Supply industry needs to tap the global chain
Technological and financial limitations are major development constraints for the local supply industry, Bui Quang Chuyen, Chairman of the Viet Nam Engine and Agricultural Machinery Corporation (VEAM), tells VietnamPlus.
Where does the Vietnamese supply industry stand now?
The supply industry has progressed, but not yet caught up with the country’s development demands. This is partically due to limited technological standards and difficulties in finances.
In 2015, the Government issued Decree 111/CP that aimed to give fresh growth impetus to the industry, but many shortcomings persist, including inadequate the lack of preferential interest rates on loans for investment projects.
In addition, many localities do not have policies to encourage businesses to invest in the supply industry. There is no support for investment in technology, in technology transfer, or preferential tax policies, especially for agricultural machinery. For instance, there is no import tax refund on materials and fuels used to make agricultural machinery and other supply industry items.
FDI businesses regularly complain that it is difficult to find suppliers (of spare parts, accessories etc.) in Viet Nam. What can we do to be a bigger part of the production chain?
To join in the global supply chain, particularly in the automobile industry, hi-tech production knowledge is required so that we are competitive in terms of product quality, price, packaging and delivery. There are many other factors as well.
VEAM currently has three companies in the supply industry; Machinery Spare parts No.1, Pho Yen Mechanical JSC and Song Cong Diesel Company. About 70 per cent of the companies’ output is supplied to Japanese motorbike makers.
We know that the businesses will have to invest in high-tech machinery, with accuracy and capacity of foremost importance.
To acquire and use advanced technologies, VEAM has to send its staff and workers to training courses in foreign countries and hire experts to directly train workers here.
Were there foreign businesses specialising in agricultural machinery that bought VEAM shares during its recent initial public offering (IPO)?
Most of the 240 investors who took part in the IPO on August 30, 2016 were financial companies and several were involved in both the financial and automobile industries.
In fact, there were not any investors in agricultural machinery who bought VEAM shares because, even in Japan and the Republic of Korea, a lot of capital is required and profitability is not high in this industry.
However, we at VEAM also see it as a political task, and we will have to meet the demand for “Made in Viet Nam” agricultural machinery.
You say foreign businesses are not interested in agricultural machinery, but in fact, there is fierce competition from Chinese products. What do you think about this issue?
In the area of agricultural machinery, our strategic focus is on quality. To compete with cheap machines imported from China and India, we seek to develop our capacity and high-tech capabilities.
VEAM will not compete with similar products from China and India on price. Similarly, on the service side, we will focus on maintenance and meet the demands of users.
VEAM enterprises have been part of big joint ventures alongside Honda, Toyota and Ford… What can be done to go from this stage to becoming owners and access sci-tech advances? And can they join the global supply chain?
VEAM has sent its staff to a number of foreign companies, including Honda Vietnam and Toyota Motor Vietnam (TMC), to hold leadership roles and serve as members of executive boards in such joint ventures. Many VEAM staff are playing the role of managers or team leaders in production lines.
In Ford Vietnam, from the General Director to other key positions, there are Vietnamese personnel, therefore both grasps of technology and technology transfer are possible.
However, we are mainly interested in automobiles. We will focus on gaining experience, learning technologies and investing in the sector. As for motorbikes, I think volumes will fall after 2020 because the market will be saturated.
The country’s automobile industry is facing a lot of difficulties; isn’t it a bit adventurous for VEAM to continue focusing on this area?
VEAM has an auto factory in central Thanh Hoa Province, which is set to grow 20-30 per cent annually, mainly meeting the market demand for trucks. Our strategy is to invest in production through raising the localisation rate and improving the quality of trucks. In the future, we expect to manufacture buses. Trucks and buses are the two strategic vehicles for the future, as identified by the Government.
For small sedans, VEAM will continue participating in financial investments with joint ventures, such as TMV and Honda.