Transcript Fostering True Ownership in Vietnam: beyond CPRGS and aid

Drafting
Industrial Master Plans
Issues and Methodology in East Asia
?
Flying geese in perfect formation
Flying geese in loose formation
Random geese
Policy Formulation in Developing Countries
GRIPS Development Forum
Topics
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East Asian dynamism and industrial
issues
Method and organization for industrial
policy formulation
Comparing Japan, Malaysia, Thailand,
and Vietnam
VDF and Vietnam’s Motorbike Master
Plan
East Asian Dynamism
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Diversity in size, income, culture, politics
East Asia as one factory—one organism with
many links, not just a collection of countries
FDI flows create and rearrange industrial bases
Dynamic sandwich and upward mobility (each
country must improve constantly, or stagnate)
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Many countries succeed, but some fail to
participate in the dynamism
Per Capita GDP in 2004 (＄PPP)
0
Hong Kong
Japan
Taiwan
Singapore
Brunei
S Korea
Malaysia
Thailand
China
Philippines
Indonesia
Vietnam
Cambodia
PNG
Mongolia
Laos
N Korea
Myanmar
East Timor
World Bank data
5000 10000 15000 20000 25000 30000 35000
Green: participants in East
Asian production network
Manufactured Exports
Graph: manufactured exports
(% of total exports)
100%
Leading group
Japan
Taiwan
Korea
80%
Singapore
Second group
Malaysia
60%
Thailand
Philippines
40%
Third group
Indonesia
China
20%
Vietnam
Myanmar
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
1984
1983
1982
1981
1980
1979
1978
1977
1976
1975
0%
Source: ADB, Key Indicators of Developing Asian and Pacific Countries , 2001/1993; IMF, International Financial Statistics Yearbook 1990 . For
Japan, Japan Statistical Yearbook 2002/1999 , Statistics Bureau/Statistical Research and Training Institute, Ministry of Public Management,
Home Affairs, Posts and Telecommunications, Japan.
Structural Transformation in East Asia
3
Country
2
Latest
comers
Latecomers
ASEAN4
NIEs
1
Japan
Garment
Steel
Popular TV
Video
Digital
Camera
Time
East Asia’s Industrial Issues
“Glass ceiling” or middle income trap
 Integration before agglomeration
 China challenge
 Modular vs. integral manufacturing
 FDI-led growth vs. forced capability
building
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Stages of Catch-up Type Industrialization
Technology
absorption
FDI
Agglomeration
STAGE ONE
Simple
manufacturing
under foreign
guidance
Vietnam
STAGE TWO
Have supporting
industries, but still
under foreign
guidance
Creativity
STAGE THREE
Technology &
management
mastered, can
produce high
quality goods
STAGE FOUR
Full capability in
innovation and
product design as
global leader
Japan, US, EU
Korea, Taiwan
Thailand, Malaysia
Glass ceiling for
ASEAN countries
Different Speed of Catching Up in E. Asia
Per capita real income relative to US
(Measured by the 1990 international Geary-Khamis dollars)
100%
Japan
80%
Taiwan
S. Korea
60%
Malaysia
Thailand
40%
Indonesia
20%
Philippines
Vietnam
2005
2000
1995
1990
1985
1980
1975
1970
1965
1960
1955
1950
0%
Sources: Angus Maddison, The World Economy: A Millennium Perspective, OECD Development Centre, 2001;
the Central Bank of the Republic of China; and IMF International Financial Statistics (for updating 1998-2006).
Lessons from Malaysia
&Thailand
（Success）Impressive growth and FDI-led
industrialization under reasonable policy
（Failure）Domestic private-sector capability is
still weak after many decades of
industrialization
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Foreign dependency--inability to send foreigners home
Value and capability are not internalized
Risk of wage pressure and shifting FDI to China or Vietnam
Is this due to policy inadequacy or something else?
Malaysia and Thailand recognize these weaknesses and
try to support SMEs, FDI-local linkage, value-chain
upgrading, creation of high-value industries, etc.
Malaysia’s Manufacturing++
Malaysia’s IMP3 (1996-2005) aimed at
raising and broadening the value chain
Leveling up of each
industrial cluster
-Core production
-Supporting industries
-Supporting services
-Human resources
-Logistics
-R&D
Coping with China
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It is foolish to directly compete with China, in the
same product, market, and technology
Others should take a complementary position visà-vis China (use Chinese inputs but do not compete with
Chinese products directly)
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To do this, business architecture theory is useful.
