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BANKING UNIVERSITY OF HO CHI MINH CITY CLASS: INE702_222_1_D04 MACROECONOMICS 2 ESSAY TOPIC: “OVERVIEW ABOUT INDUSTRIAL POLICIES OF EAST ASIAN COUNTRIES LIST SOME OF THE SUCCESS AND FAILURE OF THESE POLICIES AND LESSON FOR VIETNAM” GROUP 8 LECTURER: TRẦN MẠNH KIÊN NAME ID 030837210082 8 Phan Thùy Dung 030837210125 030837210171 20 Hoàng Quốc Hữu 030837210213 030837210250 32 Hùng Võ Thu Nguyệt 44 Trần Trúc Quỳnh 56 Nguyễn Trần Phương Trâm Ho Chi Minh City, June 2022 TABLE OF CONTENTS 1 INTRODUCTION: 1 2 MAIN CONTENT: 2 2.1 Theoretical basis: 2 2.1.1 Some problems about industrial policy definition: 2 2.1.2 Industrial policy definition: 4 2.1.3 Industrial policy goals: 5 2.1.4 The focus of industrial development policy 6 2.1.5 Tools of Industrial Policy: 7 2.2 The difference between Industrial policy and Agricultural policy: 7 2.2.1 The difference of definition: 7 2.2.2 The difference of goals: 7 2.2.3 The reason why East Asian countries prioritized industrial policy over agricultural policy: 8 2.3 “Industrial Policy” in East Asian countries: 9 2.3.1 Industrial Policy of Japan: 9 f Japan's research and development investment policy after 2000: 13 2.3.2 China’s industrial policy: 14 2.3.3 Korean industrial policy: 18 2.3.4 Taiwan's industrial policy: 22 2.4 The successes and failures of these policies: 25 2.4.1 Review of Japan's industrial policy: 25 2.4.2 Review of China's industrial policy: 26 2.4.3 Review of Korea's industrial policy: 27 2.4.4 Taiwan's Industrial Policy Review: 29 2.5 Lessons for Vietnam from industrial policies of East Asian countries: 31 2.5.1 An overview of industrial policies of East Asian countries: 31 2.5.2 Lessons for Vietnam: 39 2.5.3 Vietnam and applying lessons from industrial policies of East Asian countries: 40 3 CONCLUSION: 43 REFERENCE BẢNG ĐÁNH GIÁ NHIỆM VỤ LÀM VIỆC CỦA NHÓM Họ và tên Nhiệm vụ Tiến độ Phan Thùy Dung làm việc - Phân công nhiệm vụ và thúc đẩy tiến độ làm (nhóm trưởng) việc các thành viên trong nhóm, tổ chức các cuộc (%) họp nhóm, phụ trách in bài cho nhóm 100% Hoàng Quốc Hữu - Tham gia đóng góp ý kiến để xây dựng bài tiểu luận 100% Hùng Võ Thu - Đảm nhiệm nội dung phần 2.1 và 2.2 Nguyệt - Tổng hợp tài liệu tham khảo 100% - Tham gia làm scripts để thuyết trình và đóng góp ý kiến để trả lời các câu hỏi phản biện - Thuyết trình nội dung - Làm nội dung phần 2.1 và 2.2 - Tham gia đóng góp ý kiến để xây dựng bài tiểu luận - Tham gia làm scripts để thuyết trình và đóng góp ý kiến để trả lời các câu hỏi phản biện - Thuyết trình nội dung - Đảm nhiệm nội dung phần 2.3 - Tham gia đóng góp ý kiến để xây dựng bài tiểu luận - Tham gia làm scripts để thuyết trình và đóng góp ý kiến để trả lời các câu hỏi phản biện Trần Trúc Quỳnh - Tham gia đóng góp ý kiến để xây dựng bài tiểu 100% luận - Đảm nhiệm phần Mở đầu và Kết thúc - Làm PowerPoint - Tổng hợp và chỉnh sửa Word - Tham gia làm scripts để thuyết trình và đóng góp ý kiến để trả lời các câu hỏi phản biện Nguyễn Trần - Tham gia đóng góp ý kiến để xây dựng bài tiểu 100% Phương Trâm luận - Đảm nhiệm phần nội dung 2.4 - Tham gia làm scripts để thuyết trình và đóng góp ý kiến để trả lời các câu hỏi phản biện 1 INTRODUCTION: Since the end of World War II, the East Asian economies – first Japan, Taiwan, Singapore, Hong Kong and then South Korea – have achieved the fastest rates of industrialization in the world human history Overall, these economies grew at a rate of 5-6% per capita in the second half of the 20th century This means that their standard of living has doubled every 12 and a half years In half a century, such growth is likely to generate a 16-fold increase in income This spectacular economic transformation has been and remains the most controversial issue, which is the role of industrial policy Whereas previous interpretations discussed East Asia moving towards a free- market, free-trade narrative, most commentators now agree that these countries, with the exception of Hong Kong, used a variety of industrial policy measures Some argue that the success of these countries is largely due to government intervention involving the promotion of certain industries through a mixture of protectionism, subsidies, trade, and mergers government-brokered mergers (M&A), accession and capacity expansion regulations, and technology licensing However, others believe that East Asia's industrial policies are not great successes and that even if they do, they cannot be adopted by other countries Because each country will have its own views and views So, that's why we chose the topic " Learn about “Industrial Policy” in East Asian countries List some of the successes and failures of these policies and lessons for Vietnam.” Through this, we will have a broader and more objective view of the industrial policies of East Asian countries Industrial policy is planned step by step and changes with passion for industry in each period In some countries, industrial policy is seen as an instrument of directional planning, applied continuously and in coordination So is the effect of industrial policies really even? Besides the remarkable achievements, the application of this policy also has many failures The lessons from that are experiences, as well as things that need to be drawn so that Vietnam can develop the national industry as well as promote the country's economic growth 1 2 MAIN CONTENT: 2.1 Theoretical basis: 2.1.1 Some problems about industrial policy definition: A major problem with the industrial policy debate is that the very concept of industrial policy is not clearly defined, leading to heated but often fruitless debates For example, During the initial debate on Japanese industrial policy in the late 1970s and early 1980s, opponents of industrial policy argued that industrial policy was not the primary reason for Japan's industrial policy Japan's success because government subsidies and loans to industries are smaller in Japan than in many other comparable countries They argued that Japan's industrial