Vietnam's shipbuilding on the rise

The international media has in recent times talked a lot about the doldrums that the South Korean shipbuilding industry has had in its struggle to overcome a sharp fall in orders. The global economic downturn has dealt a heavy blow to the world’s leader in the global shipbuilding industry, which accounts for up to 45% of shipbuilding contracts worldwide, but Vietnam’s shipbuilding industry is not safe from the economic storm either. At a time when a host of difficulties are emerging for the world’s largest shipbuilder, experts have questioned Vietnam’s shipbuilding industry, especially in the face of the global economic slump and the absence of a sustainable development plan for the industry, one of Vietnam’s most important.
At a recent seminar in Hanoi on Vietnam’s mechanical engineering, metallurgy and shipbuilding industries two years after the nation’s entry into the World Trade Organization (WTO), reports detailed weak points of the shipbuilding industry. Some experts said that shipbuilding had not met the requirements of the manufacturing industry, only the assembly industry.
Last March at a press conference of Vietnam Shipbuilding Industry Group (Vinashin), Nguyen Quoc Anh, general sales director of the group, announced that Vietnam had been listed as one of the top five shipbuilders in the world by the U.K.’s Fairplay magazine.
The group entered the international shipping market after completing and delivering two 53,000 DWT ships to the U.K.-based firm Graig in 2006.
Anh said Vinashin had aimed to become the world’s fifth largest shipbuilder by 2015 with the group’s young and dynamic labor and application of new technologies.
Vinashin maintains hundreds of shipyards nationwide with the capacity to build 1,000 DWT to 150,000 DWT ships, oil tankers greater than 100,000 DWT, 150,000 DWT offshore floating storage units, car-carriers, salvage tugs and specialized ships for security and defense.
Vinashin has shipbuilding contracts totaling nearly US$6 billion, including US$4 billion from countries with advanced shipbuilding technology such as the UK, Japan, the Netherlands and Germany. Many international contracts worth up to billions of U.S. dollars, have been cited as examples of the success of the industry.
However, to rise higher in the global shipbuilding league and maintain growth, there are issues that need to be addressed.
Currently, only about 30% of the materials and services required for building ships come from Vietnam. The industry must import most of the materials and the engines and hire foreign consultants and supervisors on major projects.
To reach the target of having 60% of the materials to supply the industry made in Vietnam by 2010, and 75% by 2015, Vinashin has invested in large shipyard complexes in three regions of the country. The number of shipyards has been increased, but the lack of technical infrastructure, material facilities, training agents, and research and design institutes has hampered industry development.
Investment and operational efficiency depend on management. Vinashin is in charge of 257 projects, including 147 under development. Whether the group is prepared to manage the large number of projects and the hundreds of subsidiaries under its charge remains a concern of both domestic and foreign economists.
Given Vinashin’s goal to attain a localization rate of 60%, its investment in supporting industries is justified.
However, this does not mean the group should pull out all the stops to achieve its target with scant regard for efficiency.
Vinashin’s measures to fulfill its objectives should be reassessed. For instance, Vinashin should engage other enterprises to supply the shipbuilding plants with the necessary materials and equipment, instead of doing it on its own, to ensure that the materials and equipment are available at competitive prices and high quality. At present, its self-contained investment strategy is hampering competition in the shipbuilding sector and adversely affecting both Vinashin and the supporting industry.
With the fall in world shipping orders, of which the International Monetary Fund predicted new shipbuilding orders in 2009 would fall to about 60% of 2008’s level and in 2010 to about 30%, finding customers could be tough for Vinashin.
The ratio between shipyards and ship repair yards is also a problem. According to the Vietnam Register, among the country’s 128 shipyards, those with the capacity to repair ships of 6,500 DWT and above can be counted on the fingers.
Developing shipbuilding support industries was the main topic of many Vinashin seminars last year.
Experts say that besides developing industries such as metallurgy, steel, engine and maritime services, Vinashin must invest more in research, science and technology institutes, ship design institutes and training.