The development of science and technology (S&T) in general, and especially in the mechanical engineering sector, is of great importance for ensuring the self-reliance of nations worldwide, and it is particularly crucial for developing countries aiming to escape the middle-income trap and secure independence in economic development as well as sovereignty. How are research institutes, one of the key organizations contributing to the scientific development of every country, operating? How have research institutes in Vietnam been performing, and have they played their role in this endeavor? This article will review research institute models in several countries, especially those with contexts similar to Vietnam where institutes have excellently fulfilled their roles. It will also review the operations of applied research institutes in Vietnam, thereby proposing organizational and operational models as well as mechanisms and policies to make these institutes truly a foundation for national economic development.

 

Speaking of institutes in the former Soviet Union or China, besides the Academy of Sciences under the government, each ministry or sector had its own subordinate institutes. These institutes operated on orders from the government or ministries, serving as research units that mastered most of the country's technologies, from mining, metallurgy, design and manufacture of machinery and equipment, to weapons manufacturing. They played a huge role in the early period of the remarkable development of the socialist bloc. When the socialist bloc in the Soviet Union, Eastern European countries, and China collapsed or underwent reform, and the state transitioned from a planned economy to a market economy, the role of these institutes was downplayed and in many cases abandoned. They no longer received orders from the state, had to operate and balance their own accounts, leading to the dissolution of many famous institutes. Scientists had to take up any job to survive; many fled to Western countries, while some engaged in any kind of business to make a living. These institutes barely survived for about one or two decades. Then, some institutes transformed into private companies or joint-stock companies, and the state's orientation for them ceased.

 

However, in China, the government recognized the drawbacks of no longer controlling the operations of institutes. To develop the country's economy and society, China needed entities like institutes to master technologies aligned with national directions, and once again the role of institutes changed. A few institutes remained under the ministries or sectors, while for those that had transformed into joint-stock companies, the state established special mechanisms to influence their operations. The functions of these companies are diverse: research, consultancy, design, pilot manufacturing, and acting as general contractors for project management. A single institute can have thousands of staff and generate revenue up to billions of USD. The mechanisms and policies supporting these research units are also diverse: from mandating foreign enterprises operating in China to transfer technology to local companies, to funding research projects, tax exemptions and reductions, and providing facilities and research equipment. However, the most important mechanism is market creation and protection. It can be said that the decoding and mastery of technology by these companies has played a decisive role in the miraculous development of China's economy in recent decades. Below, we review the reform and current operations of several Chinese institutes.

 

The Shanghai Institute of Mechanical and Electrical Engineering (SIMEE) is a consulting and design company for large projects involving power plants and electrical works, urban infrastructure, warehousing systems, smart warehouses, water treatment, and waste management. The institute can undertake functions such as design consultancy, construction consultancy, project evaluation, project management, and EPC (Engineering, Procurement, Construction) project contracting. It has been assigned to implement hundreds of major projects in China.

 

The Guangdong Electric Power Design Institute (GEDI), under the China Southern Power Grid, was established in 1958 and has 2,412 employees. It has been transformed into an EPCM (Engineering, Procurement, Construction Management) consulting, design, and project management company. It has provided consultancy, design, and project management for hundreds of projects, including coal-fired, gas-fired, and nuclear power plants. It is ranked 11th among the 15,000 design and consulting companies in China.

 

A remarkable success story is Siasun, which transformed into a technology company from a research unit of the Institute of Mechanical and Electrical Engineering in Liaoning in 2000. Today, Siasun has become a joint-stock company with a market capitalization of approximately USD 4 billion and a workforce of about 4,000 engineers, ranking third in the global robotics industry. Notably, the Chinese state not only holds a controlling stake but also requires large companies that use many Chinese robots to invest in and use Siasun's products. This is a very specific form of market creation in China.

 

 

In the former Soviet Union, apart from a few institutes that continued to be maintained by the state, the majority either transformed into private or joint-stock companies, or dissolved altogether. This is the reason why the civilian economy has lagged behind, failing to meet domestic market demand for several decades.

 

In South Korea, despite being a capitalist country with a market economy, most institutes (excluding research units of large conglomerates) are state-run, established to serve the government's economic development programs. Most investment funding comes from the state budget, while operational and research funding is about 50% from the state budget and the remaining 50% from economic contracts. This type of operation has helped South Korea become one of the leading countries in mastering advanced technologies.

