The 1st VDF Tokyo Conference on the Development of Vietnam
18 June 2005 at GRIPS, Tokyo


by Pham Truong Hoang, Vu Tuan Khai and Nguyen Duc Thanh

The First VDF Tokyo Conference was opened by Mr. Pham Truong Hoang. The program began with a speech by Mr. Vu Hai Diep from the Vietnamese Embassy in Tokyo. Mr Diep highlighted the active and significant role of Japan in many aspects of the Vietnamese economy, including contributions to policy innovation. Then Mr. Duc Thanh (GRIPS/VDF Tokyo) briefly introduced the history and activities of VDF Tokyo during its initial years of operation.

The morning session contained Prof. Kenichi Ohnofs key-note presentation on gLevel up manufacturing industries in Vietnam.h Three new ideas by Japanese economists were combined to shed new light on Vietnamfs problems. The industrialization of Vietnam proceeds under the environment of free investment and trade and global competition. Many Vietnamese companies are now facing the critical issue of moving from quantititative expansion (mainly by imitation) to quality and competitiveness in order to survive in global markets. This requires improving both management capability to absorb technology and effective government policies to support innovative manufacturers. Otherwise, global integration will lead to foreign dominance and the elimination of local players. In FDI-led developing countries, local firms often cannot compete globally by themselves, and linkage between foreign direct investment (FDI) and indigenous manufacturing becomes essential. Higher domestic capability allows local producers to become more effective partners of foreign manufacturers in Vietnam and abroad. From the viewpoint of business architecture, gintegration-basedh Japan and ASEAN are potentially good partners and Vietnam can also be a part of it, allowing it to avoid direct competition with gmodularity-basedh China.

The second key-note lecture was by Prof. Masaya Shiraishi from Waseda University. His topic was gMekong sub-regional cooperation and Vietnam.h A history of the sub-regional cooperation in Mekong region, where many wars, conflicts and crises had occurred, was presented. The lecture then turned to the situations of Mekong sub-regional cooperation before and after the Asian crisis in 1997-98. These situations were closely related to the activities and cooperative efforts of international organizations in the region such as ASEAN, ASEAN+3, ADB, etc. The presentation also focused on the relationship between Vietnam and the region: the merits and demerits of Vietnam to join, how Vietnam had responded to the cooperation, and reasons behind the active participation and even initiative-taking of Vietnam in recent years. Finally, some problems facing the region were pointed out and analysed. Two questions were raised from the participants. One was concerned with the role and interest of Japan in the cooperation and the other was about the role of foreign firms in Mekong sub-regional cooperation.

The afternoon began with the presentation of Mr. Pham Thai Binh, an expert of the State Bank of Vietnam currently studying at the International University of Japan. Binhes paper estimated the money demand function of Vietnam, a country with a high rate of dollarization and in transition, in the short and long runs. Based on the previous studies, he divided broad money demand into demand for domestic currency and demand for foreign currency deposits. Estimated parameters had expected signs.The estimated model was able to explain the recent puzzle in the Vietnamese economy that money supply was negatively correlated with inflation. The paper also investigated the responses of real money demand, domestic and foreign interest rates and so on, to various kinds of shocks by using VAR and impulse response function analysis. In the discussion, some were interested in the relationship between the monetary policy of the State Bank of Vietnam and the recently high inflation. The problem of model specification also attracted attention. It was argued, for example, that the demand functions for domestic and foreign currency should be estimated in a symmetric way.

The next presentation was by Mr. Viet Anh from Nagoya University. A central problem in his paper was to identify the share of FDI capital stock in the total capital stock of Vietnam. Based on a basic model of economic growth (the Solow model with a Cobb-Douglass production function), he proposed a method of calculating the stocks of capital given some estimated values of parameters and reported flows of capital. Using annual FDI inflow data, the author tracked the evolution of FDI capital stock. The share of FDI capital was estimated to be around one-fourth. Using econometric models, it was found that FDI had been an important determinant of economic growth. Moreover, it was pointed out that FDI inflows also stimulated domestic investment by their interaction with domestic industries (gcrowding-in effecth).

During the tea break, participants took a look at gone-page presentationsh in the adjascent room. The 20 presentations there covered a wide range of topics related to the development of Vietnam.

The tea break was followed by Mr. Tadashi Kikuchi (Keio University)fs paper concerning the Gini Index for Vietnam. The author explained how living standards were measured and that consumption expenditure was a proper basis for measurement in the case of Vietnam. He also explained how to add up different members in a household. By using 1998 data and employing two methods of calculation, the author was able to draw the Lorenz curve for Vietnam. Both approaches produced a consistent result, showing that Vietnamfs Gini Index was about 0.33. Based on these outcomes, the author presented his estimations of the effects of redistribution policy. Two simulations were carried out to show that a redistribution of relatively small income from the rich to the poor might considerably increase general welfare. Consequently, some implications for rural development and education policies were mentioned. In the discussion section, a participant raised his concern about the evolution of inequality in Vietnam. Another suggested to broaden the investigation by looking at asset inequality.

As the last presenter, Mr. Pham Vu Thang from the University of East Anglia (UK) contributed to the Conference with gUpgrading Strategy of Vietnamfs Clothing Industry.h The textile and garment industry was coping with increasing competition due to the expiration of Multi-Fibre Agreement (MFA). From the viewpoint of global value chain, this might bring both challenges and opportunities to the Vietnamese textile and garment industry. Asian traders currently outsourced from local producers, including those in Vietnam, and sold products to foreign retailers. Under free textile trade, Vietnamese companies may face a potential threat if they just keep receiving orders, designs and materials from Asian traders and remain as cut-make-trim (CMT) firms. On the other hand, global free trade creates more opportunities for Vietnamese producers through direct transaction with final foreign retailers. By upgrading capabilities, Vietnamese producers can replace Asian traders and reach a higher value-added position in the chain. In the discussion section, it was argued that an analysis on the dynamic influences from other competing countries, particularly China, might be interesting. It was also noted that, before moving up to higher value-added positions, more effort was required for an appropriate positioning of Vietnamese companies in various markets and upgrading quality control and production management.

The conference was closed by a special session in which all participants sat around and introduced themselves and their research informally. Then many of the participants moved to a nearly restaurant for an even more friendly, student-styled dinner with fresh beer. This was found to be a very happy and useful session after a long day.

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