Viet Nam's mechanics industry needs policy support for easier access to credit as well as help in finding markets for its output, Nguyen Van Thu, President of the Viet Nam Association of Mechanics, tells Thoi Bao Kinh Doanh (Business Times) newspaper.
The majority of projects in the mechanics industry are carried out by foreign contractors. Does this mean Vietnamese contractors are not capable enough for such tasks?
I've been in the industry for many years and have signed, as well as witnessed the signing of many contracts between Vietnamese enterprises and foreign corporations. Most of these were based on quality and price competitiveness.
The Government has issued Decision 186 on a strategy for developing the mechanics industry. The problem is that this does not help create an output market for the industry. So local firms end up seeing Engineering, Procurement and Construction (EPC) contracts from foreign contractors.
I can affirm that if the Government has a policy that assigns the mechanics industry with projects in thermal power, oil and gas drilling rigs and mineral exploitation we can absolutely make better products than Chinese contractors.
For the mechanics industry, output market is the most important element. With stable contracts, mechanics enterprises will be able to expand their investment in technology to meet the requirements of any project.
If the Government ignores the fact that the domestic market is consuming low quality products, the mechanics industry will not stand a chance.
But many foreign investors complain that they can't find producers and suppliers of support industry products, especially for the mechanics industry.
It's true that Vietnamese mechanics industry is young and has not made its mark in the market. We cannot ask for immediate development of the industry. But enterprises operating in the mechanics sector have received too few projects to be able to raise their capacity.
In the current context, enterprises can't make profit and will not be able to continue their business. The majority of EPC contracts are implemented by Chinese enterprises. What worries Vietnamese businesses most is that these enterprises would take advantage of low bidding prices, but in reality use old technologies in implementing the projects.
Moreover, Decision 186 has not taken into account the need to develop the steel production industry to serve the mechanics sector. It has also ignored the support industry and mechanisms needed to integrate the domestic mechanics industry with national projects.
Ten years have passed since the decision was issued, and existing mechanisms have proven to be old and outdated. The output market is becoming tighter for the mechanics industry, so no enterprises dare to increase their investment.
Is it too late for Vietnamese enterprises to join EPC contracts and improve their competitiveness?
I think we still have time until 2020. The Government has to provide the main support for the industry to develop. If this issue is not tackled, the possibility of enterprises expanding their investment in technology is very low.
With the current loan interest rate standing at 11 per cent, no enterprise can invest in factories when the profit is only three to five per cent. In many other countries, the State offers interest rate subsidies.
The Viet Nam Association of Mechanics will support enterprises in the industry to invest in technology and expand their connections. When the market for our output expands, enterprises need to strengthen co-operation with each another so that the domestic industry as a whole becomes stronger. —VNS