Quyết định 1901/QD-TTg

DECISION

APPROVING THE PLAN OF ACTION FOR DEVELOPMENT OF THE SHIPBUILDING INDUSTRY IN IMPLEMENTATION OF VIETNAM’S INDUSTRIALIZATION STRATEGY WITHIN THE FRAMEWORK OF VIETNAM - JAPAN COOPERATION THROUGH 2020, WITH A VISION TOWARD 2030

THE PRIME MINISTER

Pursuant to the December 25, 2001 Law on Organization of the Government;

Pursuant to the Prime Minister’s Decision No. 1043/QD-TTg of July 1, 2013, approving Vietnam’s industrialization strategy within the framework of Vietnam - Japan cooperation through 2020, with a vision toward 2030;

At the proposal of the Ministry of Transport,

DECIDES:

Article 1. To promulgate together with this Decision the Plan of Action for development of the shipbuilding industry in implementation of Vietnam’s industrialization strategy within the framework of Vietnam - Japan cooperation through 2020, with a vision toward 2030, under the Prime Minister’s Decision No. 1043/QD-TTg of July 1, 2013.

Article 2. This Decision takes effect on the date of its signing.

Article 3. Ministers, heads of ministerial-level agencies, heads of government-attached agencies, chairpersons of provincial-level People’s Committees and related units and individuals shall implement this Decision.

PLAN OF ACTION

FOR DEVELOPMENT OF THE SHIPBUILDING INDUSTRY IN IMPLEMENTATION OF VIETNAM’S INDUSTRIALIZATION STRATEGY WITHIN THE FRAMEWORK OF VIETNAM - JAPAN COOPERATION THROUGH 2020, WITH A VISION TOWARD 2030
(Promulgated together with the Prime Minister’s Decision No. 1901/QD-TTg of October 22, 2014)

I. ANALYSIS OF SITUATION

1. In the world and the region

The global shipbuilding market grew robustly only during 2003-07, then experienced a sharp decline during 2008-09 due to the global financial crisis. The number of dry ship orders in 2008 and 2009 was 295 and 288 million DWT respectively. Despite a slight recovery in 2010, the shipbuilding market continued its downturn in 2011 and 2012 due to the slow-paced recovery of the global economy, public debt crisis in Eurozone and decrease in credit facilities for the shipbuilding industry. Statistics of the entire industry show that by the end of September 2013, the global shipbuilding industry achieved a business efficacy exceeding that of 2012. The number of shipbuilding orders increased by some 63% over the same period in 2012. In 2013, shipbuilding companies around the world received orders for building 3,159 ships with a total tonnage of 101,343 GT.

In the 1980s, the global shipbuilding industry saw a vigorous move from Europe to Asia. Since the early 1990s, Asia has become the world’s new shipbuilding center. By 2011, China had received the largest number of shipbuilding orders while the Republic of Korea’s shipbuilding industry had revived its prime position. India, Vietnam, Brazil, the Philippines and Turkey are striving to increase their market niches.

Europe still has advantages in high-class ships while China dominates the low-class ship market. The shipbuilding industry will continue to shift from Europe to Asia with the Republic of Korea and Japan still leading the world in building complicated ships such as large-tonnage liquefied natural gas (LNG) carriers and container ships. The Republic of Korea’s shipyards are expanding to new markets of special-use ships such as drilling ships, drilling platforms and renewable energy projects using infrastructure facilities and workforce previously used for building commercial ships.

The shipbuilding industry is witnessing such major changes as increase in the number of service ships for oil and gas exploitation, LNG carriers and new types of ships which are subject to high standards of environment, exhaust reduction, energy efficiency, automation and information technologies, etc. Besides, financial institutions have provided more loans for energy-related sectors and paid less attention to the industry.

2. Position and role of Vietnam’s shipbuilding industry

Vietnam, with a coastline of 3,260 km to the East, South and Southwest and an exclusive economic zone of over 1,000,000 km2 in the East Sea, is ranked among 10 countries having the longest coastline and holds a favorable position for shipbuilding development.

Vietnam’s marine strategy through 2020 has determined marine economy as a driving force for promoting the development of other sectors, creating a radical and comprehensive change in the economic structure toward industrialization and modernization. One important solution to implementing the marine strategy through 2020 is to develop the industry of building and repairing seagoing ships. The Government has decided to develop five groups of coastal economic zones that are eligible for concentrated state investment during 2013-15: Chu Lai economic zone (Quang Nam province) and Dung Quat economic zone (Quang Ngai province); Dinh Vu - Cat Hai economic zone (Hai Phong city); Nghi Son economic zone (Thanh Hoa province); Vung Ang economic zone (Ha Tinh province); and the economic zone of Phu Quoc island and South An Thoi islands (Kien Giang). Once formed, these zones will create a more favorable investment environment for coastal areas and stimulate the development of the shipbuilding industry.

