Manufacturing industry to fuel Vietnam's automation market

Other industries that are helping to buoy the outlook for the automation and control market in Vietnam are residential and commercial building, paper and pulp, and mining. Industrialisation in Vietnam is affected by the interest shown by public and private organisations in the manufacturing industry. An analysis from Frost & Sullivan, Automation and Control Market in Vietnam, estimates the market to reach US$129.1 million in 2016. Growth is likely to be fuelled by the use of PLCs, SCADA, and DCS.

"After the reunification of Vietnam, a concerted effort was made to rapidly transform the private, capitalist industry in the south into a state-run sector," says Frost & Sullivan Research Analyst Krishnan Ramanathan. "Many industrial operations were nationalised or forced to become joint state-private enterprises; productivity of both capital and labour declined for the market as a whole and gross output slumped." Reform measures in the 1980s introduced incentives, reduced subsidies to inefficient state-run operations, and gradually allowed limited market mechanisms. The Vietnamese Government has been adopting agile methods to facilitate the deployment of large-scale industrial projects, stoking growth in this market.

The Vietnamese market holds huge potential; however, several deficiencies must be remedied to ensure forward momentum. The economic slowdown had clouded market prospects and industrial production witnessed a downtrend. Companies had been operating under constrained budgets and large-scale investments were pushed to the back burner. Although the recession was a growth bottleneck, other factors had also contributed to make the market less attractive. Foremost among the challenges faced by the industry is the lack of infrastructure and skilled professionals. This has proved to be a major deterrent for foreign investors. Strong support from the private sector will be needed to circumvent this challenge. As far as the competitive landscape is concerned, major multinationals hold sway over the automation market in Vietnam.

Local industries have neither resources nor the financial resources to compete effectively in this space. There are import barriers in Vietnam that make it difficult for companies operating in the market as the country lacks the technology to manufacture indigenously. To ensure business progression, equipment manufacturers operating in Vietnam must offer customised solutions to clients as there is very little in terms of product differentiation. The onus is on the government and private agencies to raise the capital needed to augment infrastructure. "Vietnam is on the threshold of phenomenal growth across industries, and conventional ones, such as oil and gas, are expected to continue on an upward trajectory," concludes Ramanathan. "In particular, the food industry is poised to be a major propelling force in Vietnam’s attempt to become an industrialised nation by 2020."