Vietnam Shipbuilding Industry: From Assembly to Manufacturing

 

According to the report by the Vinashin Business Group (Vinashin), shipbuilding industry production and business has made strong growth. Production value reached US$4,430 billion (US$276.87 million), up 53.2 per cent on year, and revenue was VND3,685 billion (US$230.31 million), up 48 per cent year on year. According to the Ministry of Trade, by 2010 the shipbuilding industry may earn US$1.7 billion from ship export.

 

Advantages for shipbuilding industry development include a 3,250-km coastline where many deepwater ports can be built. Studies show that Vietnam can build ships from 150,000 tonnes to 200,000 tonnes, and repair vessels of larger capacities. Besides, Vietnam can diversify ship types to include oil tankers, container vessels, passenger ships, coastal ships and cargo ships.

 

Another target of the shipbuilding industry is to raise the ratio of locally sourced parts to more than 60 per cent by signing a series of technology transfer agreements. At the same time, the industry will lift its capacity from 300,000 tonnes load to 3 million tonnes by 2010, to hold 6-7 per cent of the global shipbuilding market share. The industry has constructed many shipyards, machine plants and ship equipment factories as well as other services. At present, ship export revenue is about US$150 million a year.

 

However, according to Mr Pham Thanh Binh, Chairman of Vinashin, to realise those targets the Vietnamese shipbuilding has to first of all overcome serious existing shortcomings, which are small capacity, backward methods, and scattered and spontaneous investment. Compared to the global shipbuilding industry, Vietnam’s shipbuilding projects are small and are divided for various purposes from heavy-load ships and container ships to oil tankers and automobile carriers.

 

In addition, supporting industries are not well developed. For example, in the contract to build 27 ships for Graig Investment (UK) by Vinashin, the Vietnamese side has to hire a Danish firm to supervise and check, and a Norwegian firm to evaluate. So far, Vietnamese shipyards can design cargo ships of 6,300 DWT, cargo ships of 15,000 DWT, oil tankers of 3,750 tonnes and various types of ships with loads of 2,000-3,000 DWT.

 

Experts say the Vietnamese shipbuilding industry is moving from “assembly” technology to actual “manufacturing.” At present, apart from building ship shells, Vietnam cannot make others. Most components, even ship steel sheets, are imported.

 

Thus, to reduce ship prices, many shipyards buy old ships to take components for new ones. This is only a short-term solution, especially when the machinery manufacturing industry has not developed. However, this is only acceptable for small ships. Re-using components will raise costs for ship owners during operation.

 

However, these unregistered ships are not allowed to operate on international routes. This is why Vietnamese ships are sometimes impounded by port operators, because of the absence of international registration.

 

Many experts said Vietnam should develop several shipbuilding complexes where they already have advantages. At the same time, it should focus on establishing suitable supply chains in the building industry, which holds a competitive advantage globally.

On the macro level, instead of injecting huge capital for investment projects as now, Vietnam should combine capital advantages such as low labour costs with foreign advanced technologies. The government can create more opportunities and investment modes for foreign investors, especially those from South Korea and Japan. On that basis, Vietnam can receive technologies for downstream supporting industries.