Decision No. 02/2008/QD-BCT On approving the Plan for the Development of the Industry Producing Power Machinery and Agricultural Machinery for the period 2006-2015, with consideration to the year 2020

Pursuant to …;

Regarding the approval of the Planning for the Development of the Production Industry of Power Machinery and Agricultural Machinery for the period 2006-2015, with consideration up to 2020

Pursuant to Decree No. 189/2007/NĐ-CP dated December 27, 2007 of the Government on the functions, tasks, powers, and organizational structure of the Ministry of Industry and Trade;

___________________________

THE MINISTER OF INDUSTRY AND TRADE

Implementing Circular No. 3174/VPCP-CN dated June 11, 2007 of the Office of the Government regarding the Prime Minister's authorization to the Minister of Industry (now the Ministry of Industry and Trade) to approve the Planning for the Development of the Production Industry of Power Machinery and Agricultural Machinery for the period 2006-2015, with consideration up to 2020;

Considering the Memorandum No. 16/TTr-NC dated January 9, 2008 of the Director of the Institute of Strategic and Industrial Policy Research;

Article 1. Approves the Planning for the Development of the Production Industry of Power Machinery and Agricultural Machinery for the period 2006-2015, with consideration up to 2020, with the main contents as follows:

At the proposal of the Director of the Heavy Industry Department,

DECISION:

- The production of power machinery and agricultural machinery is an important sector serving the industrialization and modernization of agriculture and rural areas, which is prioritized and encouraged by the State for development.

1. Development Orientation

- Developing the production of power machinery and agricultural machinery based on aligning with the Strategy for the Development of the Mechanical Industry of Vietnam, focusing on internal capacity, linking with the mechanical industry and national industry, and adapting to the restructuring of agricultural production and defense industry.

- Actively integrating regionally and internationally, taking advantage of advanced technology and techniques for key products with high competitive advantages, prioritizing certain main products to meet urgent requirements of agricultural production and post-harvest processing of forestry and agricultural products.

- Sustainable development, encouraging products that save raw materials and energy.

2. Development Goals

By 2020, make the production of power machinery and agricultural machinery a strong manufacturing sector in Vietnam and the region, contributing to ensuring the success of the industrialization and modernization of agriculture and rural areas.

a) General Objective

- Value of production target (fixed price 1994): Reach VND 1,990 billion in 2010, VND 3,280 billion in 2015, and VND 5,400 billion in 2020.

b) Specific Objectives

- Growth rate of production value from now until 2010 at 12% per year, from 2011-2015 and from 2016-2020 at 10.5% per year.

3. Direction for Development

a) General direction

- Invest in improving quality, diversifying products, and actively cooperating with foreign countries in the field of manufacturing high-tech power machinery and agricultural machinery.

- Basically form a network of production and assembly and supporting industries across all three regions. Focus on solving key stages such as casting, forging billets, heat treatment, and product quality inspection. Appropriately invest in clean industry.

- Strengthen and integrate research and development activities with experimental production and learning from practical experience, focusing on harvesting and post-harvest processing equipment.

- Reorganize the industry, transform state-owned enterprises. Form leading enterprises to fulfill political and social tasks, ensuring the success of the process of industrialization and modernization of agriculture and rural areas under a market economy with socialist orientation. Move towards establishing a multi-industry production and business group for power machinery and agricultural machinery.

- Alongside the defense industry, develop programs and projects for dual-use products to leverage production organization capabilities and enhance readiness to meet national security needs when necessary.

b) Product-specific direction

- Power machinery

+ Invest in modernizing equipment and technology, enhancing manufacturing capacity, improving design and performance of products. Strive to regain a significant share of the domestic market for medium and small diesel engines, small gasoline engines, meeting the requirements of agricultural production.

+ Focus on critical components of engines (engine block, crankshaft, connecting rod, camshaft, pushrod). Due to complex technology and economic scale requiring large quantities, cooperation with foreign countries is needed to enhance product competitiveness and expand to international markets.

+ By 2015, mainly produce advanced mid-range products serving the domestic market, with a small portion for export. Increase production of spare parts (including for automobile and motorcycle engines). After 2015, aim to produce advanced products like oil pumps, high-pressure injectors, and multi-fuel engines.

- Agricultural machinery

+ Until 2015, produce sufficient two-wheel tractors up to 12 horsepower to meet domestic demand, initially produce four-wheel tractors of 18-25 horsepower effectively to replace imports, gradually increasing production capacity for four-wheel tractors of 35-40 horsepower. Seek and cooperate with foreign countries to assemble and produce four-wheel tractors of 50-80 horsepower, initially focusing on manufacturing components and spare parts, gradually mastering the technology for complete sets of these machines.

+ Encourage small and medium-sized mechanical production facilities to produce individual and primary processing equipment to ensure local processing needs and rural industries, providing supporting industrial products.

+ Gradually build specialized manufacturing facilities to concentrate on improving the quality and competitiveness of processing and preservation equipment for each type of agricultural product, initially rice, corn, soybeans, and peanuts.

