Power plants create opportunities

Vietnam will have a large market for domestic equipment manufacturing
with the planned development of 70 coal-fired power plants within the
next 15 years, according to mechanical engineering experts.

Under the national electricity development plan for 2006-15, more than
40 coal-fired power plants with capacity of 600MW or more will be
constructed in the country.

Between 2015 and 2025,
another 30 coal-fired power plants will begin producing power. With this
considerable development, demand for coal-fired power plant devices
from now to 2025 will increase.

Deputy Minister of
Industry and Trade Do Huu Hao said the domestic mechanical engineering
industry has seen significant growth in equipment manufacturing for
thermal power, reaching capacity of 600MW.

Domestic
businesses, such as the Corporation for Industrial Machinery and
Equipment and Vietnam Engine Agricultural Machinery Corporation, have
made a number of important devices such as engines, gear boxes and fan
pumps.

The domestic mechanical engineering industry
has built around 50 to 70 percent of the country's standard equipment
needs, such as lifting buckets, conveyor belts, storage devices and dust
filtration equipment.

Although Vietnamese enterprises
have the capacity to produce a significant portion of the equipment
needed for coal-fired power plants, generally only 40 percent of the
equipment used by the coal-fired power projects that are under
construction are from domestic enterprises, accounting for only 25
percent of the total value.

If domestic enterprises do not develop, they will fail to take advantage of a great opportunity.

Ngo Van Tru, deputy director of the Department of Heavy Industry under
the Ministry of Industry and Trade said domestic firms without an
understanding of design would not be able to contribute anything.
Domestic firms need time to study in order to participate in power plant
design.

Director of the Centre for Design and
Machinery Manufacturing Technology under the Ministry of Industry and
Trade Hoang Van Got outlined some local production schemes and added
that rather than becoming sub-contractors for foreign contractors,
domestic firms should plan to work with foreign partners to design and
manufacture boilers.

Domestic firms could also
manufacture the auxiliary devices for turbine generators with support
from foreign consultants. This plan could lead to domestic production of
40 percent of project value, he said.

He also
proposed measures to assign domestic joint venture companies as
Engineering, Procurement and Construction (EPC) contractors to ensure
active implementation of Build and Transfer Technology plans.

Engineering enterprises have also proposed an increase in domestic
production of supplies for thermal power plants in Vietnam .

Incentives should be offered by including required conditions in
international bidding and encouraging the establishment of centres for
mechanical equipment manufacturing./.

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Chemical analysis labs need more domestic equipment

HCM CITY — Viet Nam should manufacture more machinery for chemical analytical laboratories as the market for such services is huge, experts have said.

Phung Minh Lai, deputy head of the National Agency for Science and Technology Information, said the annual growth rate of Viet Nam's chemical industry would be between 10 per cent and 15 per cent in the next few years.

As part of a chemical industry development plan, the government has set up production targets for the petrochemical and pharmaco-chemical industries by 2020.

The Ministry of Health estimates that the total value of drug consumption in Viet Nam this year could reach nearly US$1.5 billion.

The growth rate of the pharmaceutical industry has reached 15 per cent annually in recent years, but the scale of the industry still has been small.

The industry mostly produces typical pharmaceutical products with simple technology, according to Lai.

To reach the target, the Government will invest around 11 million euros (US$14 million) in the industry by 2015.

These include funds for many projects, including six phamarceutical production plants, some of which would make antibiotics and sorbitol products.

Moreover, pharmaceutical companies are looking for foreign partners to help them put biotechnology into actual practice.

For the petrochemical industry, Viet Nam has built three plants during the first phase, and the second phase will be implemented by 2015.

The government also will invest nearly 30 million euros ($38 million) in environmental-research projects, including water and sewage treatment as well as solid waste management.

Viet Nam has applied biotechnology in the agricultural and aquacultural sectors as well as the food processing industry.

Because water and food safety certification are two areas with high demand, where laboratories and modern equipment are necessary.

Currently, the State is investing in building 17 main laboratories, but Lai said this was insufficient.

Most of the equipment now in use was imported from Europe and Asia.

