Vietnam’s energy transition offers the possibility for localization to flourish and support industries to boom.

The world is entering a new era in energy, one where sustainability and emission
reductions are no longer choices but imperatives. In Vietnam, a strong transition
in the energy sector is now underway, driven by the rise of wind, solar, and LNG
power. This shift is opening vast opportunities for the country’s energy industries,
while demand for equipment, materials, components, and technological solutions is
rising exponentially.

Amid this promising landscape, support industries are emerging as the “key”
to unlocking Vietnam’s path to the global market. Experts believe the renewable
energy segment alone could generate a multibillion-dollar market for Vietnam’s
support industries over the next decade. The transition presents a crucial chance
for the country to move deeper into global value chains, master advanced technologies,
boost localization, and strengthen its position in building a modern, sustainable
energy sector.

Strides forward strains

At a recent seminar entitled “Opening New Directions for Supporting Industries
in the Energy Sector”, Dr. Vu Van Khoa, Deputy Director of the National Research
Institute of Mechanical Engineering, said that since the government introduced Decision
No. 797/CP-CN, dated June 17, 2003, on power projects launched in 2003-2004, and
Decision No. 400/CP-CN, dated March 26, 2004, on mechanisms for hydropower projects,
Vietnam has gained mastery in developing hydropower and pumped-storage plants.

This contributed to the completion of some 30 hydropower plants of over 50
MW each in Vietnam, most notably in northern Son La and Lai Chau provinces, allowing
them to come online 1-2 years ahead of schedule and saving thousands of billions
of VND. Mastering technology not only significantly cut costs but also created thousands
of jobs at major corporations like the Vietnam Machinery Installation Corporation
(LILAMA) and the Mechanization Electrification Construction Corporation (Agrimeco).

Vietnam has also made notable progress in renewable energy. Localization in
the solar sector now stands at 35-40 per cent, focusing on support frames, cables,
and electrical cabinets. The country has even emerged among the world’s Top 10 solar
panel manufacturers, with companies such as Boviet Solar and IREX Solar playing
a key role.

Mr. Le Van An, Vice Chairman of the Vietnam Association of Mechanical Industries
(VAMI) and Chairman of Agrimeco, said domestic companies have mastered, and in many
cases excelled at, providing all support services for power, thermal, and gas projects,
covering both large and small energy works around the country and even for export.

However, challenges remain. Many energy investors lack deep technical expertise,
leading to poor assessment of contractors during bidding. Instead of prioritizing
technical criteria, they often focus solely on cost, resulting in project failure.
Intense competition amid a limited workload has also led to unhealthy price-cutting,
which compromises quality.

Dr. Khoa underlined that the number of companies deeply integrated into global
energy supply chains remains small. Vietnam has around 2,000 enterprises in energy
support industries, but only about 300 participate in global supply chains. Localization
in newer sectors like wind power is modest, at around 25-30 per cent, and is mainly
limited to structural works and installation.

Mr. Chu Viet Cuong, Director of the Industrial Development Support Center at
the Ministry of Industry and Trade, noted that while localization in energy projects
– especially wind, solar, hydropower, and thermal power – has improved, it still
falls short of government expectations. In wind energy, localization accounts for
only about 25-30 per cent of equipment value, mainly foundations, steel structures,
piles, turbine towers, and connection systems, while in solar energy it stands
at some 35-40 per cent, focusing on mounting frames, cables, electrical cabinets,
inverters, and some photovoltaic (PV) modules; still far below Thailand (60-65 per
cent) and Malaysia (55-60 per cent).

Mr. Cuong attributed the gap to limited financing, outdated technology and
equipment, a shortage of skilled workers, and technical barriers that make it difficult
for local companies to enter global supply chains.

Adding to these concerns, Mr. Tran Kien Dung, an expert with the International
Labor Organization (ILO) and Director of ProfM Vietnam, warned of a widening technology
gap. Most Vietnamese enterprises have yet to master advanced technologies and remain
weak in research and development (RD). As a result, the intellectual and technological
content of their products remains low, limiting added value.

Further compounding the problem are strict quality and technology requirements
from major global buyers who already have stable supply chains. Internally, a race
to the bottom on price, at the expense of technical standards, has led to growing
risks and frequent project failures.

Coordinated strategies

To overcome barriers in capital, technology, and human resources, and to achieve
a 40-50 per cent localization rate in the energy sector in the years ahead, experts
suggest a coordinated strategy between the government, enterprises, and research
institutes.

On the government side, Dr. Khoa recommended a strong policy requiring that
each sector have a clear localization roadmap to create market capacity. He also
emphasized the importance of government support for building fully equipped laboratories,
enabling companies to test products to international standards, noting that setting
up such labs is costly.

Responding to these suggestions, Mr. Cuong said the MoIT is actively drafting
a new decree to promote the application of science and technology and the development
of manufacturing in the power sector, focusing on three key areas: financial mechanisms,
technological innovation, and workforce quality improvements. Notably, the draft
includes tax, land, and credit incentives for companies producing electrical equipment
and energy storage technologies; support for RD and advanced technology transfer;
and prioritization of domestic products in projects using State capital.

For enterprises, now is the time for a decisive transformation. Mr. Dung emphasized
the need for a long-term development strategy, which would guide companies in the
right direction.

To succeed in this new era in energy, Mr. An proposed that enterprises act
on three fronts: strengthen technological capacity and the technical workforce,
invest in automation, and adopt international management standards; link supply
chains and specialize to form clusters of mechanical support industries, with each
company focusing on a specific segment to create synergy rather than working in
isolation, while improving governance and financial capacity; and ensure transparency
in standards and obtain international technical certifications, which serve as the
“passport” to participate in global supply chains.

VET-Vu Khue