DECISION

APPROVING THE SCHEME ON DEVELOPMENT OF MECHANICAL ENGINEERING INDUSTRY TILL 2010 IN SERVICE OF AGRICULTURAL AND RURAL INDUSTRIALIZATION AND MODERNIZATION

THE MINISTER OF INDUSTRY

Pursuant to the Government's May 28, 2003 Decree No. 55/2003/ND-CP defining the functions, tasks, powers and organization of the Ministry of Industry;

Pursuant to the Prime Minister's October 8, 2003 Directive No. 24/2003/CT-TTg on development of agricultural, forest and aquatic product-processing industries;

Pursuant to the industry service's Action Program No. 2749/CV-KHDT of July 22, 2002 sent by the Industry Ministry to its attached units, aimed to materialize the Resolution of the 5th Plenum of the Party Central Committee, IXth Congress;

At the proposals of the director of the Mechanical, Metallurgy and Chemicals Department and the head of the Local Industries Directorate,

DECIDES:

Article 1.- To approve the scheme on development of mechanical engineering industry till 2010 in service of agricultural and rural industrialization and modernization with the following principal contents:

1. Viewpoints on mechanical engineering development in service of agriculture and rural areas:

- Mechanical engineering development in service of agriculture and rural areas must conform to the strategy on development of Vietnam's mechanical engineering industry till 2010, with a vision to 2020, already approved by the Prime Minister, and must be closely associated with plannings on development of economic zones, plannings on development of agriculture, forestry and fishery as well as socio-economic development plannings of localities.

- To intensively and selectively develop a number of sub-sectors and a number of types of mechanical products such as prime movers; equipment for mechanization of soil preparation, harvesting and post-harvest preservation stages; processing equipment (first of all for the processing of agricultural, forest and aquatic products with great outputs, export markets but low processing percentages); hydraulic mechanical equipment; and spare parts for repair of mechanical equipment in service of agriculture and rural areas. To satisfy the domestic demands, and at the same time, encourage the export of mechanical products in service of agriculture that have markets and competitive edge.

- To develop mechanical engineering industry in service of agriculture and rural areas mainly by bringing into play domestic resources (through mobilizing the entire industry's capabilities on the basis of enhancing specialization and cooperation), in association with the maximum mobilization of external resources, first of all, technology and capital.

- To encourage and create favorable conditions for all economic sectors to participate in mechanical engineering programs in service of agriculture and rural areas.

2. Objectives:

- To mechanize production stages and domains that require much manpower, high labor intensity, and seasonal timeliness in agriculture, forestry and fishery. To mechanize the agricultural, forest and aquatic product- processing stages.

- To create conditions for the application of technical progresses, advanced technologies and equipment to agricultural production, forestry and fishery so as to raise labor productivity and production and business efficiency.

- To raise the level of irrigation mechanization, assuring water irrigation and drainage, taking initiative in meeting the intensive farming requirements as well as in preventing, combating, limiting and overcoming consequences of natural calamities.

- To develop services of providing, repairing and maintaining mechanical machines and equipment in service of agriculture, contributing to agricultural mechanization and raising of labor productivity, step by step improving labor conditions for peasants.

3. Orientations for development of mechanical engineering industry in service of agriculture and rural areas:

3.1. For agricultural production and forestry:

a/ Regarding cultivation:

- To equip tractors suitable to the conditions of each region and production scale.

- To mechanize the farming of such crops as sugarcane, subsidiary crops, short-term industrial plants, long-term industrial plants and fruit trees.

- To achieve the above-mentioned oriented objectives, it is forecast that from now to 2010, around 600-700 large-sized tractors, 4,000-4,500 medium-sized tractors, 5,000-6,000 two-wheeled tractors of 6-12 horse power (HP) and 150-180 caterpillars are needed each year. Annually, 30,000-40,000 trailer farm- machines, including soil-preparing machines (pillar plows, pan-shaped plows, millers, cage wheels…); sowing, tendering and harvesting machines as well as machines for preliminary processing and post-harvest preservation are needed.

- To manufacture and supply around 140,000- 150,000 gasoline or diesel-fueled engines annually by the domestic mechanical engineering industry in order to meet the requirements of agriculture and rural areas.

