The Vietnamese mechanical engineering industry is in dire need of investment to avoid falling into the hands of foreigners, according to the chairman of the Vietnam Association of Mechanical Engineering Industry Nguyen Van Thu.

The Government has long considered the mechanical engineering industry a key sector for development, ratifying strategies by which domestic production could meet 40-50 percent of total domestic demand by 2010.

However, the industry had so far managed to meet only 20-25 percent of the country's total demand for mechanical engineering products, Thu said, attributing the failure to unfocused and scattered investment as well as high credit interest rates.

"A lack of a strong manufacturing facility has also hindered industry growth," Thu added.

He said that the Government had so far decided to offer preferential credit policies to nine projects, but that only three had been able to access loans.

Demand for Vietnamese mechanical engineering equipment, especially at coal-run power plants, is very big.

While combined coal-run power plant capacities are forecast to reach 106,000MW by 2025, it is estimated that the total equipment costs related to both power and alumina production plants will reach roughly 100 billion USD.

If the country could design, manufacture and supply equipment for its coal-fired power plants, it would also be able to control investments in power plants, helping ensure national energy security and the reduction of the trade deficit, Thu said.

"Money spent on equipment and technologies related to thermal power plants account for between 75 percent and 80 percent while technologies change regularly. It would be a heavy but revenues-attractive task for contractors to undertake engineering, procurement and construction (EPC) agreements."

However, most Chinese firms are working as EPC contractors, or as big investment partners to 41 large-scaled projects in Vietnam, mostly related to thermal power.

To develop a fruitful market, Thu said, the domestic industry must improve its ability to manufacture synchronous equipment with advanced technology.

An investment boost in equipment and technology for casting and forging was also necessary for the mechanical engineering industry to further develop, he said./.