Step two is expansion

After China?s slow but steady progress towards becoming a world player in the shipbuilding industry, is the prospect of Vietnam following in China?s footsteps a realistic one? Seemingly coming from nowhere, Vietnam has made giant strides during the past five years in establishing the basis for a modern and viable shipbuilding and ship repair industry. Helped by protective governmental policies and incentives, the state-owned Vietnam Shipbuilding Industry Corporation (Vinashin), which runs all the local shipyards, has recently been given a boost to its continued development when the government announced plans to stop the import of all new vessels that can be built locally. As evidence of this, the Vietnamese shipyard of Bach Dang in Hai Phong earlier this year signed a contract with Vietnam Overseas Shipping Company (Vosco) to build five 12,000 dwt general cargo vessels. This order will provide the yard with enough work for a number of years and follows the yard?s recent successful completion of the 6,500 dwt Vinh Thuan for Vosco. The various shipyards in the Hai Phong area are leading the country?s fledgling shipbuilding industry and, together with Vinashin?s facilities at Quang Ninh, are implementing plans to build a further number of 12,000 dwt vessels as part of the government?s policy to help local yards develop and capture the domestic market which is currently dominated by overseas firms. VINASHIN five-year plan Established in 1996, Vinashin recently reviewed its achievements and announced details of an ambitious new plan for the period 2001 to 2005 aimed at expanding and diversifying production and to be more competitive in meeting both domestic and export markets for newbuilding. Five years after merging 23 small-scale and obsolete units into a state-owned enterprise, VINASHIN now consists of 16 member companies and has built some 383 vessels and repaired 1,264 while achieving an average annual growth rate of 30%. Profit last year was 1.7 times higher than 1996. Among its achievements is the designing of international-standard ships, including 6,500 dwt vessels, 3,500 dwt oil tankers and 2,500m3 LPG tankers. Despite introducing many improvements, the industry is reportedly still using old technology compared to other countries in the region. This is because of a lack of sufficient capital to invest in modernisation. A number of current developments for Vinashin shipyard facilities include upgrading the facilities of the Can Tho Shipbuilding Enterprise by constructing a dry-dock enabling the repair and building of ships of 5,000t. In the second and bigger phase, scheduled to start in 2005, some 110 billion dong ($7.5 m) will be invested to build a dock for the construction of 10,000t ships. Saigon Shipping Industry recently started work on a 175m long, 23.5m wide dry dock on the downstream area of the Saigon River, which will be among the country?s largest docks upon completion. The facility will be able to handle and provide maintenance service for ships of 10,000 dwt and will take two years to complete. These projects however appear insignificant when compared with the estimated 9,508 billion dong ($635m) Vinashin says it will need over the next five years to develop shipbuilding into a strong and competitive industry. This money is needed to establish industrial complexes manufacturing and assembling engines, boilers, ship equipment and key materials. Vinashin is aiming to achieve total export receipts this year of $50 million, growing to $150 million by 2005. Its output value in 2005 is estimated to reach 5,125 billion dong and revenue of 3,800 billion dong. According to Vinashin?s plans, its shipyards will be upgraded to enable them to build ships of up to 30,000t instead of the current 10,000t size. The corporation also expects its joint ventures with foreign companies to build ships of up to 70,000t. The corporation will also boost investment in the ship repair sector to handle ships of 40,000t. Growth incentives Local ship owners say they cannot afford to build new ships which are four times as expensive as second-hand vessels. It also costs more to build a ship in Vietnam than in foreign countries because technology, design and raw materials all have to be imported. Shipowners and investors also complain they often have to wait at least a year if they want to have a new ship built. So the new initiatives set in train by Vinashin should start to address this problem by building vessels of the right quality, at competitive prices and short delivery times to supply the local market. With the additional projected investment it is hoped the industry will effectively compete on the world market within ten years. The Korean factor Undoubtedly, the main springboard for Vietnam?s drive to modernise its shipbuilding and shiprepair industry is the $150 million joint venture, Hyundai-Vinashin Shipyard (HVS). Located at the coastal village of Ninh Phuoc, 55km north of Nha Trang City, HVS is a 50-year, 70/30 joint venture set up in March 1996 between South Korea?s Hyundai Mipo Dockyard, a subsidiary of Korean industrial giant Hyundai, and Vinashin. The shipyard was funded by the Export and Import Bank of Korea (Koexim Bank) and boasts main facilities of two dry-docks, 400,000 dwt and 200,000 dwt capacity respectively. The larger vessels the company has been receiving has increased the average cost of repairing a vessel from $200,000 in 1999 to $300,000 last year. HVS nearly doubled the number of vessels under repair at its docks from 47 vessels in 1999 to 90 vessels last year, driving its turnover up from $14 million to $28 million. The management aims to double the figures again this year with a turnover of $50 million. Last year, however, the shipyard operated at a loss because it had to pay up to $10 million per annum in interest on bank loans for the project, but it does anticipate breaking even this year if it achieves the projected turnover. Orders for repair have flooded into the yard since last year and, earlier this year, HVS beat off fierce competition from Singapore?s Keppel, Jurong and Sembawang shipyards to win a $5m repair contract for grounding damage repairs on the 1992-built containership CMA CGM Normandie. The company is also investing in building more facilities for shipbuilding with plans to build one more dry-dock for the construction of ocean-going ships as part of its second phase development for the next five years with an investment capital of some $60 million, raising the total investments to over $200 million. n