- To ensure the domestic manufacture of most of engines, a portion of small-sized tractors and agricultural machines, and most of spare parts for repair of existing machines.

b/ Regarding husbandry

For livestock farms, to concentrate on mechanization of sanitation of stables and farms; supply of water and animal feeds; creation of sub-climates (heating, cooling); bathing of domestic animals; egg hatching; milking; preservation and transportation of milk.

c/ Regarding forestry

In the years to come, to focus mainly on zoning off for forest regeneration and protecting the existing forests. To raise the level of mechanization of sapling-production stages, from soil making to forest-planting, tendering and protection, thus contributing to the implementation of the program on greening barren land and bare hills and planting of 5 million hectares of forests. From now to 2010, to mainly import assorted bulldozers, big prime movers; and heavy trucks in service of forest exploitation, transportation and road- building in forests.

The domestic mechanical engineering industry shall manufacture 80-100% of machines in service of afforestation and pesticide-spraying machines, 50-60% of timber-sawing and -cutting machines, and pruning machines...; and undertake the maintenance, repair and overhaul and manufacture a number of spare parts.

d/ Regarding irrigation

To equip machines for reservoir digging, dike building, canal dredging, and building of irrigation projects.

To equip axial pumps and low-water column centrifugal pumps for irrigating and draining in delta areas; and assorted high-water column pumps so as to pump water in service of daily-life activities and watering of industrial trees and fruit trees in midland regions, the Central Highlands and Eastern South. For areas under industrial trees of high value (coffee, tea…), to apply advanced watering technologies such as spray-watering, underground watering and drop-watering in order to save water and meet the agronomic requirements.

To take initiative in irrigation, around 26,000 pumps of a capacity of 100-540 m3/h each and 1,000 large- and medium-sized pumps are needed for fixed floodwater-discharging stations and big pumping stations.

The domestic mechanical engineering industry shall manufacture all kinds of axial and centrifugal pumps, including those in service of irrigation with a capacity of up to 15,000 m3/h and pressure column of between 2.5m and 10m, and assorted small pumps with high pushing column. To boost the manufacture of equipment in service of irrigation projects such as assorted sluice gates, sluice gate- opening and closing equipment, water locks, small- and medium-sized hydro-electric power turbines, pressure pipes and siphons, bridge cranes, roller bridges, and special-use equipment for construction of embankments and dikes, rock cage-releasing equipment, etc.

3.2. For agricultural, forest and aquatic product processing:

a/ Food

* Regarding preservation:

To manufacture and supply machines and equipment in order to upgrade the existing warehouses of 140,000 tons, build modern preservation warehouses with a storing capacity of around 650,000 tons, and mechanize the stages of goods handling, transport and quality control.

To supply dryers of all sizes (0.5-2 tons/batch for households and household group; 3-5 tons/batch for service-providing households; 6-10 tons/batch for food-processing enterprises) for rice drying, especially for summer-autumn rice in Mekong River delta.

* Regarding processing:

Rice for domestic consumption: To equip mainly small rice- millers of a capacity of 0.8-1 ton/h or simple chains covering rice husking, sieving and sorting, of a capacity of 1-2 tons/h.

Rice for export: To equip complete chains that cover rice husking, sorting, polishing and color grain- separating, of a capacity of 100-120 tons/shift, in synchronous combination with dryers and preservation warehouses.

b/ Sugar:

- From now to 2005: As the capacities of newly-built plants have not yet been brought into full play (achieving only 50-80% of the designed capacities), investments shall not be made in building new ones. Therefore, the mechanical engineering industry shall focus on manufacturing spare parts for the existing plants and the to be-relocated plants.

- From 2006 to 2010: To manufacture equipment for a number of new plants so as to bring into full play advantages of raw material regions, chiefly in the Mekong River delta provinces.

c/ Coffee:

- To equip coffee-processing establishments with machines suitable to their processing scales and technologies (dry or wet processing). For households and household groups, to equip fresh fruit-crushing machines of a capacity of 0.3-1 ton/h, and small dryers of 0.1-0.5 ton/batch.

