Le Duong Quang, deputy minister of Industry and Trade, made this statement at a conference on developing a support industry for Viet Nam's mechanics sector held in Ha Noi yesterday.

Quang said the industry still faced difficulties, even though the Government has paid much attention to its development and created several policies to support it.

"In reality, these policies have had only limited effects on industry development," he said, adding that it was because the country was embarrassed to clarify key mechanics sector for the supporting industry.

The mechanics sector operates in many areas, producing everything from shipbuilding to household products.

"We have not chosen any key products to focus on," he said.

In addition, the Government has thought about increasing the localisation rate for some products but has no solutions to help the industry participate in the global supply chain.

"Most Vietnamese mechanics businesses are small- and medium-sized enterprises which lack a long-term strategy. They compete with each other in terms of price, but not key products or technology renovation," he said.

However, the deputy minister said the sector's potential was huge, as the country's yearly import turnover is US$100 billion, of which machines make up 20 to 23 per cent.

In the past two years, several foreign-invested enterprises, especially in Japan and South Korea, made efforts to co-operate with local businesses in the sector.

Pham Anh Tuan, director of the ministry's Heavy Industries Department, shared the ideas, adding that Viet Nam has favourable conditions to attract foreign investment, especially from multinational companies from Japan and Southeast Asia.

Statistics from the Ministry of Planning and Investment's General Statistics Office showed that the country now has about 3,100 businesses operating in the mechanics sector.

State-owned mechanics enterprises, which occupy a key role in production, are concentrated in Ha Noi, HCM City and Hai Phong.

This sector has $360-380 billion invested in it with FDI capital worth $2.1 billion. Half of this investment goes into automobile and motorbike assembly and the production of other items for consumption.

"Local mechanics technology is about two or three generations behind other countries in the region. Imprecise machines have been used for years," Tuan said.

He said the country should take advantage of science and technology achievements when choosing a suitable investment to develop the sector.

Talking about the automobile industry, which accounts for a big investment in the mechanics sector, Tran Ba Duong, chairman cum general director of Truong Hai Automobile Company, said the industry had been expected to have a high localisation rate of 40-60 per cent in 2010 while meeting 60-80 per cent of domestic demand.

"However, the localisation rate last year was only 25 per cent even though the industry had some competitive products such as Thaco, Vinaxuki and Vinamotor," he said.

He suggested that the Government should create policies to help domestic companies co-operate with big automobile firms in the world. This would help them use new technology and increase exports, especially in the ASEAN market.

In addition, some industrial zones (IZs) specialising in automobile mechanics should be established to encourage foreign direct investment into the IZs, he added.

A representative from South Korean Doosan Vina Company said they wanted to co-operate with local firms in supplying materials as they had to import about 90 per cent of materials from countries with advanced and brandname technologies.

He proposed that the Government should have policies to encourage consumption of locally-made products to promote the mechanics industry's development.

He suggested that to resolve shortcomings in bidding mechanisms, the Government should ask domestic EPC contractors to buy a certain percentage of locally-made machines, materials and services.

He said experiences from other countries showed that the percentage should be 50 per cent for thermoelectricity projects and 40 per cent for oil refinery or chemical ones.

Participants also agreed that mechanics businesses should build a close network of co-operation in order to develop better.

Policies relating to the support industry should be reviewed and supplemented to create more favourable conditions for businesses and ensure long-term stability.

Enterprises in the sector should be proactive in building strategic relationships with others to renew their technology and improve products' quality.

Source: VNS