Go integral rather than modular
Business Architectures
Modular manufacturing
Integral manufacturing
Parts
interface
Parts are common and can
be used for any model
Each product has unique
parts, specifically designed
Merits
Quick results and flexibility
Endless pursuit of quality
Demerits
No differentiation, excess
entry, low profit, lack of R&D
It takes much energy and
time to achieve results
Institutional
requirement
Openness, quick decision
making, flexible outsourcing
Long-term relations, building
internal skills & knowledge
Performance
Time
Time
Partnership Possibilities
Business architecture viewpoint
From the viewpoint of
business architecture
matching, Japan=ASEAN
and USA=China can form
effective partnership
Source: compiled from Prof.
Takahiro Fujimoto’s explanation
to the Joint VDF-MOI mission,
June 2005.
Motorbike Industry in Three Countries
Duration of import bans, localization requirement and high tariffs varies
Vietnam
Thailand
Indonesia
1960
1964 Vietnam War
1970
1975
1964 Yamaha
1965 Honda
1967 Suzuki
1971 Local content restriction
(over 50%); ban on construction 1971 Honda
of new asembly plants
1974 Yamaha Suzuki
1977 Local content restriction
1977 Local content restriction
(more than 70%); lifting of ban on
with penalty
new assembly plants of 1971
1978 Ban on importing CBU
Increasing tariff for parts
1980
1986 Doi Moi
1990
1993 Local content restriction
with incentive
1996 Suzuki
1997 Honda, ban on importing
CBU
1999 Yamaha
2000
2003 Import Liberalization of
CBU
1996 Import Liberalization of
1997 Abosolution of local
content restriction
1999 Import liberalization of
CBU
Source:
Kohei Mishima in
VDF, Improving
Industrial Policy
Formulation (2005)
Alternative Paths:
FDI-led or Do-it-yourself ?
(1) FDI-led indirect competition
FDI agglomeration under open market + policy support for
linking local suppliers with FDI firms & foreign buyers
ex. Thai automobiles, Malaysian electronics
Risk: local capability may grow too slowly, and foreign dominance
continues
(2) Forced leveling-up and localization
Create national companies and internalize skills quickly with
preferred policies
ex. Korean steel & cars, Malaysia’s Proton
Risk: local ability grows, but if not enough to compete globally,
effort may eventually fail under integration
(Besides, the world no longer tolerates such policies)
The Way Forward for Latecomers
(such as Vietnam)
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Open up trade and FDI boldly
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Promote FDI-local linkage vigorously
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Learn integral manufacturing
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Strategic Thinking and Targeting
Step-by-step liberalization is not effective; create freest business
environment in East Asia, and use it for marketing
Supporting industries and human resources are key; analyze why
ASEAN4 countries are slow to acquire these skills
This strategy is needed to avoid direct clash with China and to
overcome the “glass ceiling”
General marketing and promotion do not work
Follow the first path vigorously （FDI-led indirect
competition), but also learn from ASEAN4’s
shortcomings
Drafting Industrial Strategies and Master Plans
Business
Involvement
Inter-ministerial
coordination
Japan
Dominant
(current)
… but METI itself covers
Private sector leads;
METI supports only when trade, industry, HRD,
needed
technology, environ. etc.
Malaysia
Strong
Reasonable
(IMP drafting)
Participation in drafting
and 1st brainstorming
Close exchange among
EPU, MITI & related
agencies
Thailand
Strong
Reasonable
(under
Thaksin)
Private sector leads, MOI Policy consistency under
adds policy concerns
strong PM
Vietnam
Weak
Weak
Appeal to gov’t when
problems arise
Measures are often too
general to implement
(current)
Weak
Vision and Coordination in Drafting
Who provides
vision?
Who coordinates
drafting?
Japan
Private firms
METI
(current)
through industry
associations
using committees and
deliberation councils
Malaysia
MITI
MITI
(IMP drafting)
in close consultation with Industrial Planning
private sector
Committee & Steering
Committee
Thailand
Mr. Thaksin
Industry-specific
institute
Vietnam
Unclear
Small drafting team
(MOI)
(under
Thaksin)
(current)
chapter structure given
but no clear vision
Thailand (under Thaksin, 2001-2006)
Tripartite coordination under industry-specific institutes and
committees
Policy direction
to be concretized
Prime Minister
Become
“Tropical Fashion Center”
“Detroit in Asia” etc
Order
Relevant
Ministry
Industry-specific
Committees
Direct
inputs
Private
Sector
Industry-specific
Institute
Experts
Malaysia:
Industrial Master Plan 3 (IMP3), 2006-2020
338 members + support staff; actual drafting time—about two years
Malaysia:
Drafting Process of IMP3
MITI: Ministry of International Trade and Industry
IPC: Industrial Planning Committee (headed by MITI Minister)
SC: Steering Committee (headed by MITI high official)
TRGs: Technical Resource Groups (headed by various experts)
Business opinions reflected through TRGs and brainstorming
Vietnam: Traditional M/P Drafting Process
Prime
Minister
Review for
approval
Order
Submit
Drafting
Team
Minister
Interministerial
review
Submit
MPI & other
Ministries
Data
Internal
review
MPI & other
Ministries
Government
Appeal letter to
Prime Minister when
problems arise
Contact
Ministry when
necessary
Interviews,
symposiums
(sometimes)
Technical
assistance
(sometimes)
International
experts
Business Community
No permanent channel for continuous policy dialogue
(case-by-case, temporary, ad hoc)
Ohno’s Interviews with Vietnam Net
(May 13 & 15, 2008)
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Vietnam grows not because of good policy, but
because of good labor and location.
