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Investment opportunitiesThursday, 03/10/2005, 12:27

Opportunities to invest in the engineering sector

The city’s engineering sector is lagging behind many other sectors due to these shortcomings


I. Current situation:

The city’s engineering sector is lagging behind many other sectors due to these shortcomings:
+ Outdated machines and equipment (making up 70%).
+ Most lathes are in small sizes (85-90%).
+ Self-manufactured simple machines (30%).
+ Lack of synchronization between the stages of producing billets, casting and forging.
Metal production industry: The growth of the economy has meant an increase in demand for metal products, particularly in the construction sector.
Machine and equipment production industry: The key products include instant noodle production lines, rice husking machines, engines and air-conditioners. A number of items have been exported, such as rice husking and polishing lines, and diesel engines but with modest volume.
The production of precision devices has yet to develop. The major products are wristwatches and clocks with imported components.
The manufacturing of motor vehicles: There are many projects for assembling motorcycles and cars with imported components and parts.

II. Forecast demand:  

Figures from the Ministry of Industry show that demand for machines, equipment and other mechanical engineering products in the 2001-2010 period is US$11 billion a year on average.
Locally-made engineering products now can meet only about 9% of the domestic demand. The ratio is expected to climb to 40% by 2010, or US$4.5 billion to $5 billion a year, with consumer goods making up 30%, incomplete equipment 35% and complete equipment 35%.

- Engines:
+ Engines of 6hp to 50hp (horse power): 40,000-50,000 engines required a year.
+ Engines of 150hp, 300hp and 600hp for fishing boats and coastal transport ships: 50-100 engines a year in the first years and 200-300 in the next following years.
+ Gasoline-powered engines of 4hp to 10hp for small boats and generators: 10,000 engines required a year by 2005.
+ Gasoline-powered engines of 50hp to 150hp for cars and trucks: 50,000 engines required a year by 2010.

- Automobiles and ships:
+ Automobiles: 40,000-80,000 units required a year by 2005.
+ Ships: 20 to 30 ships of 400 to 1,000 tonnage and 15 to 20 ships of 10,000 to 15,000 tonnage.
+ Fishing ships: 100-150 ships a year
+ Motorcycles: Hundreds of thousands of units a year

- Machines and equipment for the agricultural and industrial sectors: Most have been imported. The country has spent US$3 billion-US$4 billion importing this type of machines and equipment a year, and spending on these items is forecast to be higher in the future.

III. Incentives:

+ Government Decree 51/1999/ND-CP dated July 8, 1999, to provide detailed regulations on the implementation of the Law on Domestic Investment Promotion (amended) No. 3/1998/QH10. Accordingly, investment projects enjoy reduction and exemption of land use fees, rents and taxes; exemption of personal income tax and tariff on imported equipment and machines for use as fixed assets; supplementary incentives on tariff to businesses producing goods for export and traders of exported goods, incentives for profit remitted abroad, and preferential credits.
+ Government Decree 43/1999/ND-CP dated June 29, 1999, on State credits for investment development.
+ Prime Minister’s Decision 37/2000/QD-TTg dated March 24, 2000, on policy to support the development of key industrial products.
+ Ministry of Industry’s Circular 03/2000/TT-BCN dated May 31, 2000, to provide guidelines on implementing Prime Minister’s Decision 37/2000/QD-TTg dated March 24, 2000, on policy to support the development of key industrial products.
+ Ministry of Industry’s Decision 67/2000/QD-BCN dated November 20, 2000, on the list of mechanical engineering products eligible to enjoy incentives regulated at Clause 5, Item 1 of Resolution 11/2000/NQ-CP issued by the Government on July 31, 2000.
+ Prime Minister’s Decision 117/2000 dated October 10, 2000, on a number of policies and financial mechanisms for ship-building projects run by the country’s ship building sector.
+ Government Decision 55/2001/QD-TTg dated April 23, 2001, on approving the development strategy and mechanisms and policies to support the development of Vietnam’s garment and textile sector by 2010.
+ HCM City People’s Committee’s Directive 04/2000/CT-UB-KT dated February 23, 2000, on implementing the program to support businesses modernize equipment and technology with low cost, aiming to improve the competitive edge and promote exports in the 2000-2003 period.
+ HCM City People’s Committee’s Decision 15/2000/QD-UB dated April 17, 2000, on regulations on managing the provision of loans to projects under the city’s program to boost consumption through investment.

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