DECISION

APPROVING THE PLANNING ON DEVELOPMENT OF THE INDUSTRY OF MANUFACTURING ENGINES AND AGRICULTURAL MACHINERY DURING 2006-2015, WITH A VISION TOWARD 2020 TAKEN INTO CONSIDERATION

THE MINISTER OF INDUSTRY AND TRADE

Pursuant to the Government's Decree No. 189/ 2007/ND-CP of December 27, 2007, defining the functions, tasks, powers and organizational structure of the Ministry of Industry and Trade;
In furtherance of the Government Office's Official Letter No. 3174/VPCP-CN of June 11, 2007, on the Prime Minister's authorization for the Minister of Industry (now the Minister of Industry and Trade) to approve the planning on development of the industry of manufacturing engines and agricultural machinery during 2006-2015, with a vision toward 2020 taken into consideration;
Considering Report No. 16/TTr-NC of January 9, 2008 of the director of the Research Institute for Industrial Strategies and Policies;
At the proposal of the director of the Department for Heavy Industries,

DECIDES:

Article 1.- To approve the planning on development of the industry of manufacturing engines and agricultural machinery during 2006-2015, with a vision toward 2020 taken into consideration, with the following principal contents:

1. Development viewpoints

- To view the manufacture of engines and agricultural machinery as an important industry in service of agricultural and rural industrialization and modernization and enjoying the State's development incentives.

- To develop the manufacture of engines and agricultural machinery in line with the strategy for development of Vietnam's mechanical engineering industry, based mainly on internal resources and associated with the whole country's mechanical engineering and industry and with agricultural production and defense industry restructuring.

- To proactively undertake regional and international integration, make the best use of transferred advanced technologies and techniques to turn out key products of high competitiveness, giving priority to a number of major products to meet urgent needs of agricultural production and post-harvest farm produce processing.

- To sustainably develop and encourage the manufacture of products with less raw materials and fuels consumed.

2. Development objectives

a/ Overall objectives

By 2020, to develop the manufacture of engines and agricultural machinery into a strong industry of Vietnam which will attain the regional advanced level and contribute to the successful agricultural and rural industrialization and modernization.

b/ Specific targets

- Manufacture value target (at the 1994 fixed prices): VND 1,990 billion by 2010, VND 3,280 billion by 2015 and VND 5,400 billion by 2020.

- Annual manufacture value growth rate: 12% in the period from now to 2010. and 10.5% in the 2011-2015 and 2016-2020 periods.

3. Development orientations

a/ General orientations

- To invest in raising product quality and diversifying products, take the initiative in cooperating with foreign parties in manufacturing engines and agricultural machinery with high technological content.

- To basically found a manufacturing and assembling network and support industries for the industry in three domestic regions. To concentrate efforts on the fundamental stages of molding, cast forging, thermal treatment and product quality control. To adequately invest in clean industries.

- To step up and combine research and development of new products with trial manufacture and drawing of practical manufacture experience, concentrating on harvesting and post-harvest processing stages.

- To reorganize the industry and transform state enterprises in the industry. To form major enterprises to take the leading role in performing the socio-political task of assuring the successful agricultural and rural industrialization and modernization in the context of a socialist-oriented market economy. To proceed with the establishment of a multi-line group manufacturing and trading in engines and agricultural machinery.

- To formulate, together with the defense industry, program and projects on manufacture of multi-purpose products in order to bring into play the production organization capacity and increase the readiness to satisfy national security requirements when necessary.

b/ Product-based orientations

- For engines

+ To invest in modernizing equipment and technologies to raise the capacity to manufacture and innovate products. To strive to regain a major share of the domestic market on medium- and small-sized diesel engines and petrol engines of small capacity, meeting the needs of agricultural production.

+ To concentrate on the key stage of manufacturing "5C" engine details (combustion chamber, cylinder head, crankshaft, camshaft and connecting rod). To satisfy the requirements on complex manufacturing technologies and scale economy of the manufacture, it is necessary to enter into cooperation with foreign countries in the industry in order to raise the competitiveness of products and reach out to overseas markets.

