THE LEGAL AND POLITICAL ENVIRONMENT
Currently, state management agencies are extremely interested in the construction industry, especially in the field of construction, mechanical and electrical engineering. The proof is that in the past years, a series of documents and policies to promote investment and development of construction works were born such as Decision No. 10/1998/QD-TTG on the orientation of urban master plan market in Vietnam to 2020, later amended and supplemented to “Important orientations of Vietnam’s construction until 2010 and 2020”; Decision No. 445/QD-TTG dated April 7, 2009, of the Prime Minister on the master plan on development of the urban system in Vietnam to 2025 with a vision to 2050; Decision No. 1659/QD-TTG dated November 7, 2012, approving the National Urban Development Program for the period 2012-2020; Decision No. 2127/QD-TTG dated 30/11/2011 on the National Housing Development Strategy to 2020 and Vision to 2030; Decision No. 134/QD-TTG of the Prime Minister on Approval of the Project on restructuring the construction industry in association with the transformation of the growth model, etc.
In addition, the legal system and related sub-law documents construction investment has been revised and completed such as Law on Construction No. 50/2014/QH13; Law on Housing No. 65/2014/QH13; Law on Real Estate Business No. 66/2014/QH13… Moreover, economic institutions have identified promoting the private sector as the driving force for economic development. Thus, the institutional conditions and political environment are very favorable for the M&E service business. However, it must be noted that construction investment still faces many difficulties due to the impact of the policy of cutting public investment.
Vietnam’s economy is developing stably, along with that, the construction industry with the real estate market and M&E construction is also having good development prospects. A good economy creates favorable conditions for investment and development of high-rise housing projects, commercial centers or industrial works to serve production and business needs. These are important bases to create momentum and conditions for the development of the M&E construction business. It should be noted that enterprises operating in the field of trading and providing M&E equipment and services are affected by specific influences related to their industry activities. According to the assessment, the activities of supporting industries (equipment, machinery, transformers,…) in Vietnam have erratic fluctuations, decline due to inappropriate support policies.
CULTURAL AND SOCIAL ENVIRONMENT
The size and structure of our population have a great impact on construction investment activities and M&E construction service business activities. Vietnam’s population is more than 95 million people, ranking 14th among the most populous countries in the world. The average population density of Vietnam is 305 people/km2, urban population accounts for 33.6% of the total population (General Department of Population and Family Planning, 2016). Vietnam’s population continues to increase, which will put pressure on housing demand, real estate works for production and other arising needs. In addition, increased mechanical migration makes this demand even higher in urban areas. The per capita income of Vietnamese people is increasingly improving, ensuring the ability to pay for housing and other consumption. All of the above factors contribute to the growth of the construction and real estate industries, thereby affecting the M&E business.
SCIENCE AND TECHNOLOGY ENVIRONMENT
Thanks to the development of science and information technology, the field of electromechanical engineering will have the opportunity to apply modern technology and equipment in construction and installation. Moreover, the development of technology has changed the way information is updated, businesses can exchange operations, design and construction, receive customer opinions, coordinate work conveniently
TRENDS AND FOREIGN PARTICIPATION
M&E is a very promising industry because the urbanization rate in Vietnam is very high, especially when the industry, construction, and real estate are growing rapidly. According to statistics, the average revenue of the Top 5 M&E contractors in 2016 reached 1,800 billion VND, the average profit after tax was nearly 270 billion VND. It should also be noted that the M&E field is still difficult to access in Vietnam, so most of the big players in the industry are foreign contractors with strong potential and high expertise. Only a few domestic enterprises with really outstanding names like REE or SRF are ready to undertake big projects. However, recently, many large construction contractors are becoming formidable competitors in this whole M&E field because of the popular application of the D&B (Design & Build) form when the main contractors capable of executing most of the project’s segments and using few subcontractors, including the M&E part. The advantage of the D&B form is the initiative in design, project speed management to help optimize the design process to save costs. This model has the disadvantage that it requires investors to have a really professional operating apparatus.
Thus, with the industry’s attractiveness, development potential as well as barriers to market entry, it is expected that there will be a large number of potential competitors intending to enter the market. Mechatronics, in particular, must pay attention to the penetration intentions of foreign enterprises.
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