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Any chance for Vietnam's shipbuilding industry?
In the context of the Corporation of Vietnam Shipbuilding Industry (Vinashin) signed a contract to pay 15 ships with a tonnage of 53,000 tons Graig Investment Ltd., and before the positive changes of the world shipbuilding market, Vietnam decided to change strategy in shipbuilding.

From a 10-year plan (2001-2010) is relatively modest, with total investment of 450 million U.S. dollars, Vietnam switched to a five-year plan (2006-2010) ambitious, with a total investment of 3 billion dollars.

Some major objectives of this plan include: (1) Vietnam will become a strong shipbuilding countries in the region and the world, next to the ship power is now the EU, Japan, South Korea Korea, and China (2) raise the localization ratio from about 15% to 60% (3) To raise the level of output from 300,000 tons to 3 million tons of ships in 2010 (*) and accounts for about 6 -7% share of world shipbuilding (goal is 5 million tons in 2015, accounting for 10% market share). Meanwhile, Vinashin's size by three quarters the size of Hyundai, the largest shipbuilding company in the world today.

11-2005 early May, the Government of Vietnam has just moved from U.S. $ 750 million international bond issue for the first time this business Vinashin to implement their plans. And this is only a quarter of the total investment planned for the next five years Vinashin.

The industry has a strong desire of any nation. But the need to thoroughly consider the inherent advantages and the cost for the decision was made.

What is comparative advantage?

But plans to develop the shipbuilding industry with an ambitious target has been approved, but in terms of the conditions or advantage which Japan and South Korea and China had been there for the development of shipbuilding industry Vietnam is hardly any advantage.

First, although labor costs in Vietnam are cheap, but not lower than China (currently, the labor cost in China is only 1 / 15 to 1 / 10 than in Japan and Korea, where labor activities accounted for 30% of total costs).

Second, the State can not continue to "openly support" as the last for Vinashin when Vietnam joins the World Trade Organization (WTO) as well as under the threat of lawsuits from dumping competitors. Moreover, with limited budget resources, whether the State can set aside each year 5-6% of the national budget to subsidize private industry billions of dollars this?

Third, the development plan shipbuilding industry, Vietnam does not have Western countries support behind Japan and South Korea before, or have large domestic markets like China today.

Wednesday, capable human resources development is possible, but with the state education system have many problems and delays in education reform today, the quality of human resources in Vietnam is still very limited.

Finally, and perhaps most important, the development of supporting industries is difficult challenges can be overcome because we do not have a big enough market like China, not in an alliance as Japan and Korea Nations to create advantages of scale or concentration of industries and industrial clusters.

In short, Vinashin will have to compete with giant rivals, ambitious, while no comparative advantage.

These are objective factors, and subjective aspects, why?
Currently, the center of world shipbuilding are three countries in East Asia with Japan, South Korea and China accounted for 85% of the total, only 11% of the EU, the rest accounted for more than 4%. However, in terms of value, the EU is the region accounts for a large percentage of sales the most (30%) because they focus on the types of advanced vessels such as liquid gas tanker and passenger ship. Meanwhile, South Korea dominated the container ships, tankers, Japan focused on dry cargo vessels, liquid gas tanker, while China is trying to dominate everything possible.

In the near future, the shipbuilding market is expected to continue strong growth, output is estimated to grow from 40 million tons by the end of 2004 to 50 million tons in 2015

Vietnam's shipbuilding industry has little capacity, level of backward scattered investment and fragmentation, there is no comparative advantage, while the industry is increasingly demanding high technology and become more capital intensive. In 1999, with 70 million dollars to upgrade existing facilities, Ha Long Shipyard is closed only ship 55,000 tons, with 150 million dollars, the Hyundai-Vinashin Shipyard repair ship 400,000 tons and 100,000 tons ship.

Please give a different comparison: in late 2005, the Company ABG Shipyard in India has raised capital to build shipyard 120,000 tons, with total investment of only U.S. $ 89 million (including 9 million capital action). At the same time, Vinashin has started construction of Nghi Son shipyard with an investment of around 75 million dollars, but smaller-scale plant a lot of ABG. On the other hand, with about 350 million dollars are invested in more than a dozen current projects, each project on average only 35 million dollars, clearly reflected in the investment fragmentation of Vinashin.

Additionally, the ancillary industry development nearly impossible. The result is low localization rate, value added is negligible and the profit rate is very modest (less than 2% of the estimated value of the vessel). Just a small fluctuation in price of raw material inputs or outputs are easily profit from positive to negative. Even if the profit figure may not include depreciation costs and cost of capital invested in the shipyard that can average up to 60-10 million U.S. dollars for a ship .

Is there a way out for the shipbuilding industry in Vietnam?

If Vinashin plans to pursue development of shipbuilding industry probably is more realistic to focus on only a few clusters of shipbuilding where available advantage and end the spreading Venetian blinds in most regions. Also, just choose the appropriate stage in the global value chain before they have ambitions to develop all the supporting industries. Also, instead of a huge investment for the current plan, Vietnam should look combining its inherent advantages as cheap labor with advanced technology from foreign countries.

State may consider expansion opportunities and investment mode for the foreign partners, particularly South Korea and Japan. On that basis, promoting technology transfer and development of auxiliary industries downstream. Thus may be able to build a strong shipbuilding industry is highly competitive in the future.

To maintain economic growth and sustainable, a prerequisite is to ensure the economic efficiency of the portfolio strategy and thereby improve competitiveness. "Tri tri century Belgium", an investor effectively to exploit his advantage and the advantage of partners is the necessary condition of economic success in global competition today.
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