Wednesday, October 26 2016


Engineering sector preparing for integration

Update: January, 09/2016 - 10:05

Dao Phan Long, chairman of the Viet Nam Mechanical Engineering Association, told Hai Quan (Customs) newspaper about opportunities and challenges the mechanical engineering sector has faced in the context of global integration.

Viet Nam has signed many bilateral and multilateral trade agreements. In your opinion, what opportunities and challenges will these trade agreements bring to the mechanical engineering sector?

The trade agreements that Viet Nam has inked will bring a lot of opportunities and challenges to the mechanical engineering sector. The market for the sector will be expanded. We shall approach many new technologies and new methods of management. But the challenges are not so small.

Are mechanical products that domestic enterprises have chosen to invest in able to compete with exported products? Only when mechanical enterprises of Viet Nam are invested sustainably, will their products have chances to develop. If the investment is poured without careful consideration, we can not be successful and developing. Vietnamese enterprises themselves have to realise this to choose methods of investment and product selection.

The State needs to support mechanical firms to borrow preferential loans from banks. Because investment on the sector needs huge capital and long capital turnover, it is impossible to invest at high interest rates like now. In my opinion, we must treat domestic mechanical firms as well as we do with foreign direct investment (FDI) mechanical firms.

Opportunities must be attached to a foundation. How is the foundation of the Vietnamese mechanical engineering sector?

Over the past time, many people say that Viet Nam might possibly be the world's processing and manufacturing centre. The view is partly true because developed countries often seek countries having low manufacturing costs to invest in. Viet Nam, firstly, has low costs of manufacturing. It also has a favourable political and geographical position in Southeast Asia as nations can approach Viet Nam via waterway or airline, which creates favourable conditions for overseas businesses to invest in manufacturing and business.

However, if Viet Nam wants to become the world's new processing and manufacturing centre, there are some important factors. First, the State policies must focus on mechanical development. Twenty to 30 years after Viet Nam's industrialisation, there remains a big problem.

That is most of mechanical firms, which join to integrate or export, are FDI enterprises. Internal power of domestic enterprises is very limited.

Very few products can compete. Therefore, if Viet Nam wants to integrate well and become the world's processing and manufacturing centre, State policies must be consistent and thorough to encourage the Vietnamese mechanical engineering sector to improve infrastructure, finance, exporting and importing conditions, human resources training and to import advanced technology.

On the other side, enterprises themselves must strive to fulfill industrialised targets and integrate well when Viet Nam has many chances to become the world's processing and manufacturing centre. Therefore, enterprises need to do deep research and prepare all factors to develop and integrate well. Specifically, they must fulfill requirements of foreign firms on criteria, quality, management methods, human resources, etc.

You assessed that the ability to compete and integrate into the global economy of Viet Nam in general and the mechanical engineering sector in particular remained weak. How weak is it specifically?

In the past, we haven't been concerned over investment as well as put forward planning policies for the sector. Therefore, products are mainly manufactured following old technology, while high-profile experts have contributed to FDI enterprises .

Vietnamese enterprises must know the differences as well as advantages of the market in the context of integration.

Facing big opportunities and challenges, activeness is what businesses need. They need to widen connection and collaboration with each other as well as specialisation to achieve effectiveness in manufacturing. Besides, they need to make the best use of domestic and international markets.

In the past, the Viet Nam Mechanical Engineering Association has linked businesses so that they can connect together. We, many times, have proposed that international enterprises which want to bid for big Vietnamese projects need to sign agreements with domestic contractors, must pledge to use domestic workers and equipment to create markets for domestic enterprises.

How do you think the Vietnamese mechanical engineering sector can avoid lagging behind in integration?

I think in terms of State management, there needs to be a leading agency at general department level which controls the sector. In addition, it is necessary to improve and develop the roles of associations. Associations must be strong enough to build and protect markets for mechanics in global economy integration. Besides, it is necessary to have policies to encourage science and technology, investment in reforming and developing technology to make sure Vietnamese mechanical engineers are not lagging behind. There should also be barriers to limit importing equipment and machines which have been used.

How should the State invest to facilitate the mechanical engineering sector to integrate well?

I think the State should select some products to focus its investment on and strengthen their competitiveness.

They should be products having big markets and being attached with security and national defence, such as the shipbuilding sector. Besides, the State should invest in industry and service development for marine, automobile or agriculture machines. Projects on climate change in coastal provinces and HCM City or projects on transport and communication, which are about to be implemented in the upcoming time, will bring a lot of work to the mechanical engineering sector. ­­­­— VNS

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