- To study and manufacture processing equipment with suitable properties and capacity so as to equip coffee-processing stations corresponding to coffee-growing areas of 100 ha or more. To equip processing factories with technologies and equipment suitable to coffee-processing establishments that have output of between 1,000 and 1,500 tons/year (mainly in the Central Highlands and Eastern South). To equip synchronous and complete technological chains that cover stages of preliminary processing, sorting, polishing and packaging, for coffee-processing plants of capacity of 5,000-10,000 tons/year, corresponding to coffee-growing areas of around 5,000 ha.

- To study and manufacture instant coffee-processing equipment so as to supply them to three instant coffee-processing plants (expected to be built in 3 regions), each having a capacity of between 1,000 and 2,000 tons/year, corresponding to raw material areas of 1,000-1,500 ha, in service of the domestic market and export.

d/ Rubber:

- To manufacture equipment in service of improvement and upgrading of the existing rubber- processing factories and equip them with 25-30 new technological chains of capacity of 6,000 tons/year each. To upgrade and renovate equipment in order to improve the quality of dry latex in grain or block. To equip sufficient special-use vehicles for the transportation of liquid latex to factories so as ensure environmental hygiene at processing areas.

- To raise the level of mechanization of medium- and small-sized processing workshops of a capacity of 3,000-12,000 tons/year each for the production of grain latex.

- To manufacture equipment for supply to small-sized rubber-processing workshops of a capacity of 1,200-1,500 tons/year each, in service of small-sized rubber plantations.

e/ Tea

- By 2005, the mechanical engineering industry shall have conducted study, manufacture and supply equipment for the construction of 6-8 black tea-processing plants of a capacity of 12 tons of fresh buds/day each and a number of green tea-processing plants of a capacity of 6-12 tons of fresh buds/day each. By 2010, to have manufactured and supplied equipment for the construction of more tea-processing plants with modern technologies and total capacity of 5,000 tons of fresh buds/day.

- To study, manufacture and equip small-sized tea-roasting and -rumpling machines for peasants’ households.

f/ Vegetables and fruits

- To study, design, manufacture equipment and produce substitute spare parts to meet the repairing demand and to upgrade the existing 22 vegetable- and fruit-processing factories. To manufacture equipment for the construction of new processing factories of a total capacity of 250,000 tons/year by 2010. To equip vegetable- and fruit-processing establishments with industrial processing chains of a capacity of 30,000- 35,000 tons/year, as well as can- and package-production chains. For concentrated raw material areas, the mechanical engineering industry should study and manufacture equipment for the construction of vegetable- and fruit-processing plants of a capacity of 5,000- 10,000 tons/year each. For scattered raw material areas, the industry should study and manufacture equipment for the construction of small vegetable- and fruit- processing plants of a capacity of approximately 1,500 tons/year each.

g/ Cashew

- To combine mechanical and manual processing of cashew. To select modern technologies and equipment in order to diversify cashew products such as high-quality cashew-nut cakes, cashew oil and cashew-nut drinks.

- To study and manufacture equipment for investment in the expansion of capacity of existing cashew-processing establishments. By 2005, to have studied and manufactured equipment for the construction of around 15-20 cashew-processing establishments. In the 2006-2010 period, to manufacture equipment for the construction of around 50 cashew-processing establishments of an appropriate capacity of 3,000-5,000 tons of nuts/year on average, depending on the raw material areas.

h/ Coconut and vegetable oil

- To modernize coconut product-production chains. Apart from the stage of oil refinement, attention should be paid to the study and manufacture of equipment chains for the production of coconut oil products. To improve technologies and renovate equipment in order to raise the crude oil-pressing capacity. To upgrade and make new investment in equipment for the production of shortening, glycerin, fatty acid… in service of food industry, pharmaceutical industry and other industries.

- To manufacture equipment in service of investment in the construction of export coconut meat- producing enterprises of a total capacity of 3,000-5,000 tons/year and activated charcoal-manufacturing enterprises of a capacity of 1,000 tons/year.

i/ Meat, milk and animal feeds

* Meat

- To study and manufacture meat-processing machines and equipment for intensive investment in two big export meat- producing factories.