Nicole Klammer, head of the Analytica Viet Nam Project, said the country needed an outstanding platform for the analytical lab field.

Analytica Viet Nam on April 7-9 next year will hold a fair to display a variety of equipment that can be used in the country. — VNS

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Industries ignore local content

A worker operates equipment for the Tan Mai Paper Group. Most of the equipment in the paper industry is imported because it's cheaper than the locally-made alternatives. — VNA/VNS Photo Ngoc Ha

HCM CITY — Key national projects in several sectors are being implemented with little or no input from the domestic sector in the supply of equipment or materials, and this could have long-term consequences for local industries, experts have warned.

Local enterprises are unable to win equipment and material supply contracts for projects despite having the capacity because they are hampered by high taxation, poor marketing and inadequate legal support from the Government.

When the Government launched a campaign last year to promote the consumption of Vietnamese goods and services, hopes were raised that it would boost the prestige of Vietnamese brands and open up fresh opportunities for production and trade in the domestic market.

While the campaign has been successful in boosting the image and consumption of consumer goods, other sectors like mechanical engineering, construction and materials supplies have not benefited, especially in terms of participating in major national projects.

Nguyen Van Thu, chairman of the Viet Nam Association of Mechanical Engineering (VAMI), said Vietnamese enterprises had enough experience to implement big projects, however most of them lost their bids.

For instance, he noted, 10 thermal power plants each with a capacity of 300MW were being built by Chinese contractors, because Vietnamese firms were denied a level playing field.

Pham Thi Loan, member of the National Assembly's Finance and Budget Committee, noted that 30 Chinese companies were participating in 42 key projects at present.

The Chinese contractors did not use Vietnamese materials, equipment or labour, Loan said.

Many enterprises in the petroleum and gas industry were capable of building drilling platforms. They have won contracts to build such platforms in Malaysia and other countries, but could not win contracts to do the same at home, said Pham Thi Thu Ha, deputy general director of the Viet Nam National Oil and Gas Group (PetroVietnam).

She blamed improper taxation policies for preventing domestic companies from supplying materials and equipment for big projects.

At present, Vietnamese companies have to pay a corporate income tax of 10 per cent as opposed to 5 per cent for foreign contractors.

Therefore, local equipment and machinery were more expensive than those imported from abroad, Ha said.

Recently, PetroVietnam paid US$182 million to purchase an old oil rig from Singapore. This was cheaper than the money needed to build a new rig in Viet Nam because tax payments alone amounted to $40 million, Ha said.

Nguyen Viet Duc, deputy general director of the Viet Nam Paper Corporation, said domestic enterprises did not pay attention to marketing activities so their products were not known widely.

"When the paper industry planned to develop major projects, many foreign companies came to us and introduced their products while we did not receive any Vietnamese companies," Duc said.

Agreeing with Duc, Ha said domestic enterprises' marketing activities were so weak that both project investors and equipment suppliers did not know each other well. This result was that the country had many kinds of materials that were manufactured domestically with high quality and cheap prices but project owners were not aware of them.

The chairman of the Sai Gon Beer Company, Nguyen Van Thi, attributed domestic enterprises' failure in equipment and materials supply bids to poor after-sales services.

His company each year spent about VND3 trillion ($153.8 million) on renewing equipment and machinery. The company's bids were mostly won by foreign companies because of good after-sales services, Thi said.

Foreign enterprises also won material supply contracts because their bids for major projects were prepared by experienced and skilled foreign consulting companies, said Bui Kien Thanh, a senior financial expert. The bids were thus more professional, clear and confidence-inspiring for project owners than amateurish efforts by Vietnamese firms.

Consequently, Vietnamese enterprises could only become sub-contractors, Thanh said.

He also said that very high kickbacks was another reason that made it difficult for domestic enterprises to win equipment supply contracts for big projects.

While the Government has issued many regulations and policies to encourage the use of home-made materials and equipment for domestic projects, the lack of detailed guidelines have rendered them ineffective, experts said.

They said the Government has to take urgent action to address all the inhibiting factors, failing which, domestic equipment and materials industries will continue to be a non-player in their own backyard. — VNS

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