The objective of the strategy to develop the agricultural mechanical engineering sector is to meet about 45-50 percent of the domestic demand for agricultural machinery

The objective of the strategy to develop the agricultural mechanical engineering sector to 2010 with a vision for 2020 is to meet about 45-50 percent of the domestic demand for agricultural machinery. So far this objective has not been realized yet. Promoting business cooperation and investment in technology is considered to be a solution to vitalize the Vietnamese agricultural mechanical engineering sector.

Ministry to step up mechanisation of agriculture

Mechanical industry needs boost

Farmer support programme: Money not yet reaching farmers

Heavy dependence on imports

An agriculture-based country, Vietnam has a high demand for mechanical products. Every year, Vietnam manufactures about 550,000 agricultural machinery items, which include mostly diesel engines, power generators and combine harvesters.

About 1,300 companies are operational throughout the country, specializing in manufacturing/trading in tractors and many other kinds of agricultural machinery and equipment. In addition to those, there are 1,218 facilities specializing in repairing and maintaining machinery and equipment.

However, Doan Xuan Hoa, the deputy director of the Department of Processing and Trade of Agro-Forestry-Fisheries Products and Salt Production of the Ministry of Agriculture and Rural Development, said, “The domestic demand for agricultural machinery and equipment, especially tractors, plough machines and combine harvesters, is very high. Meanwhile the volume of machinery manufactured domestically is insufficient to meet the actual demand.”

Presently, most types of agricultural machinery that are being used in Vietnam are products of China or other countries. Statistics show that Chinese products accounts for about 60 percent of all agricultural machinery and equipment items being used in Vietnam, Vietnamese-manufactured products account for about 30 percent, and the remaining were used products imported from foreign countries such as Japan and the Republic of Korea.

Mr. Hoa said that most types of machinery manufactured in Vietnam still show many shortcomings compared with imported products, for example low capacity, outdated technology and expensive prices.

The Government has released Resolution 497, under which farmers are offered an interest subsidy for the loans they borrow to buy agricultural machinery and equipment. However, domestically manufactured agricultural machinery and equipment do not meet the actual demand in terms of both quality and quantity. Therefore the situation cannot improve yet.

Businesses are unwilling to invest

Despite the high demand for agricultural machinery, domestic companies seem to be unwilling to invest in this market. While the State is encouraging investment in the manufacture of some types of agricultural machinery such as high-capacity diesel engines, tractors and machine tools, no domestic company is willing to invest.

Mr. Hoa said, “The manufacture of agricultural machinery requires big investments but does not bring in a high profit as manufacturing other types of mechanical products. This is the reason why domestic companies are unwilling to invest in manufacturing agricultural machinery. ” It takes much time to manufacture a complete farming tool as well as to recover the amount of money that is invested in manufacturing. Moreover, cultivation areas in Vietnam are scattered but not concentrated, and this is another reason making domestic companies unwilling to invest in manufacturing agricultural machinery”.

What solution?

For all the above problems, it is not easy to vitalize the domestic agricultural mechanical engineering sector. Nguyen Van Thu, the president of the Vietnam Association of Mechanical Engineering, said, “Appropriate policies must be put in place to encourage investment in the manufacture of agricultural machinery.”

Most importantly, in his opinion, it is necessary to build the linkage between domestic mechanical companies. It will be impossible for a single domestic company to withstand fierce competition with Chinese products.

It will be a good solution for domestic mechanical companies to cooperate with each other so that each of them can specialize in manufacturing some components of agricultural machinery. It is very costly as well as time and manpower-consuming to manufacture a complete agricultural machinery item.

Cooperation helps reduce the manufacture cost and shorten the time needed to manufacture as well as to recover the amount of invested capital. Thanks to cooperation, domestic mechanical companies can become more competitive.

In the long term, to prevent the domestic agricultural machinery market from being swamped with imported products, it is necessary to build and tighten the linkage between scientists and manufacturers in order to improve the quality of products and reduce the manufacture cost, thus enhancing the competitiveness of domestic mechanical manufacturers.

The State has put in place policies that offer preferences to those who do scientific research catering to agriculture but reality shows that every year not more than 10 percent of the research results have been applied in production. So the problem is how to reduce the manufacture cost so that manufacturers can make a profit. “The most important and long-term solution is investing in scientific research,” Mr. Hoa asserted.

Source: VEN