+ By 2015, manufactured products will largely attain the intermediate advanced quality standards for sale on the domestic market and for export in small quantities. To intensify the manufacture of spare parts (including those for automobile and motorbike engines). After 2015, to manufacture products of more advanced level, such as oil pumps, high-pressure injection nozzles and multi-fuel engines.

- For agricultural machinery

+ From now to 2015, to manufacture agricultural machinery to sufficiently meet the domestic demand for two-wheeled tractors of up -to 12 horse power (HP), take initial steps in effectively manufacturing 18-25 HP four-wheeled tractors as substitutes for imports, thereby step by step raising the capacity to manufacture 35-40 HP four-wheeled tractors. To seek and enter into cooperation with foreign parties in assembling and manufacturing 50-80 HP four-wheeled tractors, first of all details and spare part, and gradually master technologies for manufacturing this type of machinery in complete units.

+ To encourage medium- and small-sized mechanical engineering establishments to manufacture equipment and tools for partial or preliminary processing in order to meet the needs of on-site farm produce processing and rural traces and supply products for support industries.

+ To step by step build specialized manufacturing establishments to concentrate on raising the quality and competitiveness of processing and preservation equipment for each type of agricultural product, especially rice, maize, soybean and peanut, in the near future.

+ After 2015, to further modernize a majority of agricultural machinery with diversified models and competitive prices for export. To prepare sufficient conditions for manufacturing machinery with electro-mechanical applications.

4. Detailed plans on engines and agricultural machinery

a/ Plan on product development

- Petrol engines:

By 2010, to satisfy 72% of the demand for petrol engines of 4-10HP. By 2015, to satisfy 76% of the demand.

- Diesel engines:

+ To prioritize the manufacture of 6-cylinder diesel engines of 180-400 HP and 4-cylinder diesel engines of 80 HP with advanced technologies,

+ To encourage the manufacture of diesel engines of 18-40 HP and environmentally-friendly multi-fuel engines.

+ To satisfy 65% and 77% of the demand for diesel engines (mainly engines of small capacity) by 2010 and 2015, respectively.

- Electric motors for agriculture

+To attach importance to the group of motors of 37-55-75 kW for use in underwater pump stations.

+ To satisfy 60% and over 65% of the demand for electric motors by 2010 and 2015, respectively.

- Tractors and transport vehicles

+ To encourage the manufacture of two-wheeled tractors of 12-15 HP. To boost their export.

+ To call for foreign parties to enter into joint ventures to manufacture four-wheeled tractors of 18-35 HP and 50-80 HP, mainly for export.

+ To satisfy 44.5% and 50% of the demand for tractors and transport vehicles by 2010 and 2015 respectively.

- Rice harvesters

+To prioritize the manufacture of rice harvesters (row harvesters and combined harvester-threshers), maize, peanut and soybean harvesters.

+ To satisfy 48% and 50% of the demand for rice harvesters by 2010 and 2015. respectively.

- Rice threshers

+ To satisfy 70% and 78% of the demand for rice threshers by 2010 and 2015, respectively.

-Mills

+ To concentrate on intensive investment in improving technical properties of mills.

+ To satisfy 60% and 65% of the demand for mills by 2010 and 2015, respectively.

- Water pumps for agricultural use

+ To satisfy 70% of the demand for water pumps for agricultural use by 2015.

- Fanning tools

+ To satisfy 65% and 75% of the demand for fanning tools by 2010 and 2015. respectively.

- Other agricultural machinery

+ To prioritize the manufacture of maize, peanut and soybean harvesting tools; rice implanters; farm produce preliminary processing equipment; livestock feed processing machines; machinery for aquacultural use.

- Support industries for manufacture of engines and agricultural machinery

+ To satisfy 50% and 75% of the domestic demand for molding and forging casts and standardized products by 2010 and 2015, respectively.

