Illustrative image (Photo: VNA) While the sector's technical capacity has made leaps and bounds in recentyears, gradually becoming a major supplier for highly advanced domesticindustries, a key issue remained as it has not been able to utilise economiesof scale to bring down costs and further integrate into the global supplychain.
Do Quang Hoa, leader of a mechanic team in one of many factories located in thenorthern industrial hub of Bac Ninh province said his company's biggest fear isnot having enough work.
It usually takes a huge amount of investment to build a factory, set upmachines, and train skilled mechanics, he said. Not having enough work makeseverything expensive for the company and hurts its ability to compete in themarket.
In addition, small and medium-sized companies such as Hoa's were almostentirely dependent on larger companies. It has resulted, according to him, inmechanical firms willing to sell at lower-than-cost prices just to maintainproduction.
He said it's likely the single most important hurdle to overcome for hundredsof mechanical companies in Vietnam, holding them back from reaching their fullpotential.
Hoa's opinions echoed a report on the sector by the Ministry of Industry andTrade last year, in which the ministry highlighted major barriers to overcomefor mechanical firms including higher set-up costs, longer cashflow cycles,advanced technologies, and very high cost of training.
In addition, the sector's products were typically difficult to sell compared toconsumer products. The difficult environment resulted in just a handful ofVietnamese brands, which were mostly small-to-medium in size, unable to competewith larger international brands even with home-ground advantages.
The ministry said the sector's major weaknesses were subpar product quality anda lack of core technologies. In the absence of large mechanical firms, capableof leading and improving the industry's standards, Vietnamese firms have beenfalling behind in the research and development game, leaving them entirelydependent on foreign inventions and technologies.
According to the ministry, the country's domestic mechanical firms onlyaccounted for 32% of Vietnam's market share. In addition, they accounted foreven less share in the sector's output value at just 18% and declining by theyear, showing major shortcomings and limitations in their operations.
To add insult to injury, the government has been slow, or inefficient, inimplementing support policies to speed up the industry's growth, according tothe Vietnam Association of Mechanical Industry (VAMI).
VAMI urged the government to play a more active role in supporting Vietnamesefirms including lowering the barrier of entry to participate in domesticprojects and setting a quota for made-in-Vietnam products, to be used in suchprojects.
"We have observed a lack of collaboration and connection amonggovernmental ministries, science and technology institutes, and universities intraining a skilled workforce for the sector." said a spokesperson fromVAMI.
The association said while many State-owned companies enjoy key advantages suchas infrastructure, financial capital and skilled workers, management has oftenbeen found inadequate, causing waste and inefficiencies.
Meanwhile, private-sector companies lacked a clear development path and oftenfailed to communicate or collaborate with their peers, leading to several firmsinvesting in producing the same products, with little added value to competewith imported rivals.
Huynh Quang Nhung, deputy director-general of THACO Industries, one of thecountry's leading mechanical companies, said most Vietnamese firms have not metthe standards to supply parts to major manufacturers operating in Vietnam.
"Our approach to solving this issue is to actively seek capable partners,which allows us to not have to invest in parts they can already make. Our jobis to build a strong brand, find new markets and come back to work togetherwith them to grow." Nhung said./.
VNA
