Vietnam's Industrialization Strategy in the Age of Globalization

Japan-Vietnam Joint Initiative

On April 7, 2003, Vietnamese Prime Minister Phan Van Khai and Japanese Prime Minister Junichiro Koizumi agreed in Tokyo to launch the "Japan-Vietnam Joint Initiative to Improve Business Environment with a View to Strengthen Vietnam's Competitiveness." On the following day, the first committee meeting of the initiative was co-chaired by Norio Hattori (Japanese ambassador to Vietnam), Kenji Miyahara (Nippon Keidanren), Vo Hong Phuc (MPI Minister), and Vu Dung (Vietnamese ambassador to Japan) and attended by the representatives of the public and private sectors of both countries. This initiative is expected to play a key role in the bilateral trade and investment relationship in the coming years.

FDI plays a crucial role in Vietnam's industrialization. Nevertheless, the business climate surrounding FDI firms in Vietnam has not improved greatly. The situation in recent months is even considered to have worsened due to confused policies introduced since mid 2002. At the Consultative Group meeting in Hanoi in December 2002, Ambassador Hattori pointed to the need to dramatically improve the FDI environment in Vietnam.

The purpose of this joint initiative is to promote FDI flows into Vietnam and strengthen Vietnam's competitiveness. The Initiative will be agreed, implemented and monitored with the participation of high-ranking leaders of the two countries. Under this political endorsement, an action plan will be drawn up which contains specific and prioritized measures to be taken. For this purpose, the task force has been organized in Vietnam consisting of representatives from the following organizations:

Japanese side: Japanese embassy, JICA, JBIC, JETRO, Japan Business Associations in Vietnam, Japan Business Association in HCMC; Japanese consultants also provide supporting services.

Vietnamese side: MPI, MOF/GDT, MOSTE, MOT, MOTr, MOI, MPT, OOG.

The action plan is scheduled to be finalized by December 2003, followed by implementation. While its content is yet to be decided, the issues frequently raised by Japanese investors are listed below. The action plan is likely to include many of them.

As to policy vision,

  • Announcement of long-term industrial vision and strategies for key industries
  • Prioritized strategy for the promotion of supporting industries

As to tax and trade policy,

  • Liberalization of importation of parts and industrial materials, including zero tariffs and delinking import regulation from the original F/S plans
  • Correcting the adverse tariff structure (rates on outputs should be higher than on inputs)
  • Capacity building of tax and customs officials

As to eliminating ambiguity and inconsistency,

  • Removing the myriad of cumbersome and detrimental rules including export requirement, localization, corporate decision making by consensus, double pricing, excessive labor regulation, upper limits on royalty, etc.
  • Improved coordination among economic ministries
  • Consultation with concerned groups prior to the promulgation of new laws and decrees
  • Clarification of land use rights

As to lowering the cost of doing business,

  • Lowering the costs of power, telecommunication and transportation
  • Improved investor services including one-stop service center and professional marketing
  • Enhanced policing of illegal and smuggled products
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