The ten-year 2011-20 socio-economic development strategy adopted by the XI^th Party Congress stresses “Strongly developing marine economy to match the marine position and potential of our country’s sea, combining the development of marine economy with maintenance of security and national defense and protection of sea sovereignty. Quickly developing a number of coastal economic zones and industrial parks, giving priority to development of energy, shipbuilding, cement and high-quality aquatic product processing industries, etc. Developing seaports, seaport services and ocean and river-ocean shipping; developing ship fleets and the industry of building and repairing seagoing ships.”

Vietnam’s aquatic resource development strategy through 2020 requires development of ship building and repair industry and provision of fishery logistic services: Concentrating investment in developing synchronous mechanical engineering, building and repair of fishing ships, stepping up research and application of advanced technologies to building of ship hulls, engines and fishing gear.

3. Actual development of shipbuilding industry

Vietnam’s shipbuilding industry has received large investment since 2002 and is just in the process of receiving transfer from major shipbuilding centers in Asia. The global financial crisis occurring in 2008 has exerted serious impacts on the entire shipbuilding industry and led to the comprehensive restructuring of Vietnam Shipbuilding Industry Group (Vinashin).

In addition to Vinashin, which was founded in 2006 (now the Shipbuilding Industry Corporation - SBIC) and holds the key role, Vietnam’s shipyards are also owned or managed by (1) Vietnam National Shipping Lines, (2) Vietnam National Petroleum Group and some other state groups and corporations, (3) the Ministry of National Defense, (4) local and private enterprises, and (5) foreign-invested enterprises.

Regarding ship building and repair capacity: Vietnam has 120 yards for building and repairing ships of over 1,000 D WT, with 17 0 elevating and launching facilities (including only 2 facilities for ships of between 300,000 - 400,000 DWT, while others are mainly for ships of under 5,000 DWT). The total design capacity of these shipyards is around 2.6 million DWT/ year though their practical capacity reaches only 800,000 - 1,000,000 DWT/year (31-39% of the design capacity), which can meet 50% of the domestic demand (300,000 - 400,000 DWT/ year); the total export output is 500,000 - 600,000 DWT/year, accounting 0.3 - 0.4% of the global market. The repair capacity of these yards can meet only 41.7- 46% of the national ship fleet’s demand, partly because most elevating and launching facilities are used for shipbuilding. In 2010 alone, some USD 75 million was spent on overseas repair of Vietnamese ships. Thus, the domestic and global markets’ potential has not yet been fully tapped and depends on the recovery of the global economy as well as efforts of Vietnam’s shipbuilding industry to improve its administration effectiveness, manufacture efficiency, product quality and price competitiveness. Though the manufacturing capacity in terms of tonnage has been maintained, ship delivery schedule and localization rate remain unsatisfactory.

Regarding support industries: The Ministry of Industry and Trade’s Decision No. 2840/QD- BCT of May 28,2010, promulgates a list of machinery, equipment, supplies and materials which can be domestically made, including a number of equipment for use in shipbuilding industry, including boilers of a capacity of up to 25 kg/h; diesel engines of a capacity of 50 HP (for use for small-sized motor boats); a number of working machines such as lathe, drilling machine, plane machine and compressor; and the ability to install various kinds of ship derricks and manufacture pumps and valves. The Motor and Agricultural Machinery Corporation has been able to manufacture various kinds of anchor chain, ball bearings and power generators, a number of joint-ventures and wholly foreign-invested enterprises have managed to manufacture boilers, propellers, electric equipment, paints, interior furniture, cranes and lifeboats; and a number of private establishments have been able to manufacture anchor winders, anchors, anchor chains, propellers, board devices, welding materials, axial systems, etc. However, the development of support industries remains slow with thinned-out investment, failing to achieve the localization rate target.

Regarding labor: By 2010, the entire industry had nearly 100,000 workers, including 43,797 working for Vinashin (reduced to around 26,000 by July 2013), of whom there were few internationally certified workers compared to the demand.

Regarding engineering: Vietnam’s shipbuilding industry is capable of technological engineering to serve manufacturing activities of shipyards. The technical engineering ability can only meet requirements for building small-sized and common-use ships. There has been no model test tank up to international standards for development of design models; all technical designs of ships for export have been bought from foreign countries. This is currently and will continue to be the weakest point of Vietnam’s shipbuilding industry in the future unless policies on prioritized investment and training of designing engineers are introduced.

