Mechanical engineering companies invited to strengthen cooperation

VIETNAM, July 6 – A factory of a mechanical engineering company in Hạ Long city, Quảng Ninh province. — Photo

HÀ NỘI — Domestic mechanical engineering enterprises should boost cooperation to improve their competitiveness and gain more market share, industry experts have suggested.

Nguyễn Quang Hiếu, general manager of PetroVietnam Marine Shipyard JSC (PV Shipyard), said Nhan Dan (The People) that there were huge opportunities for mechanical engineering companies to tap into the lucrative local market with a scale of up to billions of dollars.

Hiếu cited offshore wind power projects as a good example. He said Vietnamese companies could produce foundations for offshore wind turbines. Even a small-scale wind power project consists of around 30 to 40 turbines, and its turbine foundation system would require around 300,000 tons of equipment.

With each ton equaling $4,000 including the cost of materials, there would be an average of about $1.2 billion in market share for local mechanical engineering companies, Hiếu said.

Đào Phan Long, president of the Vietnam Mechanical Industry Association (VAMI), agreed. He said domestic mechanical engineering enterprises enjoy relatively abundant development potential.

Over the past 5 to 10 years, Việt Nam has spent around $40 billion every year to import equipment and machinery from abroad to serve the entire economic sector, including industrial production, agriculture, infrastructure construction, services and national security. This is a significant demand that few countries have, according to Long.

The country will also implement many essential and large-scale projects, such as the national electricity development plan for 2021-30, the Long Thành International Airport and the downtown railways, the works circulation and irrigation, which means the local mechanical market remains lucrative, according to industry experts.

However, the domestic mechanical engineering, mainly small and medium-sized, has failed to gain a larger share of the domestic mechanical market due to its limited financial capabilities, lack of equipment, weak links between businesses and insufficient government support policies.

LILAMA Corporation Managing Director Lê Văn Tuấn said mechanical engineering is a key industrial sector and the backbone of national development. However, the companies still had to find their way to expand due to the absence of a government resolution for the industry.

Increasing connectivity is essential

To gain greater market share, Hiếu from PV Shipyard said companies should develop an effective investment plan focusing on high connectivity.

For example, to manufacture large structural equipment such as foundations for offshore wind turbines, it is necessary for a mechanical engineering company to build a large factory which also includes a deep water port and has modern machinery. Each factory must have a capital of between 30 and 50 million dollars.

During this time, shortage of capital was a major weakness of most local mechanical engineering firms. So they needed to strengthen their cooperation to create strength, Hiếu said.

To solve the problem, Hiếu said, his company would partner with other companies with sufficient financial capacity, working in similar fields while using projects like mortgages to obtain bank loans.

Apart from closer business ties, a comprehensive industry development strategy is also vital, said Vice President and General Secretary of VAMI Nguyễn Chỉ Sáng.

The state’s preferential and protective policies have not met industry expectations, Sáng said, adding that VAMI would submit the government’s opinion on the publication of the Mechanical Engineering Law.

“When everything is legalized, government support policies for the industry will be implemented,” Sáng said.

Earlier, VAMI predicted that the total domestic mechanical market demand will reach about $300 billion by 2030. The need for machinery and equipment for industrial projects such as thermal power, hydropower, chemical, mining and mineral processing is about $120 billion.

Việt Nam has signed many trade agreements and multinationals are expanding to find joint venture partners and set up production plants in Việt Nam. The trend of shifting supply chains is a great opportunity for many businesses, including the mechanical engineering industry.

According to the Department of Industry of the Ministry of Industry and Trade, Việt Nam is home to around 25,000 operational mechanical engineering companies, representing almost 30% of the companies in the processing and manufacturing industry in the country. —VNS