Mechanical enterprises still have many weaknesses.
Mechanical engineering is one of the industries with a long history and is identified by the Party and State as a "backbone" industry, playing the role of a driving force leading the growth of the national economy, expanding production and business, especially some industry groups such as mechanical molds, high-tech mechanical engineering, machinery, equipment, spare parts, etc.
However, although the industry has a lot of room, diversifying and expanding the market for businesses in the mechanical industry is still very difficult due to fierce competition from foreign businesses due to insufficient competitiveness, not being able to build a brand and be known by many potential customers.
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At the August 2023 trade promotion conference with the system of foreign trade agencies with the theme "Promoting the export of mechanical products" on August 31, Mr. Nguyen Chi Sang - Vice President and General Secretary of the Vietnam Mechanical Engineering Association said that the current import and export figures of the mechanical engineering industry are large but most of them are in the FDI enterprise sector, the proportion of Vietnamese enterprises is still modest.
Through practical work, Mr. Nguyen Chi Sang said that foreign customers identified many limitations of Vietnamese mechanical enterprises. Among them, limited customer search skills; no traditional products; no sales representatives in blocks and no close connection in customer search; reluctance to change production scale and limitations in using e-commerce to serve production and business. In particular, Mr. Nguyen Chi Sang emphasized that Vietnamese mechanical enterprises still have some "chronic" weaknesses, such as: Competition mainly based on labor and material prices depending on China; enterprises do not fully understand the provisions of trade law of some markets such as the EU, the US, Africa, etc.
“ With those difficulties, we propose that the Vietnam Trade Office in foreign markets strongly support domestic mechanical enterprises, especially in providing market information ,” said Mr. Nguyen Chi Sang.
At the same time, the Vietnam Mechanical Association further proposed that the Ministry of Industry and Trade should support connecting businesses in the industry with foreign buyers. Support businesses to participate in e-commerce channels; support the synthesis of data and market demand. “There should be policies to support domestic businesses to participate in forums, seminars, international trade promotion programs; train businesses on trade promotion and trade regulations in foreign markets. In particular, the Vietnam Trade Office abroad should have more activities to support the promotion of Vietnamese businesses and mechanical products in foreign markets ,” said Mr. Nguyen Chi Sang.
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| Mr. Nguyen Chi Sang - Vice President and General Secretary of Vietnam Mechanical Association |
On the side of the Vietnam Association of Supporting Industries (VASI), Ms. Truong Thi Chi Binh - Vice President and General Secretary of VASI informed that this year, the mechanical product market has decreased by about 20% of orders, some enterprises have decreased orders more severely from 30-40%. However, the mechanical sector also has many new customers due to the shift in production. Meanwhile, the capacity of domestic enterprises has had positive changes. Along with that, many production stages of Vietnamese enterprises are capable of competing with Chinese and Indian enterprises.
According to Ms. Truong Thi Chi Binh, the new and potential market for Vietnamese mechanical products is the UAE. This is an easy-to-access market because there are not many complicated standards and the prices are good. The United States is also a potential market for exporting Vietnamese mechanical products. " However, businesses are facing difficulties in payment in the UAE market, while the US market, although having a large demand, has high requirements. Therefore, support from the trade office is needed so that businesses can seize the opportunity to access the market and meet the requirements of partners ," Ms. Binh suggested.
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| Ms. Truong Thi Chi Binh – Vice President and General Secretary of VASI |
Representing local mechanical enterprises, Mr. Dinh Hong Quan - Permanent Vice President, Bac Giang Province Mechanical Enterprises Association also said that most mechanical enterprises in Bac Giang province are small in scale, with limited ability to recognize opportunities and connect with partners. Bac Giang is also an attractive destination for FDI enterprises, these enterprises enjoy many incentives on tax and land, creating great competitive pressure for domestic enterprises.
The Bac Giang Mechanical Enterprises Association currently has 40 member enterprises and partners that have manufactured advanced equipment used in the fields of hydropower, wind power, waste incinerators, etc. To promote this strength, Mr. Dinh Hong Quan proposed that the Ministry of Industry and Trade create conditions for enterprises belonging to the Association to participate in trade promotion programs related to these products.
In addition, “ local departments and branches should coordinate to create conditions for enterprises to utilize and exploit land areas inside and outside industrial clusters. When land is allocated or leased, and enterprises are allowed to independently produce and do business, they only need to ensure the conditions according to the Enterprise Law and report to the Department. There should be appropriate policies for FDI enterprises to increase the localization rate by a certain percentage,” Mr. Dinh Hong Quan further suggested.
Build export strategies suitable for each market
Mr. Nguyen Manh Hung - Chief Representative of the Vietnam Trade Promotion Office in New York said that the mechanical engineering sector plays an important role in the US economy, especially the automobile manufacturing industry. The future trend in the US mechanical engineering sector is to apply advanced technology, produce electric vehicles, especially focus on producing sustainable and environmentally friendly products.
In addition to being a major manufacturer of mechanical engineering, the United States is also a country with diverse import needs, imported products are industrial machinery, civil aircraft, computers, semiconductor accessories, agricultural machinery, paper industry; automobiles, auto parts. Thus, there is still much room for export to the US market, domestic enterprises need to proactively source goods, comply with market regulations; have quality certificates to ensure safety standards, depending on each specific industry and product. On the other hand, Enterprises need to produce according to sustainable standards, harmonize with international standards; participate in export promotion fairs. " The Trade Office will accompany and coordinate with enterprises to promote trade promotion activities so that mechanical products can easily access the US market ," said Mr. Hung.