 

In Taiwan, the Industrial Technology Research Institute (ITRI), established in 1973, is a non-profit research institute funded by the government, specializing in applied technology research for Taiwanese industries. To some extent, ITRI operates similarly to the early-stage institutes in socialist countries, i.e., researching technologies that Taiwanese companies can apply and develop in government-directed industries. It not only helps form companies that produce new products but also assists in setting up the entire production process, including design, materials, technology equipment, inspection, quality management, packaging, and product distribution. ITRI is regarded as playing a key role in shaping Taiwan's semiconductor industry. Additionally, Taiwan has many other applied research institutes with funding split fifty-fifty between the state and production-commercial activities.

 

 

As of now, institutes in the aforementioned countries have been reformed and operate under four main models: The first model is state-run research institutes with the majority of operational funding from the state budget; the second model is state-run research institutes with part of their funding from the budget and the remainder from production and business activities; the third model involves transformation into consulting and design companies while the state retains controlling power; and the final model is 100% private companies.

 

The first model is currently applied in some developed countries like South Korea or certain European countries. Its advantage is that research activities are 100% aligned with the government's economic development programs, but its disadvantages include high dependency and stagnation. This model is suitable for foundational and long-term technology research programs. In the second model, institutes are relatively dynamic and still operate under the direction of ministries and sectors. Their dynamism, creativity, or dependency largely depends on the level of budget funding. In the third model, institutes operate more dynamically, but their activities are no longer 100% focused on S&T. With good direction from the government and ministries, especially regarding market creation and protection, institutes operating under the second and third models can be very effective. The final model offers the advantage of dynamism, but its disadvantage is that institutes may not focus on S&T activities and may engage in any business for profit, leading most institutes under this model to quickly dissolve and disappear from the S&T field.

 

Regarding institutes in Vietnam, like all countries in the socialist bloc, the institute system in Vietnam was established and built systematically. Under the Government, there is the Vietnam Academy of Science and Technology; under ministries, there are many state-level applied research institutes serving the research directions of each ministry; additionally, there are institutes under corporations and general corporations serving specific research tasks. In the early period of socialism, these institutes operated on orders from the Government, ministries, and sectors to research and master necessary S&T issues, making certain contributions to the country's industrialization. Institutes such as the National Research Institute of Mechanical Engineering successfully designed and manufactured sugar processing plants, designed, manufactured, and tested various tractors, tea processing machines, diesel and gasoline engines for agricultural machinery, and marine engines for boats. The Mining Science and Technology Institute and the Mining Energy Machinery Institute designed numerous equipment, systems, warning and monitoring systems for coal mining. Similarly, weapons institutes initially succeeded in designing various infantry weapons and manufacturing several types of missiles.

 

When Vietnam transitioned to a market economy, institutes gradually shifted to an autonomous operational model with varying degrees of self-financing, ranging from complete dependence on the state to full autonomy.

 

Returning to the four operational models of institutes abroad as analyzed above: The first model is suitable for foundational technology research and long-term plans. The operational costs are quite high, and it easily breeds dependency on the state. This model is similar to that of Vietnamese institutes with 100% state funding and has proven ineffective under current conditions in our country.

 

The fourth model involves institutes transforming into joint-stock companies where the state does not control operations. Examples include the Light Industry Institute, the Food Industry Design Institute (INFISCO), the Mechanical Engineering Design Institute (THIKECO), the Electrical Equipment and Technical Design Institute, and the Fishery Mechanical Institute. After equitization, most of these institutes no longer operate in technical fields; instead, new owners often lease or sell land-use rights and headquarters for profit, and their engineers and experts leave the profession, causing the institutes to dissolve. Consequently, shortly after equitization, many institutes ceased S&T, consultancy, and design activities.

 

The second model is similar to the current model of many Vietnamese institutes: "public science and technology organizations that self-guarantee or partially guarantee recurrent and investment expenditures." The third model involves institutes transforming into joint-stock companies where the state retains controlling power, such as IMI and the Textile and Garment Institute. Under these two models, some institutes operate relatively effectively. For example, the National Research Institute of Mechanical Engineering has performed well in advising the Ministry on development directions for certain mechanical engineering fields, building strategies and plans, and mastering design technologies in hydroelectric, thermal power, bauxite, manufacturing, automation, and automotive/motorcycle industries. Similarly, the Mining Science and Technology Institute and the Mining Energy Machinery Institute have designed and manufactured numerous equipment, automation systems, and safety monitoring systems for underground mining. IMI has succeeded in designing and manufacturing equipment for the construction sector. These contributions have not only helped us become proactive in investment but also significantly reduced investment costs, bringing substantial direct and indirect benefits to the country.

