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The Vietnam News

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Vietnam government gives shipbuilding big push

Hanoi - Vietnam's shipbuilding industry, which recently became the world's fifth-largest, is on track to pass Germany's to become the fourth-largest by 2015, behind only South Korea, Japan and China, executives attending an industry trade fair in Hanoi said Thursday. "We were so moved and proud when we heard that Vietnam had become one of the top five," said Le Manh Truong, deputy director of Pha Rung Shipyard, a subsidiary of the state-owned shipbuilding group Vinashin. "Vinashin has written its name on the world shipbuilding map in the last ten years."

Over 400 businesses from European and Asian maritime countries are attending the trade fair, Vietship 2008. For most, Vietnam is still a small, if fast-growing, player. "It's an emerging market," said Anders Sorensen of Johnson Controls, which supplies the heating and air conditioning systems for Vinashin's new 53,000-ton container carrier ships. "India is older and more well-established, but they have been very inefficient. Hopefully Vinashin manages to build up a more efficient industry, because they are looking very seriously at how things are done in Korea and China." South Korea, with some 40 per cent of the market, dominates world shipbuilding, along with Japan, China and Germany. Vietnam, technically fifth, is among a cluster of nations which each hold about 1 per cent of the market, including Turkey, India, Taiwan and the Philippines, as well as Italy, which concentrates on the specialized cruise ship market.

But worldwide demand for cargo ships is growing fast, and the Vietnamese government has targeted the industry as a national priority for investment. In 2005 the government sank the proceeds from its first public bond issue, some 750 million dollars, into Vinashin. Some economists at the time criticized the investment as a vestige of Vietnam's old Communist command economy, saying the country was unlikely to compete with countries with huge domestic markets, such as India and China. But businesses at the Vietship trade fair said government leadership had been critical to establishing Vietnam as a significant player. "You need top government approval to say, okay, let's put a shipyard here. There are joint ventures with steel plants, electric plants, water," said industry analyst Matt Flynn of the shipbuilding news website worldyards.com. "For Vietnam's case it's crucial." Vinashin is currently concentrating on simpler, lower value-added ships, according to the company's chief business officer, Nguyen Quoc Anh. As it builds up expertise through joint ventures with foreign shipyards, it plans to transition to higher-quality ships, including oil tankers, container ships and automobile carriers.

A series of foreign companies have established shipyards in Vietnam in cooperation with Vinashin. The Netherlands' Damen builds high-technology tugboats for handling the new generation of super container carriers at a yard in Haiphong. Norway's Aker builds specialized oil industry servicing vessels at its yard in the southern port of Vung Tau. Among the Vietnamese industry's goals is raising the percentage of locally made components in the ships it assembles. Less than half the value of most Vietnamese-built ships is added in Vietnam, as the engines, electronic components, and even the steel generally come from abroad. "Our target is to raise the localization rate to 65 per cent by 2015," said Vinashin's Anh. "The current rate is 35 to 37 per cent." Vinashin received its first foreign order ever in 2000. In 2007 the firm booked half a billion dollars in new contracts, and some foreign suppliers said it was experiencing growing pains.. "The Vietnamese have a very big problem to face, and that's management," said Bruno Wigandt, president of Ellehammer, which makes pumps for oil and gas tankers. "They have very good top management, but they need to educate some of their middle managers. If they don't, in one or two years they risk losing control" of some of their large projects.

Analyst Flynn said Vietnam would face significant competition from producers like China and the Philippines, which also have high ambitions for growth, but that it had some advantages in competing for orders from European firms. The quality of the ships delivered is often dependent on close supervision by clients, which some Asian manufacturers have been reluctant to allow. "My sense is that the Vietnamese are pretty open to having foreign participation," Flynn said. "That's quite positive. In China in particular, some shipyards are world class, but a fraction of them are having problems."

Deutsche Presse Agentur - March 13, 2008.