Regarding registration and inspection: Vietnam Register is a member of the International Association of Technical Survey and Classification Institutions (OTNK) and a founding member of the Asia Classification Society. At the same time, it has established bilateral and interchangeable relations with almost all members of the International Association of Classification Societies (IASC) but not yet entered into many export ship building contracts and provided independent registration and inspection for large shipbuilding orders for domestic ship owners.

Regarding training: In addition to the Polytechnic University, Vietnam Maritime University, University of Transport and Communications and professional transport training schools, there are technical and professional training and intermediate vocational training establishments which can train 8,000 -10,000 primary- and intermediate-level workers to fully meet the industry’s demand. However, the quality of these workers has not yet satisfied the requirements of the industry.

4. Existing problems facing the shipbuilding industry

Firstly, the lack of a strategic vision and specific programs of action toward development of a shipbuilding industry suitable to the cyclic development of the global shipbuilding industry. At present, the industry’s development remains passive and unsustainable for the reason that no research institution has been assigned to make statistics and forecasts and conduct strategic researches.

Secondly, almost all elevating and launching facilities of domestic shipyards have been used for building ships. The efficiency of use of shipbuilding industry’s infrastructure remains low due to thinned-out investment and incomplete equipment. The efficiency of information technology management and use for the systematic management (engineering - manufacture - finance) also remains low and not conducive to effective cost management and on-schedule ship handover.

Thirdly, the research and development (R&D) capacity remains poor; investment in R&D in maritime and shipbuilding industry is negligible; skills and size of the workforce remain inadequate to meet the industry’s development requirements. The capacity of designing human resources/engineers remains poor and the proportion of designing engineers to total human resources, even in SBIC, remains low (1%). The framework program of training designing engineers, maritime engineers, manufacture planning experts and shipbuilding engineers is falling far behind the international standards and incapable of training those who can design ships meeting the market demand. Recent difficulties facing the economy in general and shipbuilding establishments in particular have also affected the working environment and motive of the industry’s workforce.

Fourthly, at present too many shipyards are scattered throughout the country, of which many remain uncompleted due to insufficient investment through many phases and few attain international standards. Shipbuilding industry lacks an inherent linkage with other economic sectors such as transport, oil and gas, tourism and fisheries.

Fifthly, domestic support industries have developed in a spontaneous and asynchronous manner and heavily depended on material and equipment manufacturers in China and other Asian and European countries.

Sixthly, domestic shipping companies have encountered numerous difficulties in seeking investment capital sources for expanding their fleets.

Finally, the shipbuilding management and organization and business administration capacity of, and information transparency in, most shipyards remain inadequate.

II. OBJECTIVES SET FOR 2020

To turn shipbuilding into a spearhead industry in the implementation of the marine economy strategy; to concentrate on manufacturing a number of products suitable to Vietnam’s development conditions; and to win the global market’s trust in Vietnam as a country with high-quality shipbuilding industry. To strive to achieve the following quantitative targets by 2020:

- The industry’s output value growth rate will be 5 - 10%.

- Between 70 - 80% of the industry’s manufacturing capacity will be used to build ships to serve socio-economic development, national defense and security, except for submarines, cruisers and warships which require high technologies and techniques.

- Between 3 - 10% of total products will be exported; the total tonnage of ships for export will be 1.67 - 2.16 million tons/year.

Specific tasks are as follows:

1. Forming 3 linked shipbuilding clusters in northern, central and southern regions. Giving priority to manufacturing types of ships highly demanded by the domestic and global markets based on existing infrastructure and cooperation with such partners with experience and high scientific and technical levels as Japan and the Republic of Korea.

Intermediary targets: To sharply reduce the number of ship-assembling yards and form/ consolidate several key enterprises, with a view to stopping thinned-out investment.

Group of ships prioritized for development: On November 27, 2013, the Prime Minister issued Decision No. 2290/QD-TTg approving the master plan on development of Vietnam’s ship industry through 2020, with a vision toward 2030, which requires maintenance and promotion of the capacity of existing ship building and repairing yards to meet demands of the domestic and foreign markets. Building of seagoing ships will focus on the group of ships with a tonnage of between 30,000 and 50,000 DWT suitable to use needs of local ship owners, including passenger ships, small-sized transport ships, offshore search and rescue ships, patrol ships and ordinary cargo ships (dry cargo ships, container ships, chemical carriers, bulk cargo ships of up to 50,000 tons, loose cement earners of up to 30,000 tons); and special-use ships for export, such as oil and gas exploitation service ships, fishing ships, work ships, tugboats, towing ships and dredgers.

