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Vietnam vows to heighten localization ratio of thermal power equipment

Mechanical engineering is considered the backbone of the national economy. However, after many years of development, the industry can only satisfy 32 percent of domestic demand.

Vietnam's mechanical engineering companies find it hard to join thermal power projects
Vietnam’s mechanical engineering companies find it hard to join thermal power projects

In an effort to improve the localization ratio of equipment used in coal-fired thermal power plants, the Prime Minister in 2012 set a trial mechanism for designing and manufacturing thermopower equipment domestically in the 2012-2025 period

The mechanism, hoped to increase localization for 11 items, has been applied on a trial basis at three projects – Song Hau 1, Quang Trach 1 and Quynh Lap 1.

However, according to Nguyen Chi Sang, deputy chair of the Vietnam Association of Mechanical Industry (VAMI), the program has failed.

At Song Hau 1, the localization of only four out of 11 pieces of equipment have been implemented. The Quang Trach 1 project is expected to be opened for international bidding and the mechanism will not be applied. Meanwhile, Quynh Lap 1 may be transferred from the current investor Vinacomin to Geleximco.

Nguyen Van Hung, deputy CEO of Lilama JSC, commented that the mechanism hasn’t helped much in the last six years of implementation. Vietnamese mechanical engineering companies still cannot join thermal power projects, and many package deals have fallen into foreign hands.

Explaining this, Hung said few thermal power projects have been developed during this period, while investors have hesitated to use supporting equipment made by Vietnamese enterprises for fear about low quality.

VAMI attributes this to barriers in payment procedures and equipment quality.

Regarding Vietnam’s mechanical engineering market in the future, Sang said Vietnam would need $350 billion worth of machines and equipment for construction works and factories by 2030. This includes $8-10 billion worth of synchronized equipment and $2 billion worth of standard equipment each year.

Vietnamese mechanical engineering enterprises stand to benefit from the huge demand. However, if they cannot take full advantage of the opportunity, the jobs will fall into foreign hands.

Though the mechanism set in 2012 still cannot bring the desired effect, Hung said that the localization ratio in thermal power projects has increased.

The Mechanical Research Institute has successfully localized electrostatic dust filter for Vung Ang 1 Thermal Power Plant, and successfully localized the ash disposal equipment and dust filter system for Thai Binh 1 Thermal Power Plant.

Meanwhile, Lilama acted as the EPC contractor of the Song Hau 1 Thermal Power Plant and localized cooling equipment and chimney.

“The equipment designed and manufactured by Vietnamese enterprises have quality equal to imports and competitive prices,” he said.

VAMI believes that the mechanical industry would be able to satisfy 50-70 percent of market demand by 2030.