

In the early 1990s, the industry could design and manufacture only 8-10 per cent of vessels, plant and machinery required for domestic projects. Now it can build 40-45 per cent, with an annual growth rate of 40 per cent over the last 15 years. The result is significant if you take into account the comparatively small investment in the industry.

Viet Nam can build 6,500-53,000 tonne ships to an international standard, plus high-speed vessels. We can make complete equipments for thermal power, oil refineries and cement and paper factories.

In the past, we had to import all the equipments for a 300MW hydro-power plant, now we can make it all.

More importantly, instead of importing, we now export US$2.5 billion worth of engineering products, further reducing the gap between imports and exports.

What are the shortcomings of the industry?

The biggest shortcomings are limited capital and a shortage of qualified and skilled designers, consultants and workers, making our products less competitive in both design and quality.

Furthermore, the industry still hasn't developed high value and technology products. Due to the lack of co-operation between local firms and a poor management systems, investments in the industry is tempered by low effectiveness.

The industry can now make frame parts like vessel hulls but the manufacture of core parts, such as engines and precision and auxiliary plant and machinery, is still poor. The local industry is developing but it has not yet reached required level of precision and quality.

You could say so. But everything has its causes. In the context that we don't have good sources of capital, intellectual input and skilled engineers and workers, such a level of development in the industry is understandable.

But yes, we do need to improve. The State needs to put in place more financial policies that provide incentives to engineering enterprises and their needs to increase co-operation between enterprises and schools in training skilled workers and engineers.

Viet Nam must encourage foreign enterprises to invest in producing engines and machinery before transferring them to Viet Nam's partners.

In the next 10 to 15 years, we can develop more of the core parts. Right now, for example we are developing a procedure for making engines for vessels, lorries and buses.

Is ineffective planning the cause of the shortcomings. Has the industry paid too much attention to wide development rather than deep development?

Planning is macroscopic while engineering production is decided by enterprises themselves and consequently is based on market demand. We cannot force enterprises to make a product if they don't have the financial backing.

Local demand is for more and more different engineering products. If enterprises focus on only a few products, they cannot meet the demand.

It could be argued that Viet Nam could just import what it does not make. However, in the nation's limited financial condition, saving foreign currency is a priority of the Government. So, if we can't make plant and machinery and we have to import it, the import-export deficit will be more that 20 per cent.

That is not to say that we have a perfect plan for the industry. Planning is only orientation, but it is very important. Good plans mean you are more likely to get good results, to press enterprises to follow a strategy and to detect and solve possible shortcomings before they happen and to pay special attention to pressing points.

What are the pressing points?

We are targeting automobile parts and complete equipment like engines and gear boxes, derricks and equipment for 600MW thermal power plants. Also the sophisticated and high-tech products for processing industries. They are the pressing points of the engineering industry.

How about the agriculture industry?

We set a priority to develop production and processing machinery but the sector can't meet the demand. We need policies that give priority to encouraging enterprises to make agricultural machines.

It is common for an enterprise, or even a country, to specialise to get the best competitive advantage. Will Viet Nam follow this trend?

To develop any product in the auxiliary engineering sector, the Vietnamese industry will pay close attention to market demands and world trends. — VNS