Giving trust and "unleashing" the mechanism for domestic contractors

Speaking with the Industry and Trade Newspaper, Mr. Vu Van Khoa - Deputy Director of the Institute of Mechanical Engineering Research (Ministry of Industry and Trade) said that, more than ever, Vietnam needs domestic enterprises that are large enough, have the capacity to compete, reach international standards, have brands, play a core role, and lead the industrialization and modernization process. To do so, it is necessary to build mechanisms and perfect policies, especially to solve the bottleneck in the mechanism for evaluating contractor capacity.

Mr. Vu Van Khoa - Deputy Director of the Institute of Mechanical Research (Ministry of Industry and Trade). Photo: Can Dung

Sir, why have businesses and corporations not yet demonstrated a prominent role in leading, motivating, paving the way, guiding, attracting, and promoting the development of other components? Where are the difficulties, especially in the mechanical industry?

Mr. Vu Van Khoa: In the field of automobile, motorbike and hydroelectric mechanical engineering, we have a number of strong corporations such as VinFast, Truong Hai, Thaco, Huyndai... or the Institute of Mechanical Research, Vietnam Engine and Agricultural Machinery Corporation, Song Da Corporation... These enterprises and corporations have created jobs for many satellite enterprises and workers.

But in many other areas, we do not have enterprises strong enough to lead the manufacturing industry. Currently, enterprises are only processing basic technology, not capable of industrial autonomy, and technology is completely dependent on foreign enterprises.

In the country's major projects in the fields of energy, urban railway infrastructure development, and high-speed railways, FDI enterprises still depend on them as general contractors, while domestic enterprises do simple work. As such, the surplus and technology content brought about are also very low.

To develop, in my opinion, we need to first build mechanisms and policies to protect the market and create businesses that lead and are "leading cranes" in many different areas of the economy.

However, at this time, there is a bottleneck in Circular 03/2025 of the Ministry of Planning and Investment on contractor capacity assessment. In which, it is clearly stipulated that the capacity of the general contractor is limited, each member participating in that work must have capacity. However, new items such as biomass power, high-speed railway, urban railway, we have not done before, so domestic enterprises have experience.

So, all that work will be done by foreign contractors as general contractors and we will only be subcontractors.

Therefore, I propose to change this condition, possibly by allowing the contractor to participate in a job that has never been done before, but the general contractor or all other contractors in that consortium are qualified, experienced and committed to taking responsibility, then domestic enterprises can participate in implementing large projects and key programs of the country.

With our experience, the fastest and cheapest way to acquire science and technology is to cooperate with companies that have foreign core and basic technologies; when participating in economic contracts, foreign partners will have to "pay their dues" on economic contracts regarding technology.

Our experts will learn the shortcut and move on to stage one, which is to get a handle on the job and then move on.

Currently, our country has about 25,000 mechanical enterprises operating. It is forecasted that the market size of Vietnam's mechanical engineering industry in the period of 2019 - 2030 will be about 310 billion USD. How do you evaluate this powerful force of mechanical enterprises to be able to lead and act as a bridge for the development of the key industry?

Mr. Vu Van Khoa: Before going into the main content, I will tell the story in 2003 after Decision 797/400 of the Ministry of Industry and Trade and then Program 1791 of the Prime Minister, all equipment for our hydropower industry depended on foreign sources and the selling price was very high.

We were assigned by the Minister of Industry and Trade at that time to learn from experience and were given a budget of 157,000 USD, but later, we only used 150,000 USD.

The unit surveyed all businesses from Japan, Korea, Norway, Germany, Russia and Ukraine... - the hydropower powers and then chose Ukraine as a partner. The partner was willing to share, train, and guide, however, domestic businesses did not support because they thought we could not design.

Then, under the leadership of the Government and the Ministry, we designed and built 29 projects. We mastered the design, of course the manufacturing cost of the product will be lower, from which the investment level will also be reduced.

Like Son La Hydropower Plant, which generated electricity 2 years earlier, the amount of money worth tens of thousands of billions was put into operation early, saving a lot of interest, providing electricity for the country and creating a lot of jobs for mechanical enterprises at that time.