Beyond the efforts of the institutes themselves, these achievements are also due to the important factor of direction from the Government, ministries, and sectors. Without the Government's guidance on localization, without research projects to master science and technology supported by the Ministry of Science and Technology and the Ministry of Industry and Trade, it would have been very difficult for these institutes to make such contributions.

 

Despite these successes, it can be said that the institutes have not truly become a foundation or leverage for the development of the country's industries. Several subjective and objective reasons are listed below:

Subjectively, to some extent, institutes still rely on state funding, have not linked their activities with businesses, and have not mastered technologies needed by the market. Many institutes focus on short-term benefits such as real estate business, office leasing, or renting out their premises for survival, neglecting their core technical activities.

 

Objectively, the market efforts of institutes are not effective. Additionally, the state lacks strong mechanisms for market creation and protection. Investors are not confident in the research results of institutes, so instead of cooperating with them, they import foreign technology. Mastering technology requires time, effort, and funding. Without good market direction and state market protection, it is very difficult, if not impossible, for institutes to bring their research into practical application. This is the most important challenge we face, and I believe we must address it as soon as possible.

 

To overcome this limitation, we need to build development strategies for ministries and sectors as part of the overall national socio-economic development strategy. For ministries and sectors with high development needs and large investments, a localization roadmap should be developed with the participation of relevant ministries. This will prevent the situation where investors import machinery, equipment, and hire foreign services at high costs while domestic institutes and businesses have no work.

 

For example, the strategy to build high-speed railways and urban metro systems is a long-term national strategy with investments worth hundreds of billions of USD. If we rely on foreign contractors, we not only pay high prices but also become dependent during the investment process. To receive technology transfer, we need to integrate and negotiate with partners during or before investment, prepare and train human resources. In short, we need a specific investment roadmap for high-speed railways linked to a concrete localization roadmap. According to statistics, the investment cost per kilometer of high-speed railway in some countries ranges from USD 17 to 25 million, including viaducts and tunnels. However, all contractors are quoting us much higher prices. Therefore, if we master the technology, localize part of the equipment, and master project management, the investment cost will be much more reasonable. Without government direction on localization, without the coordination of the Ministry of Transport, the Ministry of Industry and Trade, the Ministry of Science and Technology, the Ministry of Construction, the Ministry of Finance, and local authorities, this cannot be achieved.

 

In addition to the main reason above, there are other objective reasons such as land-use rights, asset ownership, financial autonomy, and cost accounting. The state needs to promptly finalize and issue necessary mechanisms.

 

Based on the analysis of operational models of institutes in several countries and a review of the activities of research and development institutes under the Ministry of Industry and Trade, as well as an analysis of the causes of success and failure in the current models applied in these institutes, the following proposals are made:

First, regarding the operational model, institutes should adopt the model of "public science and technology organizations that self-guarantee recurrent and investment expenditures" as stipulated in Decree No. 60/2021/ND-CP. However, it is necessary to change the existing perspective among managers that "institutes operate under market mechanisms and thus do not need state protection" to the perspective that "the state should orient, create, and protect the MARKET, and provide time-bound and conditional support for research to master technology in order to serve national socio-economic development programs."

 

Second, institutes should proactively develop or adjust their development directions and strategies in line with national socio-economic development programs, meet market demands, and proactively propose to the Government and ministries to issue appropriate mechanisms and policies for mastering technology, as well as for creating, developing, and protecting the market.

On the side of state management, based on the direction of the Party and the Government, we recommend that the Government direct the development of overall development strategies and plans that integrate localization programs across ministries and sectors, so that institutes can have clear directions for research and strategy building.

 

It is hoped that the author's contributions on the operations and transformation of applied research institute models will provide the Ministry of Industry and Trade, the Ministry of Science and Technology, and those interested in the mechanical engineering sector with a more specific perspective on institute activities. I also believe that, in the coming time, with the guidance of the Ministry of Industry and Trade and the Ministry of Science and Technology, the institutes will achieve new developments to truly become a leverage for the country's industrial development.

 

 

Former Director of the National Research Institute of Mechanical Engineering

Vice President, General Secretary of the Vietnam Association of Mechanical Enterprises

 

Source: https://khcncongthuong.vn/tin-tuc/t11871/phat-trien-cong-nghiep-quoc-gia-vai-tro-cua-cac-vien-nghien-cuu.html