Steel and Engineering: Building Vietnam’s Competitiveness Through EPC Capabilities

Vietnam’s steel and mechanical engineering sector is reaching a critical turning point in 2025. The industry has long supported industrialisation, but leaders now argue that competitiveness will depend on the ability to act as engineering, procurement, and construction (EPC) contractors. At the Vietnam Private Sector Forum, industry executives called for a national-level programme to strengthen capabilities and reduce dependence on foreign contractors in strategic infrastructure projects.

Industry Structure and Current Position

Vietnam’s steel sector has grown into one of Southeast Asia’s most dynamic producers. Exports of steel products reached more than US$11 billion in 2024, and production capacity continues to expand. Domestic companies supply both construction and industrial projects, while a handful of conglomerates dominate upstream steelmaking. Mechanical engineering, meanwhile, remains fragmented, with thousands of small enterprises alongside a few larger groups.

Despite these achievements, the sector’s competitiveness remains uneven. Many domestic firms provide materials or components but lack the integrated capabilities required for large-scale EPC contracts. As a result, foreign firms dominate critical infrastructure such as metro systems, power plants, and petrochemical complexes. Industry leaders now argue that without deliberate policy support, Vietnam will remain dependent on external contractors for its most strategic projects.

The EPC Gap

The EPC gap is at the heart of the competitiveness debate. Engineering, procurement, and construction contractors take full responsibility for design, supply, and project delivery. In Vietnam, foreign companies hold this position in almost every major infrastructure project. Domestic firms, in contrast, are often subcontractors, supplying steel structures or mechanical components but rarely leading project execution.

This reliance creates strategic vulnerabilities. Costs are higher, technology transfer is limited, and value capture remains outside the domestic economy. For policymakers, it also means less control over projects that are central to national development. Industry leaders therefore see building EPC capacity as not just an economic priority but also a matter of sovereignty and resilience.

Examples from 2025 illustrate the issue. In Ho Chi Minh City’s metro expansion, foreign EPC contractors managed most of the work, while Vietnamese firms participated only in secondary packages. In energy, domestic suppliers provided equipment for solar and wind projects, but foreign contractors still led design and integration. These patterns repeat across industries, underscoring the urgency of change.

Policy Proposals and National Programmes

At the 2025 forum, executives proposed a national competitiveness programme for steel and engineering. Their vision includes three key components. First, infrastructure investment in deepwater ports, logistics hubs, and industrial parks. These facilities would reduce costs and improve supply chain reliability for domestic manufacturers. Second, workforce development through vocational training and partnerships with universities to build engineering skills. Third, regulatory reform to ensure that Vietnamese firms can qualify as EPC contractors in major public projects.

Industry representatives also called for localisation quotas. Under such policies, large infrastructure projects would be required to include a minimum share of domestic contractors and suppliers. This approach has been used in other countries to build local capability. Advocates argue that without such measures, Vietnamese firms will struggle to scale up and compete.

The government has expressed cautious support. Ministries recognise the need to strengthen domestic industry but also emphasise the importance of efficiency and quality. For now, pilot projects are being discussed, where Vietnamese firms would lead EPC contracts under supervision, gradually building capability. The coming years will test whether this approach can deliver tangible results.

Technology and Innovation Needs

Technology is a major barrier to EPC competitiveness. Many Vietnamese steel and engineering firms operate with mid-level equipment suited to manufacturing but not to advanced project integration. To compete with international EPCs, they must invest in design software, project management systems, and quality assurance processes. These investments require capital and a long-term commitment.

Some progress has been made in 2025. Larger firms have begun adopting Building Information Modeling (BIM) and digital project management tools. Several companies are partnering with foreign technology providers to upgrade their capabilities. However, adoption remains uneven. Smaller firms continue to rely on traditional methods, limiting their ability to participate in complex projects. Bridging this technology gap will be critical if domestic firms are to step into the EPC role.

Innovation in product development also matters. High-strength steel, modular construction techniques, and sustainable materials are increasingly demanded in international markets. Vietnamese firms that can deliver these innovations will be better positioned to compete globally. Building R&D partnerships and investing in innovation hubs are among the strategies now under discussion.

Global Competition and Strategic Positioning

Vietnam’s steel and engineering firms do not compete in isolation. Regional rivals such as South Korea, Japan, and China have decades of experience as EPC leaders. Competing directly with them will be difficult. Instead, Vietnam’s opportunity may lie in focusing on specific niches, such as mid-sized infrastructure projects, regional industrial parks, and renewable energy platforms. By mastering these areas, Vietnamese firms can gradually expand their capabilities and reputation.

The domestic market provides a strong foundation. Vietnam’s infrastructure needs are vast, ranging from urban transit systems to power generation. If domestic firms can secure even a modest share of EPC contracts, they will build the track record necessary to compete abroad. In this sense, the path to global competitiveness begins with success at home.

International partnerships also play a role. By collaborating with established EPC contractors, Vietnamese firms can gain exposure to best practices and gradually take on larger responsibilities. Several joint ventures announced in 2025 reflect this approach, pairing Vietnamese engineering groups with foreign EPC leaders in power and transport projects. These partnerships are not yet equal, but they are important steps toward capability building.

Investor Perspective

For investors, the steel and engineering sector presents both opportunity and complexity. On the opportunity side, Vietnam’s infrastructure boom guarantees demand for materials and services. Companies that can move up the value chain will see strong growth. On the complexity side, execution risk remains high, and building EPC capability will take time and sustained capital.

M&A can play a decisive role in this transformation. Investors who acquire or partner with domestic engineering firms can help accelerate their development. By injecting capital, technology, and management expertise, they can position these firms to win larger contracts. Consolidation is another possibility. With many small and fragmented players, the sector is ripe for roll-up strategies that create national champions capable of competing with foreign rivals.

The sector’s long-term value lies not just in steel production but in integrated capabilities. Investors who recognise this shift and align with firms committed to transformation will be well positioned. For others, the risk is that they remain tied to commodity production with limited margins.

Strategic Lessons from 2025 So Far

Looking back at 2025, three lessons stand out. First, scale alone is not enough. Vietnam has strong steel production, but without EPC capability, value capture remains limited. Second, policy support is essential. Without national programmes and localisation requirements, domestic firms will struggle to compete with entrenched foreign contractors. Third, technology and innovation are the decisive factors. Firms that invest in advanced tools and sustainable practices will move ahead, while others risk falling behind.

These lessons highlight a broader theme: Vietnam’s industrial policy is shifting from quantity to quality. The focus is no longer just on producing more steel or equipment but on building the integrated capabilities that create strategic independence. For investors, this shift creates both opportunity and responsibility. Supporting this transformation requires patience, expertise, and alignment with long-term national goals.

Conclusion

Vietnam’s steel and engineering sector stands at an important crossroads in 2025. It has scale, demand, and a strong domestic base, but it lacks the EPC capabilities that define global competitiveness. Industry leaders are calling for national programmes, technology upgrades, and localisation policies to close this gap. Progress is beginning, but challenges remain. For investors and policymakers alike, the message is clear: the next phase of Vietnam’s industrial transformation will depend on whether the country can build its own EPC champions. Success will mean reduced dependence on foreign contractors, stronger value capture, and a foundation for global expansion. Failure would leave Vietnam as a supplier rather than a leader in the projects that define its future.