Old institutions and old people still dominate in
government; lack of business involvement and
inter-ministerial coordination.
Create a powerful & young group directly under
PM, like other successful E Asian countries.
Outside the government, there should be idea
competition among think tanks so that people
and government can choose from various policy
proposals.
Policy Formulation for Vietnam:
Ohno’s Proposal
-Elite technocrat
group under strong
leadership of Prime
Minister
-Choose young, well
educated officials
and experts
-Simplify policy
authority and
procedure
Prime Minister
Direction, full
authority for
policy making
Faithful
execution and
reporting
Technocrat Group
(Policy Maker)
Policy,
guidance and
monitoring
Faithful
execution
and reporting
Ministries (Policy Implementers)
New Attempt in Drafting
Vietnam’s Motorbike Master Plan
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In Spring 2006, Joint Working Group (JWG) was
organized to draft the Motorbike Master Plan
Vietnam Development Forum as a coordinator
20 members—including IPSI/MOI, motorbike
assemblers, experts, and VDF
Official recognition by MOI and Vietnam-Japan
Joint Initiative Phase 2
MOI budget + VDF budget; in addition, METI
support for expert dispatch
Final draft by May 2007 (about one year)
Vietnam Development Forum (VDF)
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Established in 2004 by Japan’s research grant
Joint research project between GRIPS in Tokyo, and
National Economics University (NEU) in Hanoi
Objectives:
(1) Research innovation
(2) Policy impact & networking
(3) Mobilizing young talented Vietnamese
Tokyo
Hanoi
Drafting
Organization
Ministry of Industry
Master Plan for approval
Motorbike Joint Working Group
IPSI/MOI
Relevant
ministries
and
agencies
VDF
Coordinator
Experts
Assemblers
Opinions
Assemblers
Part
suppliers
Information
& analysis
Experts
Drafting Activities
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Supporting Industry Survey in North & South (Feb-Apr
2006)
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Brainstorming sessions (May-Aug 2006)
Hearings of assemblers & suppliers in N & S (Nov 2006)
Japanese expert dispatch (Jan-Feb 2007)
Mr. Minato (air polllution)
Mr. Hiroe (supporting industries)
Mr. Kawashima & Mr. Nakagawa (industrial property rights)
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Discussion with related ministries and agencies
MOTransp, MOTrade, MOLISA, Police, 127 Committee, VN
Register, NTSC, MPI/TAC, researchers and universities, etc
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VDF consumer survey (in-street & on-line) (Mar.2007)
VDF Motorbike Symposium (Mar.2007)
The Content of “Final Draft”
(As of May 24, 2007)
Introduction
1. The role of motorcycles in Vietnamese society **
2. Industrial structure & production orientation
3. Demand forecast
4. Supporting industries & industrial human
resources
5. Urban planning & transport modes **
6. Reducing traffic accidents **
7. Environmental protection *
8. Intellectual property rights*
9. Policy measures
** Non-supply issue
* Non-key issue in traditional format
VDF in Improving Policy Making
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Government recognizes weaknesses in master
plan drafting, but cannot improve by itself
FDI producers are skeptical of Vietnamese
government’s policy capability and intention
Japanese government wants improvement, but
TA and other aid are so far ineffective
 Triangle trap situation, no progress
VDF as a voluntary facilitator （NPO)
Skepticism
No directive
Weak
coordination
PM
MOIT
Motorbike producers
Japan (METI, MOFA,
JETRO, JICA, etc)
Ineffective aid
Effective?
Sustainable?
Ongoing VDF Activities
(As of May 2008)
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Supporting industry policy formulation
--New Japanese Ambassador (Mr. Sakaba) wants
to promote SI as top priority; active
networking with Vietnamese top leaders
--JETRO designated as the Japanese-side actor
--VDF supporting Mr. Sakaba with idea inputs
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Automobile policy dialogue
--Unstable policy: Toyota & Honda want to
initiate meaningful dialogue with Vietnamese
government
--They want VDF to be the facilitator