policy had no decisive impact on the country's development Behind this assertion is the implicit definition of industrial policy as a policy involving the transfer of money that aims to change the incentives faced by industries However, as we will see later, financial transfers are only a small part of the industrial policy of Japan (and other East Asian countries) Thus, unless we abandon this narrow, financial-biased definition, we cannot understand the true importance and influence of East Asian industrial policy Having said that, the problem with the (often implicit) definitions of industrial policy in circulation is that they are often too broad rather than too narrow For example, Pinder (1982), a leading British industrial policy proponent in the 1980s, considers all of the following components of industrial policy: pro- industrial policy in general as policy Human; financial incentives and financing for investment; public investment program; public procurement policy; financial incentives for R&D; company-level policies such as specific R&D support; antitrust policy; merger policy to create 'national champions'; support for small businesses; regional policies such as the development of physical and social infrastructure and the establishment of industrial clusters; general trade protection; sectoral policies such as organizing recessionary coalitions in recessionary industries; product upgrading in labor-intensive industries The tendency to adopt an overarching definition also exists among skeptics of the merits of industrial policy Donges (1980), a fierce critic of industrial policy, explicitly stated that industrial policy "includes all government actions that affect industry" However, although all of the above policies have implications for industrial development, classifying every policy affecting industrial development as industrial policy is not a useful way to proceed If we did, almost any policy could be classified as industrial policy, which would render the concept meaningless In this sense, Landesman's (1992) emphasis on the 'specific', or discriminatory, nature of industrial policy deserves attention According to him, 2 industrial policy “is designed specifically, that is, towards specific industries, firms, regions, groups in the labor market, etc., not general Therefore, implicit in the formulation and implementation of industrial policy is always a trade-off between different groups, regions, industries, etc.” Under this definition, we can exclude general policies such as creating a skilled workforce or improving labor management relations from the field of industrial policy, making the concept more focused However, Landesman's concept of industrial policy is still somewhat overwhelming, because it includes policies designed to affect both specific regions and specific groups in the labor market It is true that industrial policy affects different regions and groups differently, and its effects on specific regions and groups should be seen as a by-product rather than a policy goal Likewise, region- and group-oriented policies may affect specific industries (e.g setting up an industrial park for the garment industry in an area with high unemployment), but this should not be turned into industrial policy Once industrial policy has been defined, it is necessary to comment on the difference between so-called general industrial policy and selective policy Mainstream economists tend to argue that general industrial policy, which affects all industries equally, is less distorted and therefore more favored For example, Corden (1980) states that “the best possible industrial policy would be to provide an adequate infrastructure, some limited power of monopolies and cartels, a system educational system to help create human resources for industrial success, instructing industry prospects (no coercion or subsidies), stability and simplicity in the tax system, free and flexible capital markets, and steady movement toward non-partisan protection, whether directly or indirectly” (page 182-3) In its famous study of the East Asian miracle, the World Bank (1993) argued that industrial policy was not only economically inferior to industrial policy in general, but was also incapable of applicability in the region other developing countries because it requires a high level of governance capacity that many of them do not have Regardless of one's view of the relative merits of selective industrial policy, there is an important definition problem here As Lall (1994) has pointed out, in practice the distinction between general and selective industrial policy is virtually meaningless, because almost all general industrial policy involves selectivity filter to one degree or another This is because, in a world with limited financial resources and limited management capacity, there will always be some degree of selectivity involved in the implementation of industrial policy For example, it can be argued that general support for R&D (such as a subsidized R&D fund for a specific industry) is not related to selectivity However, unless there are unlimited financial and administrative resources, dedicating more resources to support R&D activities means that R&D-intensive industries are now being prioritized over others In 3 Document continues below Discover more fKrionmh :tế vĩ mô MES3 Trường Đại học… 444 documents Go to course Bài tiểu luận 1 - Tại sao Việt Nam thực… 17 90% (21) Vĩ-mô - Vĩ mô 13 90% (10) Dhnhhcm Vstep Listening 3 5 TEST 1 9 Kinh tế 100% (1) lượng Multiple choice - ch.2 (+answers) 10 Kinh tế vĩ 100% (1) mô Chapter 4 100% (1) (+answers) 11 Kinh tế vĩ mô Business 2 0 wordlist upper intermediate 14 Kinh tế this way, the so-called general industrial policy will likely target certain are1a0s0% (1) without acknowledging it, leading to the risk of policy incolnưsiợstnegncy To take another example from the above quote by Corden, government cannot just abstractly 'provide adequate infrastructure' It must decide, for example, which