+ After 2015, increase the level of modernization for most agricultural machinery products with diverse designs and competitive prices suitable for export. Prepare conditions for producing machinery with electronic applications.

4. Detailed Planning for the Power Machinery and Agricultural Machinery Industry

a) Product Development Planning

- Gasoline Engines

By 2010, meet 72% of the demand for gasoline engines with power ranging from 4 to 10 horsepower; by 2015, meet 76% of the demand.

Production Planning

+ Prioritize the production of six-cylinder diesel engines with power ranging from 180 to 400 horsepower and four-cylinder diesel engines with power of 80 horsepower using advanced technology.

+ Encourage the production of diesel engines with power ranging from 18 to 40 horsepower, multi-fuel engines, and environmentally friendly engines.

Encourages the production of diesel engines with power from 18 to 40 horsepower, multi-fuel engines, and environmentally friendly engines.

||| The target is to meet 65% of the equipment needs by 2010 and 77% by 2015 (small power engines will achieve higher levels).

||| - Electric motors for agriculture

||| + Focus on products with power ratings of 37-55-75 kW for installation in submersible pump stations.

||| + By 2010, meet 60% of the equipment needs; by 2015, meet over 65% of the equipment needs.

||| - Tractors and transport machines

||| + Encourage production of two-wheel tractors with 12-15 horsepower. Increase exports.

||| + Attract foreign joint ventures to produce four-wheel tractors with power ratings of 18-35 horsepower and 50-80 horsepower, primarily for export.

||| - Rice harvesters

||| + Prioritize production of rice harvesters (row and combine harvesters), corn harvesters, peanut harvesters, and soybean harvesters.

||| + By 2010, meet 48% of the equipment needs; by 2015, reach approximately 50%.

||| - Rice threshers

||| + By 2010, meet 70% of the demand for motorized machines; by 2015, reach 78%.

||| - Rice hullers

||| + Focus on deep investment, enhancing technical capabilities of machines.

||| + By 2010, meet 60% of the equipment needs; by 2015, reach 65%.

||| - Agricultural pumps

||| + By 2015, production should meet 70% of the equipment needs.

||| - Agricultural tools

||| + By 2010, production should meet 65% of the equipment needs; by 2015, reach 75%.

||| - Other agricultural machinery

||| + Prioritize production: corn harvesting equipment, peanut harvesting equipment, soybean harvesting equipment; rice transplanting machines; initial processing equipment for agricultural products; animal feed processing machines; machines for aquaculture.

 

||| - Supporting industries for the production of power machines and agricultural machinery

||| + In 2010, meet 50% of domestic demand for casting blanks, forging, and standard parts; in 2020, reach 75%.

||| + By 2010, the proportion of domestic raw material costs in the cost of power machine and agricultural machinery production should reach 22-25%.

||| b) Consolidation of investment capital and anticipated sources of capital

||| Total investment capital for development during the period 2006-2010 is 110 million USD, 2011-2015 is 155 million USD, and 2016-2020 is 261 million USD. The total investment capital until 2020 is approximately 525 million USD (1994 prices).

||| Main sources of investment capital are domestic, with state-owned enterprises playing a leading role in major projects.

||| (See the Appendix of the Planning for a list of main investment projects)

||| 5. Solutions and policies

||| a) Major solutions

||| - Market solutions

||| + Implement market research and forecasting activities, select certain key products to plan sample imports, trial manufacturing, production investment, and brand building. Establish agricultural mechanization demonstration centers.

||| + Form a network of investment advisory organizations and technology transfer services reaching individual farmers, family farms, and small and medium-sized enterprises.

||| + Enhance the awareness of businesses regarding market research and development as a decisive factor for long-term development.

||| - Investment solutions

||| + Accelerate the implementation of key mechanical product projects approved by the Prime Minister, as well as agricultural machinery production projects in the priority industry.

||| + Focus on deep investment, technological innovation, and equipment upgrades to expand production and maximize existing capacity.

||| + Encourage and mobilize all sources of investment, prioritizing advanced technology and export sectors.

||| - Research and technology transfer solutions

||| + Encourage research institutions to form joint ventures and collaborations with agricultural service centers. Support private sector participation in research, innovation, and technology transfer activities.

||| + Expand international cooperation. Assist in establishing pilot models for new technology application in production.

||| + Prioritize annual funding for scientific and technological tasks directly serving key product investment projects that have competitive advantages and export potential.

