Vietnam Agricultural Machinery and Engine Development Strategy and Solutions in 2016 -2020

Based on the platform built up over the past 26 years, on April 5, 2016, VEAM was approved to carry out an equitisation plan by the Prime Minister. According to the plan, VEAM will be transformed into a joint stock company in January 2017 with 50 per cent stake held by the State. The corporation will set out development objectives and strategy for the coming period as follows:

 

Firstly, continuing to manufacture traditional mainstream products assigned by the Government, persistently carrying out the agricultural and rural development mechanisation and modernisation plan by applying advanced machines to land preparation, crop planting, crop harvesting and processing of agricultural products so as to help farmers improve labour productivity and reduce manual labour.

 

The diversification of agricultural machinery is aimed to expand VEAM’s market share, help farmers with the opportunity to use products made by VEAM, create jobs for its employees, reduce imported equipment from foreign countries and especially restrict low-quality equipment and machinery from other countries.

 

Secondly, diversifying its product categories such as trucks and passenger cars in order to raise the localisation ratio in line with the automotive industry development approved by the Government.

 

Thirdly, boosting production, fabrication and machining of parts and components for the automobile industry in general and agricultural machinery industry in particular, raising the production capacity of automobile industry and supporting industries, with the first priority given to production of motorcycles, automobiles and agricultural machines.

Fourthly, increasing revenue and profitability by 1.5 folds from the current levels by 2020. VEAM expects to attract new investors after it goes public, enabling it to increase financial capacity, governance capacity and technological content.

 

To successfully carry out its strategy, the corporation has set out a number of solutions for the coming period.

 

Regarding internal forces: The corporation will strengthen corporate governance and consider this a crucial stage in the process of transforming into a joint stock company. Corporate governance must be conducted methodically to obtain the highest efficiency. The corporation will streamline its organisational management apparatus, restructure its subsidiaries, associated companies and joint venture companies to have higher performance efficiency; restructure its products and scopes of business, and select typical products to boost production. The corporation will place emphasis on quality and compete in quality rather than prices. In the coming time, VEAM will focus investment to manufacture products of high demand, especially 4-wheel tractors and combine harvesters; invest to build new plants and upgrade existing ones to enhance performance efficiency; strengthen financial management to first of all preserve and develop capital base sustainably. On that basis, the corporation will be able to increase profitability in both financial investment and direct business operations.

 

In addition to the above solutions, the corporation puts forth recommendations to the government and relevant ministries to consider adjusting the following policies:

 

Firstly, regarding VAT policy, VAT on agricultural machine production is recommended to be lowered to zero. Currently, VAT is exempted for agricultural machinery and this raises difficulty to manufacturers because they are not refunded VAT. They will face more difficulty in price competition with foreign enterprises.

 

Secondly, regarding policies on import of used agricultural machinery, the government should apply technical barriers so as to not turn Vietnam into a dumping ground of agricultural machinery and equipment. According to many surveys, people in many southern provinces are currently using old equipment and machines imported from Japan, South Korea and other countries. The use of outdated obsolete equipment is restricting sale of VEAM and other firms. Besides, old equipment easily breaks down while no warranty is provided. So, VEAM suggests erecting technical barriers to limit import of obsolete equipment.

 

Thirdly, regarding policies on automobiles, VEAM recommends, in addition to tax reduction policy on automobiles of less than nine seats, applying other policies to support domestic manufacturers and assemblers. In the future, transport infrastructure and living conditions of people in Vietnam will surely improve and the demand for automobiles will increase as a result. VEAM will continue to maintain and develop companies to manufacture and assemble sedans and passenger vehicles; thus, the corporation suggests the Government have policies to support its subsidiaries and associated companies manufacturing and assembling cars in Vietnam.

 

Fourthly, on wage and reward policy, the corporation suggests the Government consider and adjust salaries for executives in SOEs based on their performances. Without effective wage and remuneration policies, it is very hard to encourage companies to add efforts to increase profits for the State. Therefore, it is important to build and apply more reasonable wage and reward policies and avoid using all-equal policies as now.

 

Fifthly, regarding administrative procedure reform, it is important to reform and streamline administrative procedures to facilitate companies in production, business and export operations. Tax authorities need to conclude settlements for enterprises in a timely manner to provide a basis for them to perform annual financial settlement.

 

Sixthly, on fiscal policy, the Government should have policies to support farmers to purchase and use machines and equipment from domestic manufacturers, especially new products. Then, they will be able to buy new machines to improve labour productivity and reduce manual labour.

 

The above macro policies will help companies to develop more favourably and help farmers to buy modern advanced equipment more easily. The corporation also expects the new government, with the determination of the Prime Minister and ministries the mechanical industry in general and agricultural machinery production industry in particular, will develop, a helping hand to the achievement of the target of turning Vietnam into a modern industrial country by 2020 as stated in the Resolution of attraction Party.