Mechanical industry seeks solutions to access global value chain
The mechanical support industry that provides various details and components for downstream industries faces major difficulties.
Large market potential
According to the Vietnam Industry Agency (VIA) under the Ministry of Industry and Trade (MoIT), Vietnam’s mechanical engineering industry enjoys advantages in three main sub-sectors: motorcycles and motorcycle spare parts; household mechanics; automobile tools and parts.
Specifically, domestic mechanical engineering enterprises such as VinFast, Thanh Cong, and Thaco now produce and assemble almost all types of vehicles including cars, trucks, and coaches.
According to the VIA, domestically produced metal components have now met 85 to 90 percent of the motorcycle demand, 15 to 40 percent of automobile production needs, some 40 to 60 percent of agricultural and construction machinery, and about 10 percent of high-tech industry needs.
Truong Thi Chi Binh, Deputy President of the Vietnam Association for Supporting Industries also said that mechanical and supporting industry enterprises now have great opportunities since Vietnam joined various free trade agreements, which can provide mechanical enterprises with more advantages in exports and in attracting foreign investment.
Leaders of the Vietnam Association of Mechanical Industry (VAMI) assessed that there are many capable enterprises in the fields of molds, mechanical components, electrical cables, plastic components, and technical rubber. Many of them have boldly made investments to improve production capacity to better serve foreign-invested (FDI) enterprises. However, the product quality of some domestic enterprises remains low, while production cost is high, resulting in low competitiveness. In addition, Vietnam still lacks large mechanical enterprises of international level that play a leading role in the field.
A VAMI representative admitted that “domestic enterprises face many challenges in technological innovation, improving labor qualifications and infrastructure quality”.
Therefore, the association proposed a support program that connects with potential buyers of each industry in order to help medium-sized companies to invest in expanding production, train human resources, and access new technologies. It is also advising equal investment incentives for domestic mechanical enterprises and FDI enterprises. In addition, the state should prioritize orders from Vietnamese mechanical enterprises, especially in public investment projects.
The VIA also proposed that the Ministry of Industry and Trade strengthen the development of downstream industries, including the energy industry, the precision engineering industry as well as some mechanical industries. This will attract multinational corporation investment in large-scale projects in Vietnam.
The expansion of the domestic supporting industry market is expected to pave the way for participation in the supply chains of producers and assemblers of final products.
In the coming period, Vietnam will carry out important projects with large total investments such as:
Electricity planning for the 2021-2030 period at about US$133 billion, high-speed railway of US$50 to US$60 billion, urban railroads, traffic, irrigation, oil and gas works marine economy, and also shipbuilding, automobiles and motorcycles. This will be a great opportunity for Vietnamese mechanical supporting industry enterprises to join in the supply chain.
VietNam Economic News