2. Building 3 centers for repair of low- and medium-class ships in regions with geographical advantages and close to major seaports and/or international shipping routes.

The Prime Minister’s Decision No. 2290/QD-TTg of November 27, 2013, approving the master plan on development of Vietnam’s ship industry through 2020, with a vision toward 2030, also mentions the issue of ship repair: Environment-friendly equipment should be acquired to repair ships of a tonnage of 100,000 - 300,000 tons when the demand is high.

Intermediary targets: By 2020, ship repair centers will be capable of meeting 90% of the low-class ship repair demand and 60-70% of the medium-class ship repair demand.

3. Raising the localization rate based on guaranteeing linkage between the shipbuilding industry and domestic support industries and attracting foreign investment in support industries for the shipbuilding industry, with priority given to types of ships with a competitive edge on domestic and foreign markets.

4. Developing institutions and formulating legal documents for the industry, developing product types and production scale, and building the R&D capacity.

III. VISION TOWARD 2030

1. To develop the shipbuilding industry for a long term to meet the market demand and financial and management capabilities.

2. To form a number of centers capable of building special-use ships using high technologies and generating large economic value, including also container ships, oil tankers and floating oil storage facilities of up to 100,000 tons up to international standards for domestic use and export.

IV. STRATEGIC ISSUES

1. To restructure (rearrange, reorganize) the existing shipyards nationwide, concentrating on using existing infrastructure and manpower.

2. To develop support industries for the shipbuilding industry (machines, special-use electric equipment, small-sized diesel engines, small-sized power generators, propeller shafts, steel sheets, shapes and tubes) and ensure the supply-cooperation relationship among these industries.

By 2020, to focus on hydraulic machine parts, deck equipment and accessories, special- use electric tubes and mechanical products; to step by step form an industry of manufacturing ship-hull steel for low- and medium-class ships.

3. To develop the domestic and export markets for ships and ship repair services; to give priority to types of ships with a competitive edge on the market. To perform the general tasks of Vietnam’s fisheries development strategy through 2020: “consolidating and developing the mechanical engineering to build and repair fishing ships, adopting an appropriate roadmap to quickly building fishing ships with steel or new-material hulls in replacement of wooden-hull ships...”

4. To train highly qualified and professional human resources for all levels, including managers, engineers and workers, with special priority given to ship designing engineers and shipbuilding project managers.

5. To build R&D capacity for the three linked shipbuilding clusters in the three regions.

6. To adopt a supervision mechanism.

V. PLAN OF ACTION

1. Restructuring the existing shipyards nationwide, concentrating on using existing infrastructure and manpower

2. Developing support industries for the shipbuilding industry

3. Developing the market for domestic sale and export of ships and ship repair services

4. Training highly qualified, professional and international-level human resources for all levels

5. Building R&D capacity for the three linked clusters in the three regions

VI. ORGANIZATION OF IMPLEMENTATION AND SUPERVISION MECHANISM

1. Assignment of tasks

a/ The Ministry of Transport shall:

- Form a working group with the participation of involved parties to organize the implementation of the Plan of Action in a synchronous and effective manner.

- Urge and inspect agencies, units and localities in implementing the Plan of Action; annually summarize and report on the implementation to the Steering Committee; periodically and finally review results and effectiveness of the implementation of the Plan of Action, then report them to the Prime Minister.

b/ Related ministries and sectors shall:

- Elaborate and implement contents and tasks of the Plan of Action within the ambit of their functions and tasks prescribed in Part V of the Plan.

- Work with the Ministry of Transport in evaluating results and effectiveness of the performance of assigned tasks and implementation of assigned contents before summarizing and reporting them to the Prime Minister.

c/ Enterprises operating in the shipbuilding industry shall base themselves on the contents and tasks in this Plan of Action to formulate specific schemes and investment projects for implementation of the Plan.

2. Supervision of the implementation of the Plan of Action

The Ministry of Transport shall supervise the implementation of the Plan of Action and report it at annual meetings of the Working Group for the Industrialization Strategy. The working group shall report supervision results to the Steering Committee for the Industrialization Strategy.

3. Adjustment of the Plan of Action

Any difficulties or problems arising in the course of implementation of the Plan of Action should be reported to the Ministry of Transport and the Working Group for the Industrialization Strategy for consideration and settlement.

The Ministry of Transport shall work with the Working Group for the Industrialization Strategy and related ministries and sectors in summarizing and evaluating implementation results by 2016 as well as relevant experience of Japan, then adjust the Plan of Action for implementation from 2017.

4. Funding sources

Funding sources for the implementation of the Plan of Action shall be mobilized from the central budget, local budgets, international aid, social and community sources and other lawful sources. -