Machinery Industry Development: Still Far from the Target

In 2002, the Vietnamese government offered a development strategy to push up the growth of the machinery industry. Then, the Ministry of Industry and Trade also approved eight planning projects, comprising the production of dynamic and agriculture machines; electricity equipment; supporting industries and the manufacturing of agro-forest processing machinery. Besides, planning projects for the industry were carried out in Hanoi and Ho Chi Minh City. The auto, motorbike and ship industries started developing. However, up to now after nearly a decade, the machinery industry has seen nothing new. Important equipment of the sector for projects must be imports. In fact, if Vietnam amends the Law on Bidding, reduces the duty of added value or issues technical barriers in order to help local machinery firms win the bid, particularly EPC contracts, the firms still have to import a majority of important equipment.  

Vietnam has developed and gained achievements in eight major fields of the development strategy of machinery industry, including shipbuilding, complete equipment and hydrotecnic equipment. In the shipbuilding sector for example, Vietnam has been able to build international-standard ones, including cargo ships with capacity from DWT6,500 to DWT53,000 and some high-speed vessels. In terms of complete equipment, the Vietnamese machinery industry manufactured for the first time equipment to serve projects and plants of thermo power, oil refinery, cement and paper industry. In the past, to build a hydropower plant with capacity of 300MW the country had to import all hydrotecnic equipment, but nowadays the domestic machinery industry is able to provide them. From an export-import perspective, Vietnam has gone from a country having to import machinery products to now exporting over US$2.5 billion worth of goods, helping to reduce the trade deficit.

 

Some expect that Vietnam will soon become a powerful country in shipbuilding. However, despite having built international standard ships with capacity of DWT6,500 - DWT53,000, Vietnam’s machinery industry has just been able to provide the main body such as frame and flank, not internal components. The country now has a series of joint venture manufacturers of auto and motorbike. However, what does Vietnam’s machinery industry own? Although producers, especially FDI firms, present reports on the quite high localization rate, the real figure is very low, with that of Honda Vietnam standing at only 10 per cent, followed by Toyota Vietnam, with 7 per cent. The remaining firms reported the localization rate of merely 2-4 per cent. 

 

At that time, many Vietnamese farmers managed to create by themselves the agricultural machines and tools that they need. The industry’s biggest limitation is not only shortage of capital and team of engineers and skilled workers, but also of a long-term development strategy.

 

The question is when Vietnam will have a developed machinery industry which meets the demand of the economy and how to become a industrial country towards modernization in ten years in accordance with the Socio-economic Development Strategy 2011-2020 without the developed machinery industry.