Japan-Vietnam Economist Club
The 2nd WORKSHOP
16 August 2003 (Sat), GRIPS, Tokyo 14:00-
Vietnam's Industrialization Strategy in the Age of
Summary of the NEU-JICA Joint Research
by Professor Kenichi Ohno
The second workshop of JVEC was held on August 16, 2003 at GRIPS with the presentation of Professor Kenichi Ohno on the topic "Vietnam's Industrialization strategy in the Age of Globalization," which was a summary of the Joint Research Project of the National Economics University (NEU) and the Japan International cooperation Agency (JICA). There are three parts to the presentation: key issues, policy advice, and analyses of electronics and steel industries.
For the first part, the most important issue for Vietnam nowadays is how to accelerate industrialization and improve competitiveness under free trade commitments. There were three major views - (i) state-led view, (ii) FDI-led view, and (iii) free market view. The last view was not supported by anyone in the NEU-JICA project while the Japanese team supported the second. The Vietnamese researchers and officials are divided between the first and the second. Professor Ohno argued that the key to Vietnam's industrialization should be the FDI policy. He discussed the FDI mechanism in which two forces of agglomeration and fragmentation interact. Vietnam at present still remains at a low stage of development in the East Asia's structural transformation chain, measured by either income level or production and export structure. But he pointed out that Vietnam had a good potential to join the Asian dynamism and soar as a latecomer goose - if policies are appropriate. Another issue is the role of domestic firms. There has been no intimate link between local firms and FDI assemblers. Cooperation between the domestic sector which is protected from foreign competition and the export-oriented FDI sector is weak. Vietnam has not received a critical mass of FDI in comparison with the Asian countries.
The second part was policy advice, which can be summarized as follows: (i) Dramatically improve the FDI policy, including attracting critical mass without selectivity, open policy environment, lowering cost of doing business, strengthening FDI climate and marketing; (ii) Enhance policy dialogue with businesses in the process of policy formulation, and create a special team under the Prime Minister. This team should be given the authority for economic policy making and supervising all ministries and organizations; and (iii) Design the tariff reduction schedule as a part of the overall industrial strategy. Concrete rules for setting tariffs were presented with three hypothetical tariff reduction scenarios as examples.
Finally, the last part analyzed the electronics and steel industries of Vietnam with the policy advice especially focused on tariff reduction.
There are many exciting opinions and discussions during the workshop, especially over policy issues. Participants raised questions on the effect of China's WTO membership on Vietnam's trade and FDI attraction, the link between domestic enterprises and exports, how to mobilize domestic resources for the process of industrialization and modernization, risk of relying too much on FDI, and the possibility of short cut policy for Vietnam to catch up with the East Asian countries. Besides answering these questions, Professor Ohno explained about related issues so that the participants could further understand the content of the FDI-led view promoted by the Japanese government in Vietnam.
At the end of the workshop, Prof. Ohno informed that GRIPS has been selected to be one of the recipients of the COEs (centers of excellence) research grant of the Japanese Education Ministry during 2003-07. A proportion of this fund will be used by GRIPS Development Forum (GDF). By early 2004, GDF will open a branch office in Hanoi to conduct a new type of policy research and networking, which is consistent with the JVEC principle and similar to the activities of GDF in Tokyo. This is good news for JVEC and we hope that JVEC's objectives will be realized in the near future.
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