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| Building a national brand for the mechanical engineering industry, bringing Vietnamese products deeper into the global supply chain. |
"Promoting and boosting the export of mechanical products" was the theme of the latest trade promotion meeting with the system of overseas trade offices (August 2023), organized by the Ministry of Industry and Trade in a hybrid format of in-person and online participation with 63 provinces and cities and Vietnamese trade offices abroad.
Driving forces behind national economic growth.
In today's modern, highly integrated, and constantly developing economy, the larger the international market a country's goods and brands dominate, the stronger its national economy becomes. It can be said that product brands, corporate brands, and national brands are closely related and mutually influential.
Mechanical engineering is one of the oldest industries and has been identified by the Party and State as a "backbone" industry, playing a driving role in the growth of the national economy, expanding production and business, especially in certain sectors such as mold making, high-tech mechanical engineering, machinery and equipment, and spare parts.
Speaking at the conference "Promoting and Boosting Exports of Mechanical Products," Vu Ba Phu, Director of the Trade Promotion Department (Ministry of Industry and Trade), assessed that the mechanical engineering industry has made remarkable progress, increasing the localization rate and creating momentum to promote industrial and economic development. This has directly and indirectly created jobs for millions of workers.
However, according to assessments, although Vietnam's industrial competitiveness index is narrowing, ranking 44th in the world, this figure includes industrial products held by foreign direct investment (FDI) enterprises. Vietnamese mechanical engineering, processing, and manufacturing enterprises are significantly lower in this regard.
At the same time, the rate of labor productivity growth in the industrial sector is very low compared to other countries in the region; technology is slow to innovate, largely lagging behind the world average; and there is a shortage of high-quality, skilled human resources in the industrial sector. On the other hand, the structural transformation within the processing and manufacturing industry remains slow, mainly focusing on processing and assembly in the low-end segment of the global value chain. Vietnam has not been able to proactively secure inputs for production, having to import up to 91.2% of production materials, leading to low localization rates and domestic added value. Many products of the Vietnamese mechanical engineering industry lack competitiveness, largely due to the lack of well-known brands .
However, in reality, although not having many "well-known" brands, the Vietnamese mechanical engineering industry has contributed some typical brands that have established a certain position in the world market, such as Hoa Phat, Vinfast, Thanh Cong, Thaco... The domestic mechanical engineering industry has also manufactured several product sub-sectors with competitive advantages domestically and regionally, such as steel structure manufacturing, non-standard goods production, manufacturing of some machines, equipment and spare parts serving the needs of the power, oil and gas, mining, and construction materials industries, manufacturing of some agricultural, processing and preservation machinery for agricultural, forestry and aquatic products, automobile assembly, ocean-going shipbuilding, passenger ships and water transport...
According to Brand Finance's valuation data, Hoa Phat brand is valued at $620 million and is the only mechanical engineering and steel manufacturing enterprise in the Top 16 most valuable brands in Vietnam in 2023.
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| Hoa Phat Group was honored at the ceremony announcing products that achieved National Brand status in 2022. (Source: hoaphat.com) |
Hoa Phat currently holds the number one market share in Vietnam in the fields of construction steel and steel pipes, and is among the top 5 largest galvanized steel sheet manufacturers. On the international market, Hoa Phat's products and brand are present in 30 countries and territories across 5 continents and are protected in many major countries. For many consecutive years, the Hoa Phat brand has been selected as a National Brand and one of the strongest brands in Vietnam.
Although not among the top brands, THACO has been honored as a Vietnamese National Brand for the sixth consecutive year. THACO is a multi-industry industrial group, with automobiles playing a key role in creating sustainable value. Currently, THACO distributes a full range of vehicles: passenger cars, buses, trucks, and specialized vehicles from international automotive brands (KIA, Mazda, Peugeot, BMW; Foton, Mitsubishi Fuso). To date, the localization rate of vehicles produced by THACO AUTO has reached 20-60% (the highest in Vietnam currently); simultaneously creating opportunities for the development of fields such as mechanics, agriculture, and other industries, attracting many businesses to invest and contributing to the progress of the national economy.
It can be said that building and developing the national mechanical engineering industry is a very difficult task, but it is absolutely necessary. Only when the nation has a strong mechanical engineering production base, comparable to other countries, can it achieve self-reliance, ensure national defense and security, and promote socio-economic development, especially in the current volatile global situation. Therefore, the State needs specific policies to invest in the development of the mechanical engineering industry with strong brands.
Integrating mechanical products deeper into the global supply chain.
According to preliminary figures, for many years, Vietnam has imported approximately $40 billion worth of equipment, machinery, and materials annually from abroad for all sectors of the economy, including industrial production, agriculture, infrastructure construction, services, and national defense and security. This is a fairly large market that many countries would like to have but cannot access.