+ By 2010, the ratio of domestic material cost to the finished product cost in the industry of manufacturing engines and agricultural machinery will reach 22-25%.

b/ Total investment capital and projected capital sources

The total investment capital for the industry development will be USD 110 million during 2006-2010, USD 155 million during 2011-2015 and USD 261 million during 2016-2020. The total investment capital for the whole period from now to 2020 will be around USD 525 million (at the 1994 fixed prices).

Investment capital will mainly come from the domestic source, with state-owned enterprises playing the leading role in large projects.

5. Solutions and policies

a/ Major solutions

- Market solutions

+ To conduct market demand surveys and forecasts, and select a number of key products to be manufactured, then work out plans on import of product samples, trial manufacture, investment in manufacture and building of strong brands for domestically manufactured products. To build show centers for agricultural machinery.

+ To form a network of organizations providing investment consultancy and technology transfer services for farmers' households, household farms as well as small- and medium-sized enterprises.

+ To provide training for raising enterprises' awareness about marketing as a factor decisive to their long-term development.

- Investment solutions

+To accelerate the implementation of projects under the Program on key mechanical engineering products already approved by the Prime Minister as well as projects on manufacture of agricultural machinery in spearhead industries.

+ To concentrate on intensive investment and renewal of technologies and equipment for production expansion and maximum use of existing capacity.

+ To encourage and mobilize all sources of investment capital, first of all for advanced technologies and export production.

- Scientific research and technology transfer solutions:

+ To encourage research institutes to enter into joint ventures or associations with agricultural service centers. To support the private sector in participating in research, innovation and technical advance transfer activities.

+ To expand international cooperation. To support the formulation of pilot models of introduction of new techniques into factories.

+ To prioritize the provision of annual support funds for the performance of non-business scientific and technological tasks in direct service of investment projects on key products with advantages and competitiveness and for export.

- Human resource solutions

+ To support the training of business managers in technology management with the support fund for small- and medium-sized enterprises.

+ To prioritize the investment in upgrading establishments training human resources for support industries. To provide professional training, through industry extension programs, for technicians, technical workers and fanners.

- Financial solutions

+ To make capital borrowing procedures simple and transparent (especially for private enterprises).

+ To mobilize idle capital from the private sector.

- Line management solutions

+ To consolidate state corporations, enabling them to well play the leading role in the industry's development; to develop the parent company-affiliate company model, gradually transforming a number of local engines and agricultural machinery enterprises into affiliate companies or satellite enterprises of big companies. To accelerate equalization in order to diversify capital sources.

+ To bring into play the role of the Vietnam Mechanical Engineering Federation and the Vietnam Mechanical Engineering Enterprises Association. To propose and organize, through the Federation and Association, coordination among enterprises in order to step up their cooperation and association, both vertical and horizontal.

- Other support solutions

+ Within the framework of regulations and committed integration roadmap, to give priority to domestic manufacturing establishments to get contracts on supply of agricultural machinery in the capacity as general contractors in projects on hunger eradication and poverty alleviation, projects executed in remote and deep-lying areas, projects on forest plantation and tending, etc.

+ To conduct activities of measuring and inspecting quality standards of engines and agricultural machinery on a regular basis, paying special attention to products for export.

+ To attach importance to environmental pollution prevention and treatment.

+ To select distinctive products and build satellite mechanical craft villages for big enterprises, and promote support industries.

+ To form fanner-manufacturer-commercial bank links. With bank providing credit guarantee for fanners to purchase equipment and tools.

b/ Major policies

- Market policies

+ To propose the Prime Minister to direct ministries and branches in elaborating and promulgating criteria of support for products of high competitiveness under programs on investment promotion in foreign markets.

-To apply a mechanism for fair price appraisal of all imported products and supervise its operation.