That is, we have mastered the design, everything is very cheap, investment costs are cheap, we are proactive.

Back to the question, in my opinion, with current resources, domestic mechanical enterprises can carry out large, complex jobs in large projects that have been bid for and almost belonged to foreign enterprises.

As can be seen, if we trust the domestic mechanical business team, if there is a suitable mechanism, we will be able to control it and the country will save a lot of money.

An auto parts production and assembly line in Vietnam. Photo: Thang Nguyen

For the "leading cranes" which are private enterprises, what solutions should we focus on to clear the bottlenecks and shortcomings that hinder business development, especially for industrial production enterprises, sir?

Mr. Vu Van Khoa: Firstly , for industrial manufacturing enterprises, it is necessary to build goals as well as long-term implementation plans. Gradually acquire technology and have their own research centers to invent, create, and proactively change.

At this time, items from cars to clothes, apparel or all appliances change very quickly according to customer tastes. I think that, with the world economy in general and Vietnam in particular, we should use the term flexible manufacturing rather than smart manufacturing so that the same set of machines can produce different items.

Second, the enterprise must build its brand with a commitment to quality; not only in the domestic market but also in foreign markets, because that is also a promotional channel to expand production. Having penetrated foreign markets, it will be possible to sell more goods, the demand will be high, the more production will be, the lower the production cost will be, so the goods will be more competitive.

Third, private enterprises are following the trend, so they keep stepping on each other's toes and making duplicate investments. Therefore, there must be a State policy to guide enterprises and industry associations to coordinate like in foreign countries, with each person producing one product.

Currently, participating in supply chains is not easy, we have to meet quality, progress and price standards. Meanwhile, domestic enterprises are mostly small, medium and micro enterprises, investing in equipment, machinery and applying the standards of multinational corporations like Samsung is very difficult.

That's why there's a story about "domestic enterprises not being able to produce screws for phones", but in fact it must be clarified, because people require such quality, with a production of millions of pieces in a very short time, no enterprise can keep up; but if we do less, our enterprise is completely capable of doing it.

Even FDI enterprises investing in Vietnam such as Samsung, for example, the companies that provide technical support to the Samsung complex are "backyard" companies. It is very difficult for Vietnamese enterprises to participate in their chain, or if they do, they only participate in simple technologies, a very small part.

The State needs to have a mechanism for enterprises to participate in the chain themselves, and cannot use administrative orders to force FDI enterprises to let this or that enterprise of ours participate. We must compete equally, because now in the market economy, they are also for profit.

Building a "leading crane" is considered a decisive step towards the goal of developing an increasingly strong Vietnamese business force, becoming the backbone of the country's economy in general and spearhead industries in particular. Could you please share your recommendations and proposals for state management agencies to improve the capacity of businesses and support efforts to build them into strong businesses?

Mr. Vu Van Khoa: Firstly, we need to create "bait" for businesses through markets, capital, training or policy mechanisms. In my opinion, at this point, to build businesses that are truly the backbone of the country's economy in general and key industries in particular, the most important step is to have a market.

Even VinFast is struggling to sell electric cars in the Vietnamese market, it is not easy. We have to create a market by issuing policies or creating opportunities for domestic enterprises, especially key enterprises, to participate in major national programs.

For example, we are now implementing the Power Plan VIII, developing infrastructure, especially urban railways and high-speed railways... we should also create conditions for businesses to participate, when there is a market, businesses will invest on their own.

Second, we must "untie" the Law on Bidding. We must change the conditions on contractor capacity in Circular 03 of the Ministry of Planning and Investment.

Because the Power Plan VIII or high-speed railways and urban railways all have to be bid and cannot be appointed. If this condition is maintained, Vietnamese enterprises will only be subcontractors.

Third, state agencies must support businesses in forecasting the market. The Ministry of Industry and Trade is doing a very good job in this regard. Specialized units and trade offices around the world have provided complete and timely information, becoming a channel for providing useful information to businesses.

As for financial or other issues, businesses will have a way to do it.

Thank you!

Source: https://congthuong.vn/trao-niem-tin-coi-troi-co-che-cho-nha-thau-noi-dia-348015.html