The difficulties of mechanical product processing industry in Vietnam

With the mission to provide all necessary equipment for agro-forestry-fishery sectors, or even for the tourism, services and transportation sectors in our country, Mechanical engineering development orientation is considered one of the top priorities in Vietnam. Currently, there are many foreign companies investing in this industry, among which Cam International Co., Ltd, a 100% Singaporean owned company, specializing in metal working, processing and coating, is currently operating in Kizuna Serviced Factory, Long An Province. Therefore, the State always encourages and motivates enterprises to invest in order to make this industry a spearhead industry of our Country.

However, the field of manufacturing mechanical products in our country still faces many challenges in promoting the development.

1. Investment capital shortage

Mechanical engineering enterprises and facilities in Vietnam are facing a lot of difficulties as this industry requires a large initial capital while capital recovery lasts for a long time due to long production cycle. Therefore, most of the enterprises in this field operate at a small scale, in household type with small number of workers resulting in monotonous and uncompetitive products in the market. Most of the products are simple equipment such as pressure pipeline, tole welded, rolled products, etc. but not workpieces or molds. Particularly, there are up to 97% of enterprises in micro type in Ba Ria province according to a survey of the Department of Industry and Trade in 2016 conducted at 330 mechanical manufacturing facilities.  In which, about 70.31% of enterprises have capital under 1 billion dong and 26.56% of enterprises have capital from over 1 billion to less than 10 billion dong. These figures indicate that the State needs to support enterprises in investing capital in this key industry.

2. Inconsistent investment in the industry

The investment in mechanical engineering over the last years has not been synchronous and consistent in all provinces across the country. According to Mr. Nguyen Manh Quan, Director of Heavy Industry Department under Ministry of Industry and Trade, our country now has about 3,100 mechanical engineering enterprises out of 53,000 facilities in this field. Among which, there are nearly 450 state-owned enterprises, 1,250 collective production facilities and 156 self-trading factories. In addition, only about 50% of manufacturers are specialized in fabrication and assembly while the rest are mostly repair facilities. As a result of fragmentation and inconsistency in investment in this industry, the linkage between facilities is not powerful enough to promote the whole industry’s growth.

3. Backward machinery

Generally, machines and equipment for processing mechanical products in the country are quite backward compared with other countries in the same region. Hence, it difficult for manufacturers to produce high-value finished products, leading to the failure to form key groups of products with competitiveness in the market. At the same time, as a member of WTO and the fact that Vietnam is entering into Trade Agreements such as the FTA, mechanical engineering industry is bound to pose huge difficulties and challenges in competing with other countries in the world, especially in ASEAN region. Therefore, machinery innovation for improving products’ quality, creating high value and competitive items is so urgent that investors need to pay attention and deploy immediately.

4. Poor human resource quality

The technical level in our country is quite weak and limited as most workers are not trained properly, but often self-trained. Therefore, Vietnam’s labor resources are not fully met the demand of operating hi-tech equipment requiring high technical level, professional skills and concentrated production capabilities. This is considered as one of the most serious issues affecting the production and economic efficiency of the mechanical processing industry in our country. Therefore technical and professional training for workers in this field is also an urgent issue to which attention should be paid by enterprises.

Finding the right solution and direction for the mechanical engineering industry is really a difficult problem for our State and investment enterprises. At present, our State is proposing and issuing many supporting policies for mechanical engineering facilities and enterprises nationwide. Hopefully, this industry with the State’s support will become one of the key industries, helping Vietnamese mechanical products reach out to the world in near future.

By Marketing Department – Kizuna JV Corporation