Foreign Investment In Mechanical Engineering Projects Encouraged
Reported by Le Ha
Mechanical engineering plays an important role in Vietnam’s modernization and industrialization plans. However, is the sector capable of fulfilling this task? The Saigon Times discusses this issue with Dr. Do Huu Hao, deputy minister of industry and trade and chairman of the Vietnam Mechanical Engineering General Association.
Q: What are the obstacles facing mechanical engineering?
A: The most daunting challenges pertain to the lack of financial resources, design consultancy services and qualified human resources which can ensure domestic mechanical engineering products are competitive in both quality and design. Vietnam has yet to focus on manufacturing products with high added value and technical content. Cooperation among domestic mechanical engineering manufacturers still leaves much to be desired. Management remains inconsistent, which leads to overlapping, inefficient investments.
Though progress has been made, Vietnam’s mechanical engineering sector is not fully developed and capable yet. What do you think about this view?
While the statement holds true, it should be added that filling the gap between manufacturing and invention is an uphill task. For instance, Vietnam can only produce traditional products and small diesel engines. It is still beyond its capacity to manufacture advanced equipment. The problem is ascribable to the shortage of financial and human resources. The challenge lies in developing mechanical engineering products with high value-added and technical content.
To that end, a slew of measures must be adopted simultaneously. The Government should implement suitable credit policies to help mechanical engineering manufacturers have opportunities for investing in research and development. Enterprises should join forces with institutes and universities to train human resources for this industry. The authorities, meanwhile, need to encourage foreign businesses to pour money into mechanical engineering projects aimed at manufacturing advanced products and gradually transfer the technology to Vietnam.
This, in turn, will erect the platform for the mechanical engineering sector to post sustainable growth. With this approach, we believe it is feasible to achieve the core goals mentioned above. For example, we are charting out the procedure for diesel engine assembly for shipbuilding, as well as engines for trucks and buses.
Some contend that dismal zoning plans have choked the growth and hampered the competitiveness of Vietnam’s mechanical engineering as they focus on breadth rather than depth. What are your views?
The contention is utterly flawed. Zoning plans merely offer guidelines. The onus falls on enterprises to decide what to produce, based on market principles. The Government cannot force businesses to manufacture certain products, especially since it does not provide enterprises with financial resources. Besides, in a rapidly changing economy, demand for mechanical engineering products will be soaring. It will be inadvisable for mechanical engineering businesses to manufacture only a few products at the expense of other equipment.
On the other hand, some have proposed importing equipment which Vietnam cannot manufacture. However, in this age of globalization, what truly matters is efficiency. Given the financial constraints facing Vietnam, we should steer clear of profligacy and resist the temptation to squander foreign currencies. If Vietnam fails to manufacture equipment for large energy, construction, cement and sugar production projects, the costs incurred by machinery import will be staggering. The trade deficit may even soar above 20%.
Of course, it does not mean Vietnam’s zoning plans are accurate and judicious. Given the importance of sensible zoning plans in fostering development in mechanical engineering, the Government will not only urge enterprises to adhere to their business strategies but also seek to pinpoint shortcomings in existing plans. More focus will be placed on the profile and scale of the mechanical engineering sector to help this industry thrive.
Could you please elaborate?
Apart from implementing key mechanical engineering projects which have already received approval from the Prime Minister, we will pay attention to new segments such as those for auto parts, oil rigs and coal-fueled thermopower plants with a capacity of up to 600MW. We will also eye advanced, intricate machinery that caters to the needs of hi-tech manufacturing, electronics and processing industries.
Specialization for greater competitiveness is a prevalent trend in the world. Should Vietnam embrace this model?
Growth models should take into account market conditions and global trends. Vietnam probably needs to ponder on this approach. In particular, it must pay attention to the development of supporting industries.