Sub-sector assessment Brick manufacturing in Nam Dinh – Vietnam Paul Weijers - Swisscontact
Content 1. Information on brick manufacturing sub-sector and social issues 2. Market of bricks 3. BDS 4. Input supply and financial services 5. Conclusions and recommendations
1. Information on B-M and social issues � Brick manufacturing in Nam Dinh has grown steady 14-18% annually. � Brick manufacturers concentrate along riversides. � The production scale is small, mainly household-based, concentrating in two districts of Hai Hau and Truc Ninh. � Available technologies: traditional fixed kiln, VSBK, and tunnel kiln. � Total yearly brick output is approximately 400 million bricks (value of VND 145 billion).
1. Information on B-M and social issues � Legal f or m of sur veyed ent er pr i ses Legal form 8% Informal household enterprises. 25% Formal household enterprises. Joint stock and 67% State-owned
1. Information on B-M and social issues � Ent er pr i ses usi ng t r adi t i onal f i xed ki l n t echnol ogy � Household enterprises consist of informal and formal household enterprises. � Concentrate in Nghia Hung, Hai Hau, Truc Ninh and Vu Ban districts. � Technology and equipments are simple. Most of the work is done manually.
1. Information on B-M and social issues � Ent er pr i ses usi ng t r adi t i onal f i xed ki l n t echnol ogy � Many enterprises have built chimney to reduce smoke. � The ratio of usable final bricks is low (70-75%). � Scarce source of clay is the biggest problem. � The businesses frequently suffer from complaints and claims for financial compensation by the local people and control by authorities
1. Information on B-M and social issues � Enterprises using tunnel kiln technology � There are 7 enterprises using tunnel kiln technology: 2 equitized and 5 state-owned. � The enterprises receive credits and loans from banks for investment and working capital. � Capacity ranging from 5 to 15 mil. bricks/yr. � Huge clay resource but taxable. � Fierce competition with cheap traditional brick. Market share is only 20 to 30% of the provincial brick market.
1. Information on B-M and social issues � Soci al i ssues – I ncom e: br i ck m anuf act ur i ng i s t he vi t al i ncom e sour ce of househol d busi nesses, especi al l y i nf or m al ones. – G ender : m or e wom en wor ki ng i n al l st ages of pr oduct i on. No cl ear wage di f f er ence bet ween m al e and f em al e em pl oyees. – W or ki ng condi t i on: poor condi t i on am ong househol d ent er pr i ses.
1. Information on B-M and social issues � Soci al i ssues – Chi l d l abor : 80% of t he ent er pr i ses di d not em pl oy peopl e bel ow t he age of 15. – Soci al pr obl em s: cr ops ( 53% ) , sm el l ( 37% ) . – Soci al associ at i ons: Ther e sever al soci al associ at i ons but no busi ness associ at i on f or br i ck m anuf act ur er s.
2. Market of bricks � M ai n m ar ket M ain M arket of Brick M anufacturing by type of enterprise 100% 100 90 71% 80 67% 68% 70 Household (informal) 60 Household (formal) 50 33% 40 Joint stock & State- 23% 19% 30 owned 10% 9% 20 0 0 0 0 0 0% 10 0 Within the province Within the community Within the district Outside the province Own use
2. Market of bricks � Cl i ent s Clients of SM Es 0% Other 0% Other brick m anufacturers 8% Public/ state constructions 33% E nd users/ households 49% Transporters 14% Retail traders Own use, fam ily, friends 4% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%
2. Market of bricks � Com pet i t or s � Manufacturers of same type of bricks in the vicinity (69%), outside the vicinity (26%). � Manufacturers of lower quality bricks (22%), of higher quality bricks (14%).
3. BDS: Types of BDS assessed � Market information � Technical training � Management training � Business plan/ feasibility study � Technical counseling � Technology transfer � Quality assurance � Transportation and delivery
Some main conclusions on BDS � Market Information: Information comes mainly embedded or via friends. Most interest is on price information � Technical training: Only very incidentally external training organizations are used. � Management training: There is a moderate demand, but virtually no supply of such training. � Feasibility study/ business plan preparation: Only the preparation of business plans is sometimes used
Some main conclusions on BDS � Technical counseling: is hardly used, only in the case of tunnel kilns. � Technology transfer: Technology is one of the most important concerns of SMEs. However, only relevant if “high-tech” is introduced . � Quality assurance: The quality of clay and of the production process is most important. BDS providers are not known. � Transport and delivery: is very well developed and functioning.
4. Input supply & financial service � Input supply � Sources of clay: alluvium soils on riversides and fine clay from fields. Clay supply 60% 53% Percentage of enterprises 45% 50% 40% 30% 24% 16% 20% 8% 10% 0% From owned From river Supplier who Supplier who Other land take from land take from river
4. Input supply & financial service � Input supply � Clay exploited from river is the long-term source. � Some measures of saving clay include: 1) Mixing a certain amount of coal or young sand to the clay and 2) Making bigger hold. � Shortage of clay should not obstruct the growth of the industry in a long term.
4. Input supply & financial service � Financial services � Near to 100% of the SMEs ever obtained a loan. � Sources of loan include: banks (43%), family/friends, and People’s Credit Fund. � Uses of loan: working capital (68%), raw materials (48%), machinery and equipment (40%), infrastructure (22%), land (10%). � Annual interest rates are mainly between 10- 15%.
5. Recommendations � Opportunities - Constraints – Traditional fixed kiln technology – Tunnel kiln technology � Recommendations
Opportunities-Constraints Traditional fixed kiln technology Category Opportunities Constraints � Simple � Outdated technology Technology and product technology causing pollution and development health problems. � Easy to build and � Restriction/ seasonal operate activities. � Promising VSBK � Low quality of (China technology) products. � Require experienced burners � Low efficiency
Opportunities-Constraints Traditional fixed kiln technology Category Opportunities Constraints � High demand for � Primitive marketing Market access cheap products skills. from rural low � Lack of market income families. information . � Convenient and � Market limits within cheaper the province . transportation by � Medium term trend water way. is decreasing demand for low quality brick
Opportunities-Constraints Traditional fixed kiln technology Category Opportunities Constraints � For part of the � Serious shortage of Input supply businesses from clay/clay supply own land or direct locally and from other access to river. provinces. � Cost of fuel increased (mainly coal). � Lack of information on input suppliers.
Opportunities-Constraints Traditional fixed kiln technology Category Opportunities Constraints � Labor easily � Limited awareness Management and available. of owners’ business organization management. � Seasonable � No long term business recruits farmers who are business plan. seasonable � No skill training for available laborers.
Opportunities-Constraints Traditional fixed kiln technology Category Opportunities Constraints � Policy to ban brick Policy production of traditional technology by 2005-2010. � Uncontrollable exploitation of clay, violating governmental ordinance on dyke protection and exploitation of clay . � No labor association.
Opportunities-Constraints Traditional fixed kiln technology Category Opportunities Constraints � Less � Poor facility for Infrastructure transportation cost drying. � Low investment � Huge investment Finance cost for traditional for proper fixed kilns. technology. � Low labor costs. � Lack of access to long term credit. � Low tax.
Opportunities-Constraints Tunnel technology Category Opportunities Constraints � Production year � Available only for a Technology and product around. minimum capacity of development 5 million bricks per � More variety of year. products.
Opportunities-Constraints Tunnel technology Category Opportunities Constraints � Tunnel brick more � Increasing Market expensive. access demand for high � Products are not quality bricks.. appropriate for rural low- income households. � Market outlet limits at Nam Dinh city. � Lack of marketing techniques. � Bias against tunnel brick by the majority of population in rural areas.
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