Mr. Nguyen Chi Sang, Vice President and General Secretary of the Vietnam Mechanical Engineering Association, stated that although the import and export figures for the mechanical engineering industry are currently large, most of them are held by foreign-invested enterprises (FDI), while the proportion of Vietnamese enterprises remains quite modest.
In reality, foreign customers recognize several limitations of Vietnamese mechanical engineering businesses; among them, limited customer acquisition skills. Furthermore, they lack traditional product lines; do not have a sales team or strong linkages in customer acquisition; are hesitant to change production scale; and are limited in using e-commerce for production and business.
Furthermore, businesses primarily compete on labor costs and materials, relying heavily on China, and lack a thorough understanding of the trade laws and regulations of several markets such as the EU, the US, and Africa. Therefore, the association proposes that Vietnamese trade offices in foreign markets provide strong support to domestic mechanical engineering businesses, especially in providing market information. Simultaneously, the Ministry of Industry and Trade needs to support connecting businesses in the industry with foreign buyers, assist businesses in participating in e-commerce channels, and help compile market data and demand.
According to Ms. Truong Thi Chi Binh, Vice President and General Secretary of the Vietnam Association of Supporting Industries (VASI), the market for mechanical products has seen a decline of approximately 20% in orders, with some businesses experiencing even heavier declines of 30-40%. However, the mechanical sector has also gained many new customers due to shifts in production. Meanwhile, the capacity of domestic businesses has improved significantly. Furthermore, Vietnamese businesses are now capable of competing with Chinese and Indian companies in many production stages.
Ms. Truong Thi Chi Binh also pointed out that the United Arab Emirates (UAE) is considered a potential market for Vietnamese mechanical products; however, businesses are facing difficulties with payment.
The United States is also an attractive destination, but it demands high standards. Therefore, support from the Trade Office is needed so that businesses can seize market access opportunities and meet partner requirements.
Mr. Nguyen Manh Hung, Head of the Vietnam Trade Promotion Office in New York, shared that the mechanical engineering sector plays a crucial role in the US economy, especially in automobile manufacturing. In the future, the US mechanical engineering sector will focus on adopting advanced technologies, producing electric vehicles, and sustainable, environmentally friendly products.
Besides being a major manufacturer of mechanical engineering products, the United States also has diverse import needs, including industrial machinery, civil aircraft, computers, semiconductor accessories, agricultural machinery, paper machinery; automobiles, and auto parts.
Therefore, there is still much room for export to the US market. Domestic businesses need to proactively secure sources of goods, comply with market regulations, and obtain quality certifications that ensure safety standards, depending on the specific industry and product.
As a traditional export market for Vietnamese mechanical products, exports of mechanical goods account for 5% of Vietnam's total export value to Japan. According to Mr. Ta Duc Minh, Commercial Counselor of the Vietnamese Trade Office in Japan, Japan is implementing a new policy to avoid dependence on China for supply sources and expand into the ASEAN bloc, including Vietnam.
On the other hand, Japanese mechanical engineering businesses are mostly small and medium-sized, long-established, and their owners want to transfer their technology, but this is relatively difficult in a country with an aging population, so they are looking to Vietnam for opportunities in production cooperation.
Opportunities are abundant, but Vietnam's mechanical engineering industry still relies heavily on imported raw materials such as high-tech steel and aluminum, which is a weakness for its development. Therefore, the Trade Office recommends that domestic mechanical engineering enterprises invest more in research and development to participate more deeply in the global supply chain.
Mr. Ngo Khai Hoan, Deputy Director of the Department of Industry (Ministry of Industry and Trade), emphasized that, in order to support businesses, the Department of Industry has coordinated the implementation of many support programs for the mechanical engineering industry, especially promoting trade in the processing and manufacturing industries. Furthermore, the Department has coordinated activities to enhance the capacity of businesses, such as organizing training for consultants with the aim of disseminating this knowledge to domestic enterprises.
Regarding FDI enterprises, the Department has coordinated the implementation of two key programs: training mold engineers and facilitating networking. Concerning the association's proposal to expand the scope and scale of participation in important specialized trade fairs and exhibitions, the Department will conduct research and implement appropriate activities in the near future.
According to experts from the Ministry of Industry and Trade, although the market potential for the mechanical engineering industry is enormous, diversifying and expanding markets remains extremely difficult for businesses in this sector due to insufficient competitiveness, lack of established brands, and limited awareness among potential customers. Therefore, the Government and the Prime Minister have been decisively and closely directing ministries, agencies, and localities to implement numerous solutions to overcome difficulties and promote growth.
Furthermore, the Ministry of Industry and Trade has implemented a comprehensive range of measures to support domestic production and business, diversify supply sources and partners, strengthen trade promotion, expand markets, and continue to maintain and consolidate its position in markets with existing free trade agreements; coordinating with relevant ministries and agencies to support businesses in responding to trade barriers and trade defense measures.
Hopefully, in the future, the Vietnamese mechanical engineering industry will contribute many more new names to the List of Products Awarded the Vietnam National Brand, confidently expanding into the global market.
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