- Human resource-related solutions

||| + Support training for business managers on technology management through small and medium-sized enterprise support funds.

||| + Prioritize upgrading training facilities for supporting industries. Through promotion programs, train technical staff and farmers.

||| - Financial solutions

||| + Simplify and clarify loan procedures (especially for private enterprises).

||| + Utilize idle capital from the private sector.

||| - Industry management solutions

||| + Strengthen state-owned corporations to effectively guide the industry; develop parent-subsidiary company models, gradually transform local machine and agricultural machinery production enterprises into subsidiaries or satellite companies of large corporations. Promote shareholding to diversify ownership.

||| + Leverage the role of the Vietnam Mechanical Engineering Association and the Vietnam Machinery Business Association. Through these associations, propose and organize collaboration among businesses to enhance vertical and horizontal cooperation.

||| - Other assistance solutions

||| + Within the framework of regulations and integration timelines, prioritize domestic production facilities to receive contracts for supplying agricultural machinery under turnkey project conditions for poverty alleviation projects, remote areas, forest planting...

||| + Regularize measurement, inspection, and quality control activities for power machines and agricultural machinery, particularly focusing on export-related products.

||| + Emphasize environmental pollution prevention and treatment.

||| + Select specific products, establish satellite mechanical villages for large enterprises, promote supporting industries.

||| + Form an organization consisting of farmers, manufacturers, and commercial banks. Banks guarantee credit for farmers to purchase equipment and tools.

||| b) Policy transfers

||| - Market policy

||| + Request the Prime Minister to direct relevant ministries and agencies to develop and issue criteria for supporting high-competitive products in overseas investment promotion programs.

+ Apply and supervise the operation of a fair pricing mechanism for all imported products.

- Investment policy

+ Request the Government to apply the maximum preferential policies as stipulated in Decision No. 55/2007/QĐ-TTg dated April 23, 2007 of the Prime Minister on certain mechanisms and policies to encourage the development of key industries for investment projects producing power machinery and agricultural machinery.

+ Call for foreign investment in the production of power machinery and agricultural machinery in Vietnam.

+ Encourage investment projects producing post-harvest equipment in rural areas.

- Science and technology research policy

+ Request the Government to support from the state budget 50% of the costs for technology transfer, purchasing design copyrights, and hiring foreign experts.

- Human resource policy

+ Request the Government to support from the state budget 50% of the training costs for human resources directly implementing investment projects producing substitute import products and potentially exportable products, with the training costs fully accounted for in the product cost.

- Financial policy

+ Projects producing power machinery and agricultural machinery shall be considered for credit loans for investment in fixed assets from the State. The loan mechanism shall be implemented according to the current regulations of the Government. Consideration for export credit loans shall also be provided according to current regulations.

+ Improve the loan mechanism through credit guarantees from organizations such as the Farmers' Association and Industry Associations. Prioritize loans for the production of post-harvest equipment for rice, corn, soybeans, and peanuts.

+ Apply reasonable import tariffs on domestic products of power machinery and agricultural machinery that have been produced and have production capacity sufficient to meet market demand.

+ For complex parts and components requiring high technology that domestic manufacturers cannot produce, do not intend to produce, or produce inefficiently over the long term (within 5 to 10 years), request the Government to consider applying low or zero import tariffs to reduce the overall cost of the equipment.

+ Implement credit support policies for farmers purchasing machinery and equipment for agricultural production.

+ Implement risk insurance for commercial banks providing working capital for farmers to purchase agricultural production machinery.

- Industry management policy

+ Create conditions for the formation of multi-sector and multi-industry power machinery and agricultural machinery conglomerates when they meet the necessary criteria.

- Other assistance policies

+ Support production facilities in adopting the ISO 9000 Quality Management System, building brands, testing and evaluating, and announcing product quality.

+ Request the Government to consider expanding the list of entities eligible for investment incentive mechanisms under Decree No. 108/2006/NĐ-CP dated September 22, 2006 of the Government for the group of cultivation, irrigation, and post-harvest processing equipment.

+ New investment projects, upgrading, modernizing equipment, production lines, or using advanced technology shall be considered for priority land leasing, exemption or reduction of land rental fees for a limited period, and benefits in land transfer and mortgage policies according to the law.

+ Continue to implement land consolidation and exchange to meet the requirements of large-scale agricultural production, creating conditions for the efficient use of agricultural mechanization machinery and equipment.

Article 2. Implementation Organization

- The Ministry of Industry and Trade shall coordinate with relevant ministries, agencies, and provincial People's Committees to direct the development of the power machinery and agricultural machinery manufacturing industry according to the approved planning.

- The Ministries of Agriculture and Rural Development, Planning and Investment, Finance, National Defense, Science and Technology shall, within their respective functions, cooperate with the Ministry of Industry and Trade to concretize the solutions and policies set forth in this Decision.

- Provincial People's Committees shall facilitate the implementation of projects for the production and assembly of power machinery and agricultural machinery within their jurisdiction, supervise the implementation of investment projects in accordance with the registered content to ensure consistency with the industrial development plan and the overall socio-economic development plan of the locality; depending on specific local conditions, they may formulate supportive and encouraging policies for farmers and agricultural technical service establishments to enhance the purchase and use of power machinery and agricultural machinery for production purposes; exempt certain business operators in the agricultural electromechanical services from taxes for a limited period, prioritize and encourage investment in specialized industrial clusters suitable to each locality's characteristics.

Article 3. This Decision shall take effect fifteen days after its publication in the Official Gazette.

Article 4. Ministers, Heads of ministerial-level agencies, Heads of government agencies, and Chairpersons of provincial People's Committees shall be responsible for implementing this Decision./.