Foreign engineering firms scope machinery and equipment market

Employees of Dong Phong Mechanics Co at work. Foreign investors are placing their attention on the Vietnamese mechanical engineering market.

The country for the first time hosted French businesses studying the local mechanical engineering industry. The French Trade Office (Ubifrance), which organised the trip, said the French firms would visit leading mechanical engineering groups and companies to seek co-operative opportunities.

In another move, 10 machinery and equipment producers from Germany, the US, South Korea, Britain and Italy are displaying products at an exhibition in the capital aimed at sourcing Vietnamese customers.

The government has so far shown priority towards growth of the mechanical engineering sector to serve industrialisation and development targets.

Last year, the country's import value in machinery and equipment reached $20 billion, equal to roughly 14 per cent of total import turnover. While market size remained small, a growth rate of 13 per cent revealed a positive outlook.

Chairman of the Vietnam Association of Mechanical Engineering Nguyen Van Thu said the country planned to invest in the construction of coal-fired and hydro power plants with total capacity of 108,100MW from now to 2025. Investment will also be focused on alumina production plants, expected to churn out roughly 15 million tonnes by 2025. Thu said total capital investment for such plants was estimated at roughly $100 billion.

If including chemical, construction and other industries, total investment capital would reach about $250 billion, he added.

Moreover, Deputy Chairman of the National Assembly's Economic Committee Nguyen Duc Kien noted that if the country implemented its $60 billion high-speed railway project, it would encourage the development of many industries, especially the metallurgical, mechanical engineering and automation industries.

However, to enter the potential market, the world's industrial giants will have to compete against Chinese counterparts. According to a study by the Centre for Economic Policy Research, China is Vietnam's largest machinery and equipment supplier, accounting for up to 30 per cent of the country's total import turnover. But the chance for the world's industrial giants to gain a market share in Vietnam remains open as most Chinese products are low-tech.

Ubifrance said French companies expected to enter Vietnam's mechanical engineering market as the country would surely enhance quality and productivity through the import of modern machinery and equipment from the world's major industrial countries in order to meet its target of becoming an industrial nation by 2020.