According to the Vietnam Association of Mechanical Industry (VAMI), the country has approximately 3,100 manufacturing enterprises with 53,000 production facilities, accounting for nearly 30% of the total number of industrial processing and manufacturing enterprises in Vietnam. However, domestically produced mechanical products currently occupy only about 7% of the market.
Speaking at the seminar “Diversifying Markets, Developing Mechanical Products” on December 9, Dr. Phan Dang Phong, Director of the Institute of Mechanical Research under the Ministry of Industry and Trade (MOIT), noted that the domestic mechanical market has seen significant improvements in both quantity and quality.
For example, in the past, automobile and motorcycle production lines were mostly handled by foreign companies such as Honda, Toyota, and Hyundai. Starting in 2012, the institute sent teams of engineers to Japan and South Korea to learn from their experiences. As a result, the institute can now independently design and manufacture automobile assembly lines, achieving a localization rate of 85-95%. Notable examples include assembly lines for Vinfast, Thanh Cong, and Thaco.
However, domestic and export market satisfaction remains modest. Particularly in the field of complete equipment, thermal power plants, hydropower plants, renewable energy, cement, and material production, Vietnam meets less than 30% of equipment demand.
Dr. Phong pointed out that the reason for this shortfall is the lack of leading enterprises with proprietary technology and sufficient experience to undertake complete project contracts. Only when there are capable enterprises able to act as general contractors can the development of auxiliary equipment for the equipment chains be promoted.
“For example, in the field of urban railways or gas power plants, there are no domestic enterprises capable of acting as general contractors. If foreign firms act as general contractors, they will subcontract to foreign subcontractors or their chain in Vietnam, leaving us passive in developing auxiliary equipment,” Dr. Phong explained.
Similarly, Mr. Nguyen Duc Cuong, Vice Chairman of the Hanoi Supporting Industries Business Association, stated that domestic enterprises mainly produce detailed components for FDI enterprises in Vietnam, with some production for export. Companies with “Made in Vietnam” products are limited, with few examples like Vinfast motorcycles, Dong Anh boilers, and medium-low voltage products.
“The mechanical manufacturing sector needs to invest in infrastructure, machinery, equipment, and process systems and must have orders to build those process systems. This requires 2-5 years, making it challenging for businesses in the sector to secure capital, primarily for land, workshops, machinery, and equipment investments,” Mr. Cuong stated.
Mr. Nguyen Duc Cuong emphasized that the mechanical manufacturing sector requires investments in infrastructure, machinery, and process systems, necessitating orders to build those systems. This process takes 2-5 years, making it difficult for businesses to secure capital, primarily for land, workshops, and machinery investments.
“Most businesses currently rely on the loans from bank and financial institutions for investment. The capital recovery process takes 5-7 years. With an interest rate of 5%, after 10 years, the investment value is 50%. If there were dedicated land funds for businesses with tax-free or low-interest loans of 0% for a certain period, businesses would have a much greater advantage. Japan once had such a policy.
In reality, the mechanical industry is a foundational industry that the CPV and Vietnamese State pay special attention to. Resolution No.29 on promoting industrialization and modernization outlines six foundational industries to focus on developing, including the mechanical industry. Decision No. 319 on the Development Strategy for Vietnam’s Mechanical Industry to 2025, with a vision to 2035, specifies mechanisms, policies, and key mechanical products to focus on. Decision No.1791 pilots the design and manufacturing of thermal power plant equipment domestically.
Mr. Nguyen Duc Cuong believes that if there are policies and mechanisms, the support from ministries and agencies is crucial to disbursing support funds effectively, with leading enterprises taking the lead.
The question of resource allocation is not about the amount of money but about how to manage financial resources. Leading enterprises with good management and operational capabilities will receive and allocate state resources to subcontractors. This can form a network of supply chains and achieve effective exploitation.
“For example, if 1,000 enterprises submit proposals, all with excellent projects, but when given financial resources, can they manage and exploit them effectively? This relates to financial management capabilities, not just production,” Mr. Cuong explained.
Dr. Phan Dang Phong also acknowledged that there are still bottlenecks in policies that need to be addressed. For example, goals set in many policies are still too high and not aligned with reality. Some goals are not specific, making it difficult to summarize and evaluate. Some financial and tax incentives are excellent for mechanical enterprises, but when implemented, they face obstacles and delays. Some policies are quite stringent and not truly appropriate, making it difficult for businesses to access. “We need to review and summarize support policies for the mechanical industry in recent times to make adjustments and supplements as appropriate,” Dr. Phong recommended.
