Currently, Vietnam is facing a population explosion. The population density of our country is increasing day by day, especially in big cities. According to the United Nations, the urban population of our country will reach nearly 56 million people by 2050, the urbanization level will reach 54%, higher than most developing countries. Along with this situation, more and more large projects are invested and built.

In such a project, there are usually two main parts: Construction (Structural and Finishing) and M&E – Mechanical & Electrical which account for about 30-50% of the total project volume. Thus, the M&E business is an important sector in the economy and has a close relationship with the construction industry, in which the infrastructure investment, commerce, and industry sectors, investment in real estate development because it is related to construction activities. In Vietnam, talking about M&E construction, there are some big contractors such as Refrigeration Mechanical and Electrical Joint Stock Company (REE); Searefico Refrigeration Technology Joint Stock Company; Hawee Electromechanical Joint Stock Company; Sigma Technical Joint Stock Company; Pacific Electromechanical Joint Stock Company (PME); Saigon Technology and Engineering Joint Stock Company (TECHGEL),… It can be seen that this is a business with its own characteristics and is considered to have a lot of potentials but also contains many risks and challenges.

     M&E stands for Mechanical & Electrical (understood in Vietnamese means Mechanical & Electrical, it is often abbreviated as M&E engineering).

The M&E system is divided into four main categories:

  • Heating Ventilation Air Conditioning (HVAC) system for short.
  • Water supply and drainage and sanitary equipment (Plumbing & Sanitary, P&S for short).
  • Electrical (Electrical).
  • Fire alarm & fire fighting system.

In the above 4 items, the Electrical part accounts for about 40-60% of the volume of M&E (Depending on each project, it can even be up to 70.80%).

Electricity is divided into Heavy Electricity and Light Electricity.

Heavy electricity includes:

Main power supply: is the main power supply system, including medium voltage cabinets, medium voltage lines, 24kV/0.4kV transformers and main switchgear (called MSB, main switchboard). There may be additional (Automatic Voltage Regulator System: Automatic Voltage Regulator System, AVR for short).

    • System of distribution cabinets: Sub main power supply (including power supply for motivation, production, lighting, sockets…).
    • Living lighting system: Lighting. Socket System: Socket outlet.
    • Emergency lighting system: Emergency lighting (exit light, emergency light).
    • Earthing system: Earthing system (or grounding system).
    • Lightning protection system: Lightning protection system (including grounding rods and lightning rods, other than the grounding system).

Light electricity includes:

    • LAN and Internet system: Data network system.
    • Telephone system: The telephone system.
    • Security monitoring system: Security & Supervisor system.
    • PA system (public address system)

The Mechanical part includes the remaining three items.

This is a much longer and more difficult construction part than the Electrical part, requiring the construction contractor to have full experience and expertise to design and construct in the most reasonable and cost-effective manner. while still ensuring to fully serve the needs of the project.


Necessary characteristics of businesses operating in the industry

The necessary condition for enterprises to participate in activities in the industry is to have a large initial investment in the system of facilities, machinery and equipment and human resources with specialized technical expertise. More specifically, M&E construction activities always require large capital to invest in machinery and equipment, advance and pay for large contracts/orders. Most businesses often use financial leverage, so they have a large proportion of borrowed capital. Therefore, changes in interest rates, credit limits or actions of banks affect the solvency of M&E construction enterprises. Regarding labor, labor is management and quality engineers in the field are still a headache for many managers in the industry.

Barriers to market entry

The attractiveness of the industry is great, businesses operating in the field of construction and real estate investment can register for more services and conduct business in the M&E segment. Barriers to market entry are moderate, enterprises take time to invest in construction machinery and technology; establish a team of engineers, establish relationships with partners to supply quality equipment and materials; carry out customer promotion, and do market. Also, many foreign contractors (Japan, Korea, China) intend to penetrate the Vietnamese market.

In the last two decades, the construction and real estate development industry, including M&E construction, has experienced many changes, many large enterprises and corporations in the field of construction have been established and put into operation. The construction of electromechanical systems (M&E) has great development potential but contains many risks, many competitors, and great competitive pressure.

Although there are no official statistics, but through the annual evaluation report of the Ministry of Construction, it can be seen that construction investment activities in Vietnam have grown very quickly in both the number of works and the type of products. products with the participation of many domestic and international contractors. During the most difficult period of the market (2013-2015), the estimated growth rate of the construction industry is about 4.4%/year. However, according to the assessment of the international research organization BMI (Business Monitor International Research), the growth of this industry is estimated at 9.85% in 2016. BMI’s forecast also shows that the civil construction industry and industry is estimated to grow at an average of 6.6%/year in the period 2017-2025. BMI also assesses that foreign construction contractors are present in most of the housing projects, hotels, and commercial complexes with a high construction value in major cities of Vietnam.

According to estimates of the Vietnam Association of Mechanical Enterprises (VAMI), the number of construction contractors in Vietnam is very large. It is estimated that there are about 150000 construction contractors, of which, 2000 are large and medium-sized contractors. On average, every 2.2 km2 there is a house built by a teacher. This shows that the construction market in Vietnam is extremely vibrant and competitive.


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