- To supply slaughtering equipment for small-sized meat-producing establishments of a capacity of around 10-20 tons/day each. For cities and industrial parks, the mechanical engineering industry should study, manufacture and supply complete meat-producing equipment chains, including slaughtering devices, in combination with veterinary inspection, cooling preservation, raw material-transporting vehicles and refrigerator cars, as well as byproducts technologies for the processing of meat products such as meat paste, sausages and Chinese sausages.

* Milk:

- The mechanical engineering industry should study the renovation of milk-processing technologies and equipment with a view to catching up with the world's advanced technologies. To study and manufacture proper equipment for investment in upgrading and expansion of dairies and building of a number of new ones in provinces and cities. Apart from cow milk-processing equipment, the industry should pay attention to the study and manufacture of equipment for the processing of vegetable milk, such as soya milk.

- To take part in manufacturing equipment for new dairies to be built in Lam Dong, Hai Phong and Quang Ninh…

* Animal feeds

To study the manufacture of modern equipment in association with technology transfer for the construction of animal feed-processing establishments of a capacity of between 30,000-100,000 tons/year each, ensuring the processing of 2 million tons of industrial feeds by 2005 and 4 million tons by 2010.

j/ Timber and forest products

- To process timber and forest products mainly in service of paper, artificial board and household furniture production. The mechanical engineering industry may participate in the manufacture of various equipment, spare parts and tools for timber-processing industry. In the immediate future, to well perform the task of manufacturing equipment for paper pulp plants in Thanh Hoa, then in Bac Kan and other plants; manufacturing equipment for plank- and bamboo board-production chains of an output of 1,000-4,000 m3 of products/year, corresponding to each raw material area.

- To equip pine-resin processing chains of a capacity of 1,000-1,500 tons/year.

k/ Aquatic and sea product processing:

- To actively take part in the manufacture of equipment and spare parts for aquatic and sea product processing factories.

- To manufacture and supply iced water- and ice-making equipment and chains of different capacities to serve the preservation stage in the fishing process.

- To manufacture equipment for freezing preservation stores.

- To produce and assemble special-use automobiles (refrigerator cars).

Besides, the mechanical engineering industry should also take part in manufacturing equipment for salt processing.

4. Development solutions and policies:

a/ A number of major solutions

- To concentrate on directing the acceleration of the implementation of mechanical engineering projects in service of agriculture under the Program on Key Mechanical Products, already approved by the Prime Minister. To study, select and propose the Prime Minister to add new products into the Program.

- To step by step reorganize the mechanical engineering system in service of agriculture and rural areas, from central to local level, along the following directions:

+ To consolidate the State corporations (under the Ministry of Industry and the Ministry of Agriculture and Rural Development) so that they can well play the leading role; develop the model of parent company-subsidiary company; gradually convert a number of locally-run agricultural mechanical-engineering enterprises into subsidiary companies or satellite enterprises of big companies. To accelerate the equitization of State enterprises in the agricultural mechanical-engineering industry.

+ To reorganize production along the direction of specialization and cooperation; enhance coordination among mechanical engineering enterprises nationwide so that they can manufacture complicated products such as tractors, combined harvesters threshers, processing chains and equipment…

+ To develop an agency network to supply equipment, spare parts, materials, fuels, oil and grease…, to provide warranty and post-sale services. To create conditions for all economic sectors to join in this network, ensuring that it can access all hamlets and villages.

- To boost intensive investment; renovate technologies and equipment in order to raise the production capacity; to maximize the invested capacity in service of the manufacture of agricultural mechanical products.

- To consolidate research and designing institutions, step by step formulating research and designing institutions that are strong enough and specialized in mechanical engineering in service of agriculture and rural areas, being capable of designing complicated equipment and chains.

- To consolidate and promote the role of Vietnam Association of Mechanical Engineering Enterprises.

- To probe into, grasp and forecast market demands for agricultural mechanical products; select and determine machine types and sizes suitable to farming conditions and practices as well as scales of raw material areas; select a number of key products for each branch or domain for investment in the production thereof. For machines and equipment that cannot be made in the country yet, there should be plans on the importation of their prototypes for study and experimental manufacture, then mass manufacture thereof.

- To encourage and mobilize all capital sources for investment in the development of mechanical engineering industry in service of agriculture and rural areas. To actively call for foreign investments, first of all in the manufacture of machines, equipment and complicated processing chains.

