Updated  
July, 31 2014 09:47:28

Viet Nam's engineering sector has room to grow

Viet Nam's mechanical engineering sector is on par with those in the region, Nguyen Van Thu, chairman of the Association of Mechanical Engineering Enterprises told theThoi bao Kinh te Viet Nam (Viet Nam Economic Times).

Do you agree that our engineering industry has not lived up to its role as a core industry in the course of our national industrialisation and modernisation?

No I don't think so. In recent years, the engineering industry has strongly developed. In 2013, the value of the industry reached VND 700 trillion (US$32.9 billion), accounting for 20 per cent of the total value of Viet Nam's industrial sector. If in 2006, the export turnover of the sector was $1.6 billion, in 2013 the figure had jumped to $13 billion.

However, the sector still faces many challenges, particularly in finding long term investment capital. Domestic products from basic industries like metallurgy, chemistry, and supporting industries can only meet a small quantity of the market demand. As a result, we depend heavily on imports.

In addition, we don't have the market as most of the industrial projects applied the method of tender document for the appointed projects or the lowest prices win projects. As a result, winners of most projects were Chinese contractors. In the period from 2003-2011, Chinese contractors won five out of six chemical projects in the method of Engineering Procurement Construction (EPC), plus two out of two mineral processing projects and 49/62 of the cement projects and many others.

In the thermo power industry, China were selected as the EPCs for 16/27 projects.

What I should mention here is that most of the EPC projects won by Chinese contractors are behind schedule; the shortest is three months and the longest is three years. Other points I want to emphasise here is the poor project quality stemming from poor-quality equipment and machines. They are not up to the standards which were written in the tendering documents. This is the key reason causing cost overruns in many projects.

What are the main causes leading to the above mentioned situation?

The main factor was that our old Law on Tendering gave preferences to contractors who had offered the lowest prices, paying no attention to where the equipment came from or its quality. Meanwhile, many project owners opted for the EPC method and didn't want to break the projects into several packages for tendering.

In addition, the inspection and evaluation capacity of the contractors of many Vietnamese agencies is weak. So is the competency in writing contract agreements, particularly articles relating to awards and sanctions.

Last but not least, though we have rather comprehensive policies on supporting and developing the engineering industry, they have not been fully implemented.

What has the Association of Mechanical Engineering Enterprises done to improve the situation?

Our association has many times asked the government to increase inspection missions to important projects undertaken by Chinese contractors. We have also asked the government to introduce tougher measures to force Chinese contractors to use Vietnamese sub-contractors in their EPC projects as well as the use of supporting equipment made in Viet Nam instead of imported equipment and facilities.

In addition, during the tendering we should be able to select the best tenders to do the job to the highest possible standard. And of course, one of the requirements included in the call for tenders is a mandate to use Vietnamese mechanical engineering equipment and facilities. This is the only way to help our chemical engineering sector to be on par with others in the region.

Some people have expressed concern over the quality of Vietnamese contractors and equipment. What's your opinion?

In the past 15 years, in EPC projects with contractors from the G7, they have selected Vietnamese mechanical engineering companies as their sub-contractors. The value of our sub-contracts was between 15-20 per cent of the project value.

One thing I have to concede is that our mechanical engineering companies are not able to undertake big projects. So working side by side with foreign contractors would provide good opportunities for Vietnamese enterprises to learn.

In the last few years, the PV Shipyard (Petro Viet Nam Shipyard) was the first to be selected for an appointed project in designing and manufacturing an oil rig for Petro Viet Nam (PVN). After nearly 30 months, PV Shipyard was successful in designing the 90m self-elevating platform offshore, worth $200 million.

At present, PV Shipyard is designing a second self-elevating offshore Jack-up which can work at a depth of 125 m. — VNS

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