Regarding the Philippine market, Mr. Phung Van Thanh - Commercial Counselor, Vietnam Trade Office in the Philippines said that the Philippines is currently a potential market for Vietnam's mechanical products because this country is in need of developing key industries such as mining, shipbuilding, refrigeration, household appliances, and transportation. In the coming time, to successfully penetrate the Philippine market, businesses need to proactively research market demand, develop specific market development and marketing strategies. " The Trade Office will provide information about trade fairs and exhibitions, organize research delegations, study the market, provide legal support; build a Vietnam - Philippines business club to connect and reduce necessary costs for export businesses ," said Mr. Thanh.
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| Representatives of Vietnam Trade Offices, Vietnam Trade Office Branches, and Vietnam Trade Promotion Offices Abroad share market information. |
Japan is a traditional export market for Vietnamese mechanical products. The export turnover of mechanical products accounts for 5% of Vietnam's total export turnover to Japan. Mr. Ta Duc Minh - Commercial Counselor, Vietnam Trade Office in Japan informed that Japan is currently implementing a new policy to avoid dependence on China for supply and expand to ASEAN countries, including Vietnam.
On the other hand, Japanese mechanical enterprises are mainly small and medium-sized, long-standing, the owner of this enterprise wants to transfer, but in a country with an aging population, this is relatively difficult, so he is oriented to Vietnam to find opportunities for production cooperation. " The macro-level commitments between the two countries give Vietnam an advantage in attracting investment from Japan ," said Mr. Ta Duc Minh.
Despite many opportunities, the Vietnam Trade Office in Japan also pointed out some challenges, that is, Vietnam's mechanical industry still depends on imported raw materials such as high-tech steel and aluminum, which is a weakness for the development of the industry. Therefore, in the coming time, the Trade Office recommends that domestic mechanical enterprises need to invest more in research and product development to proactively source raw materials, increase production capacity to be able to process high-value products and be more equal with Japanese enterprises, thereby increasing opportunities to participate more deeply in the global supply chain.
Regarding the Czech market, Ms. Nguyen Thi Hong Thuy - Commercial Counselor, Vietnam Trade Office in the Czech Republic said that the Czech mechanical industry is professional, modern and large-scale, with a high level of digitalization. The Czech Republic is capable of domestically producing complete products, especially cars, airplanes, ships, trains, etc. The strength of Czech mechanical products is that they are of international quality and cheap...
“ The Czech mechanical industry is both modern and traditional, so there are many opportunities for cooperation. In particular, the Czech Republic considers Vietnam an important partner, so Vietnamese enterprises have many opportunities to approach and cooperate with Czech partners ,” said a representative of the Vietnam Trade Office in the Czech Republic. However, due to the long geographical distance, Czech manufacturers have optimized and minimized downtime, so direct investment in production to be present in the Czech Republic or cooperation with Czech partners to produce in Vietnam is an effective form of cooperation.
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| Deputy Minister of Industry and Trade Do Thang Hai speaks at the Conference |
Explaining the association's recommendations at the Conference, Mr. Ngo Khai Hoan - Deputy Director of the Department of Industry - Ministry of Industry and Trade, said: In the past, the Department of Industry has coordinated to implement many support programs for the mechanical industry, especially trade promotion for processing and manufacturing enterprises. In addition, the Department has coordinated to implement activities to improve the capacity of enterprises, such as organizing training activities for consultants. After being trained, these consultants returned to their localities and spread this knowledge to domestic enterprises.
Since 2019, the Department of Industry has continued to upgrade the capacity improvement program for domestic enterprises according to current trends. From 2021-2023, it is expected to organize capacity improvement for 50 domestic enterprises to meet smart factory standards. On the FDI enterprise side, the Department has coordinated to implement 2 typical programs such as training mold engineers and participating in connections. Regarding the recommendations of associations on expanding the subjects and scale of participation in important specialized exhibitions. The leaders of the Department of Industry emphasized that they will research and have appropriate implementation activities in the coming time.
Speaking at the conference, Deputy Minister of Industry and Trade Do Thang Hai said: Due to challenges related to geopolitics, natural disasters, storms and floods... from the beginning of the year until now, especially in the first quarter of 2023, Vietnam's import and export have encountered many difficulties. However, with appropriate policies, proactiveness and efforts of enterprises, recent import and export results have been more positive month after month than the previous month.
In August 2023, the export turnover of goods is estimated at 60.92 billion USD, up 6.7% over the previous month, 7.9% over the same period last year. In the first 8 months of 2023, the export turnover of goods is estimated at 32.37 billion USD, up 7.7% over the previous month, down 7.6% over the same period last year. The import turnover of goods in August 2023 is estimated at 28.55 billion USD, up 5.7% over the previous month, down 8.3% over the same period last year.
In the first 8 months of 2023, the total import and export turnover of goods is estimated at 435.23 billion USD, down 13.1% over the same period last year. The preliminary trade balance of goods in August 2023 is estimated to have a trade surplus of 20.19 billion USD.
Deputy Minister Do Thang Hai also said that the monthly Trade Promotion Conference with the Vietnamese Trade Offices abroad with specific topics has increased the effectiveness of this activity. Similarly, the August conference with the topic "Promoting the export of mechanical products" focused on discussing solutions to develop exports for important products in the economy.
" With the opinions of the associations conveyed through today's event, the units under the Ministry of Industry and Trade and the Vietnam Trade Office will absorb, research and support businesses. On the other hand, businesses need to increase the use of the information provided, proactively participate in trade promotion activities to expand export markets for products. In addition, investing in the manufacturing industry to increase added value, and access the global supply chain more deeply " - Deputy Minister Do Thang Hai stated.
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