- To step up the combat against smuggling and trade frauds so as to protect and expand the domestic market.

b/ Policies:

So far, the State has adopted a policy on credit support for manufacturers and dealers of machines and equipment in service of agriculture through the following main agencies:

+ The Development Assistance Fund, which shall effect the development investment credit policy for projects entitled to domestic investment promotion and provide soft loans for a number of key branches such as mechanical engineering and forest planting (under Decree No. 106/2004/ND-CP).

+ The Social Policy Bank, which shall provide soft loans for poor households, generate jobs and provide loans for economic development of Regions II and III…

However, the successful implementation of the program on development of mechanical engineering industry in service of agriculture and rural areas requires, first of all, efforts of the industry itself with support of the State policies. All mechanical engineering enterprises (not only those specialized in agricultural mechanical engineering) must be aware of the fact that their participation in the mechanical engineering program in service of agricultural and rural industrialization and modernization is not only a political task of the industry but first of all, a big opportunity for development of the industry as the market of mechanical products in service of agriculture and rural areas is extremely vast.

To create favorable conditions for mechanical engineering industry to penetrate into this market, apart from continuing the implementation of the above-mentioned policies, the Ministry of Industry shall continue to coordinate with the concerned ministries and branches in submitting to the Government for promulgation a number of support policies along the following directions:

1. The policy on support for investment in the manufacture of machinery in service of agriculture as well as agricultural, forest and aquatic product processing:

+ To propose the Prime Minister to expand the list of subjects entitled to investment preferential mechanisms under Decree No. 106/2004/ND-CP for a number of mechanical products in service of agriculture and rural areas (first of all for the group of farming, irrigation and processing equipment).

+ To support enterprises in the manufacture of new items such as proposing the State to provide interest -free loans for the purchase of machine prototypes, experimental manufacture, and to grant money for the purchase of designs of machine prototypes.

+ To particularly encourage projects of foreign direct investment in the mechanical engineering industry.

+ To give priority to domestic mechanical engineering establishments so that they can receive contracts on manufacturing equipment for agriculture.

+ To expand international cooperation in the manufacture of mechanical products in service of agriculture and rural areas.

2. Financial and tax policies:

+ To give priority to mechanical engineering enterprises that manufacture products in service of agriculture and rural areas to borrow enough working capital with simple borrowing procedures (especially for people-founded enterprises) in service of production.

+ To reduce or exempt import tax for mechanical materials and raw materials which must be imported; to exempt or reduce enterprise income tax for definite terms for new mechanical products.

+ To reduce land-use levies and to exempt land rents for definite terms for mechanical engineering projects in service of agriculture and rural areas.

3. Policy on market support:

+ To apply high import tax rates (within the permitted framework of the integration roadmap) to a number of agricultural mechanical products that can be made in the country to meet the market demand.

+ To strictly sanction acts of smuggling and trade frauds related to mechanical products in service of agriculture and rural areas.

4. Policy on encouragement of, and support for, the transfer and application of new technologies in service of agricultural mechanical equipment manufacturing as well as agricultural and forest product processing

+ To propose the Government to partly support with budget capital the expenses for new technology transfer and application in service of agricultural mechanical equipment manufacturing as well as agricultural and forest product processing.

Article 2.- Organization of implementation:

1. The Ministry of Industry:

1.1. The Mechanical, Metallurgy and Chemical Department:

- To coordinate with the Institute for Industry Policy and Strategy in working out plannings for development of a number of specialties and groups of mechanical products in service of agriculture and rural areas (to implement the Prime Minister's Decision No. 186/2002/QD-TTg approving the strategy for development of Vietnam's mechanical engineering industry till 2010, with a vision to 2020).

- To coordinate with relevant departments and institutes in studying and proposing specific policies mentioned at Points 1, 2, 3 and 4; Item b; Clause 4 of Article 1 of this Decision in order to encourage and support enterprises to manufacture mechanical products in service of agriculture and rural areas.

- To coordinate with Vietnam Association of Mechanical Engineering Enterprises and Vietnam Mechanical Engineering Society in studying and proposing solutions to the creation of a network of mechanical engineering enterprises that manufacture products in service of agriculture and rural areas, from central to local level, thus creating a close and efficient link and cooperation among enterprises.