- Investment policies

+ To propose the Government to permit investment projects on manufacture of engines and agricultural machinery to enjoy to the utmost incentive policies provided for in the Prime Minister's Decision No. 55/2007/QD-TTg of April 23, 2007, promulgating a number of mechanisms and policies to promote the development of key industries.

+ To call for foreign investment in the manufacture of engines and agricultural machinery in Vietnam.

+ To encourage investment projects on manufacture of post-harvest processing equipment in rural areas.

- Scientific research and technology transfer policy

+ To propose the Government to provide state budget supports for 50% of expenditures for technology transfer, purchase of design copyright and hiring of foreign experts.

- Human resource policy

+ To propose the Government to provide state budget supports for 50% of funds for training human resources directly engaged in executing investment projects on manufacture of products for use as import substitutes or export. Training expenditures may all be accounted into product costs.

- Financial policies

+ To consider and permit projects on manufacture of engines and agricultural machinery to borrow the State's development investment credit loans for investment in fixed assets under the Government's current regulations. To consider the provision of export credit loans for these projects under current regulations.

+ To perfect the mechanism of loan provision on pledge of trust from such organizations as the Peasants' Association and business associations or societies. To prioritize the provision of loans for the manufacture of equipment for post-harvest processing of rice, maize, soybean and peanuts.

+ To apply reasonable import duty rates to those kinds of engines and agricultural machinery which can be domestically manufactured in sufficient quantities to satisfy the market demand.

+ To propose the Government to consider and permit the application of low import duty rates or the import duty rate of 0% to hi-tech complex component assemblies which domestic manufacturers are unable or have no intention to produce or see no production benefits in the long term (5-10 years), in order to reduce costs of complete equipment.

+ To implement the policy on provision of credit supports for farmers to purchase machinery and equipment for agricultural production.

+ To provide insurance for credit risks of commercial banks that advance capital for fanners to purchase agricultural machinery.

- Industry management policy

+ To create conditions for founding a multi-owner and multi-line group of engine and agricultural machinery manufacturers when conditions permit.

- Other support policies

+ To assist manufacturing establishments in applying the quality management system ISO 9000, building brands, and conducting testing, assessment and announcement of product quality.

+ To propose the Government to consider the provision of investment incentives, promulgated together with the Government's Decree No. 108/ 2006/ND-CP of September 22, 2006, for the group of cultivating, irrigating and post-harvest processing equipment.

- To consider giving of the preemptive right to rent land or of land rental exemption or reduction for a definite lime, or application of preferential policies on land use rights transfer or mortgage in accordance with law to investment projects on building of new production chains or upgrading or modernization of existing ones or application of advanced technologies.

+ To continue the consolidation and swapping of crop fields in order to satisfy requirements of development of large-scale agricultural production and facilitate the effective use of machinery and equipment for agricultural production.

Article 2.- Organization of implementation

- The Ministry of Industry and Trade shall coordinate with concerned ministries and branches and provincial/municipal People's Committees in directing the development of the industry of manufacturing engines and agricultural machinery under the approved planning.

- The Ministries of Agriculture and Rural Development; Planning and Investment; Finance; Defense; and Science and Technology shall, within the scope of their respective functions, coordinate with the Ministry of Industry and Trade in concretizing solutions and policies provided for in this Decision.

- Provincial/municipal People's Committees shall create favorable conditions for the execution of projects on manufacture or assembly of engines and agricultural machinery in their respective localities; oversee the implementation of investment projects according to registered contents in order to ensure their conformity with local industrial development plannings and socio-economic development master plans; adopt, depending on local practical conditions, policies t0 support and encourage fanners and agricultural technical service establishments to purchase and use more engines and agricultural machinery for production; give termed tax exemption to providers of agricultural electro-mechanical services; and prioritize and promote investment in building specialized industry clusters suitable to characteristics of each locality.

Article 3.- This Decision lakes effect 15 days after its publication in "CONG BAO.

Article 4.- Ministers, heads of ministerial-level agencies and government-attached agencies, and presidents of provincial/municipal People's Committees shall implement this Decision.