- To assist the Ministry in directing the implementation of mechanical engineering investment projects in service of agriculture and rural areas in strict compliance with the set objectives and ensuring efficiency.

-To provide guidance for the provincial/municipal Industry Services and mechanical engineering corporations to implement the scheme on development of mechanical engineering industry till 2010 in service of agricultural and rural industrialization and modernization after it is approved.

1.2. The Local Industries Directorate:

- To coordinate with the provincial/municipal Industry Services and functional departments as well as mechanical engineering corporations in materializing the contents of the scheme on development of mechanical engineering industry till 2010 in service of agricultural and rural industrialization and modernization in localities; coordinate with the provincial/municipal Industry Services in studying the integration of the scheme's contents in the course of elaborating, reviewing and adjusting the local plannings on industrial development.

- To take part in elaboration of mechanisms, policies and solutions to encourage and support the manufacture of mechanical products in service of agriculture and rural areas, according to local demands and specific situations.

1.3. The Department of Sciences and Technologies:

- To study and propose mechanisms and policies to encourage and support technology transfer, investment in technology renovation, and product research and development, for enterprises manufacturing mechanical products in service of agriculture and rural areas.

1.4. The Institute for Industry Policy and Strategy:

- To coordinate with, and assist localities at their requests in, working out, reviewing and adjusting local plannings on industrial development, concretizing the scheme's contents to suit the local characteristics.

- To study and propose mechanisms and policies for development of mechanical engineering industry in service of agriculture and rural areas.

2. The provincial/municipal Industry Services:

- To advise the provincial/municipal People's Committees on directing and organizing the implementation of this scheme in their respective localities.

- Basing themselves on this scheme, to study and work out programs on development of mechanical engineering industry in service of agriculture and rural areas for their respective localities, that covers the building of networks of locally-run mechanical engineering enterprises in service of the overhaul, repair, maintenance and distribution of mechanical products, then submit them to the provincial/municipal People's Committees for approval and direction of implementation.

3. Vietnam Association of Mechanical Engineering Enterprises and Vietnam Mechanical Engineering Society:

- To take part in elaborating and proposing mechanisms and policies for development of mechanical engineering industry in service of agriculture and rural areas.

- To coordinate activities of their members in boosting scientific research activities, task assignment and cooperation in production according to the scheme's contents.

4. Mechanical engineering enterprises:

- To organize the implementation of this scheme's contents in their respective enterprises.

- To enhance cooperation and link between enterprises so as to bring into play their advantages and make use of the capability of the entire industry; to boost the manufacture of mechanical products in service of agriculture and rural areas; to take advantage of opportunities to get the markets in the integration process.

- The corporations shall actively bring into play their leading role, organizing production along the direction of high-level specialization, accelerating the formulation of the models of parent company-subsidiary company and satellite enterprises, developing forms of placing goods-processing orders with small and locally-run enterprises; boosting research and development activities; selecting and focusing on development of a number of new products along the directions mentioned in this scheme.

5. Mechanical-engineering research institutes:

- To take initiative in reviewing the industry's capabilities, probing into markets and elaborating plans on study, designing and manufacture of products in service of agriculture and rural areas.

- To train mechanical engineering personnel in service of agriculture and rural areas.

6. Mechanical-engineering job-teaching schools and vocational training establishments under the Ministry of Industry:

- To accelerate the training of the contingent of mechanical engineering cadres and workers in service of agriculture and rural areas. To train mechanical engineering skills for peasants, supporting localities in terms of mechanical engineering knowledge in service of agriculture and rural areas.

Article 3.- This Decision takes effect 15 days after its publication in the Official Gazette.

Article 4.- The director of the Ministry's Office, the chief inspector of the Ministry, the directors and heads of the Ministry's Departments, the director or the Institute for Industry Policy and Strategy, the director of the Industrial Machine-Tool Institute, the general director of Machinery and Industrial Equipment Corporation, the general director of Vietnam Engine and Agricultural Machinery Corporation, the general director of Vietnam Electrical Equipment Corporation, the directors of the provincial/municipal Industry Services and the heads of concerned units shall have to implement this Decision.