roads will be built where, and in deciding this it will have to consider, among other things, its possible impacts on industries industry in the relevant regions To take another example from Corden, it cannot provide 'an educational system that creates human resources for industrial success' without determining the scientists, engineers and skilled workers in the industry In what field the future will be trained – a decision tied to its vision of the future of the country's industries Technical colleges and universities cannot train engineers and skilled workers in the abstract - they must be trained in very specific fields (chemical engineering, operating numerically controlled machines with computer, etc.) As can be seen, the dichotomy between general and selective industrial policies is ultimately untenable, with the exception of policies such as basic education and the provision of health care – policies that should not be classified as industrial policy anyway, at least by my definition Whether we use terms such as targeting or not, selectivity is a must-have issue, and in fact is frequently faced by industrial policy practitioners Indeed, it may be better to explicitly acknowledge the necessity of selectivity and openly discuss which areas to target in what ways, rather than trying to pretend there are no goals what's going on, thereby increasing the risk of inconsistencies between different targeting activities Furthermore, contrary to what the World Bank (1993) says in this regard, countries with weak administrative capacity have a higher chance of success with more precisely targeted policies, because they save on scarce administrative costs In summary, the important question is not whether industrial policy should be selective, but how to select the right sector in the right way, based on the overall goals of industrial policy 2.1.2 Industrial policy definition: A set of actions implemented by the government to increase industrial productivity, foster technical advancement, and enhance employment possibilities is known as industrial policy Industrial policy is implemented through both broad programs intended to aid in the process as well as targeted intervention to safeguard and finance specific sectors, businesses, and initiatives expansion and revitalization of industry All measures that aid in the creation and growth of industries inside a nation are considered to be part of industrial policy Two types of options are 4 frequently put up when policymakers think about which industrial strategy is best for growth and development in order to streamline the conversation The first remedy is the notion that industrialization is a process that cannot be left to the market's free will To encourage these businesses' development and global competitiveness, the state must choose a set of "lead" industries, create and build state-owned firms, and apply supportive policies for these businesses global market The second approach is predicated on the idea that supporting and funding state-owned businesses is unsuccessful since they are subject to incentives that don't always maximize profitability In order to encourage the development and maturity of potential private firms, it is necessary to assist the private sector, allow private enterprises to compete, and then "reward" the winners with several policies, such as through interest rate support and tax incentives 2.1.3 Industrial policy goals: An important issue is determining the goals of industrial development policy In most countries, when formulating industrial development policies, there are often multiple goals However, two main goals can be stated: balanced and equitable industrial development Balanced industrial development requires ensuring a balance between industry, between localities and territories Most countries in the process of industrial development do not focus excessive investment on a single industry and find ways to maintain competitive markets In addition, the goal of balanced development is also reflected in the fact that: Besides the industrial centers of large cities, many countries have encouraged the development of rural areas and considered industrial repositioning as important means to this end In order to establish a balanced industrial structure, the charges should focus on two issues: promoting the development of small-scale industry and selecting and developing a number of key industries Equity is one of the two main goals of industrial policy It includes aspects such as social justice and equity between domestic and foreign investors The implementation of this goal is meant to ensure the sustainable development of industry in particular and of the economy in general In addition to the above two goals, there are other objectives such as: ensuring “quality of life” through the establishment of social rules to control pollution and waste, enacting food and food laws, or there are also countries where the goal of industrial development policy is to increase foreign exchange earnings in order to improve the balance of payments In recent years, with the increasing trend of economic integration, countries also consider the goal of 5 strengthening economic cooperation with the world and the region as a goal of industrial development policy 2.1.4 The focus of industrial development policy Industrial policy places an emphasis on developing the manufacturing sector of the economy Proponents of industrial policy argue that the de- industrialization in the UK and the US over the past three decades has resulted from underestimating the role of the manufacturing sector, reducing its contribution to GDP and create jobs for workers According to Cohen and Zysman (1987): given the importance of the manufacturing sector, this is an erroneous policy orientation In addition, macroeconomic adjustment measures may not be enough to promote the development of the manufacturing sector because for the productivity growth of this sector, capital allocation is also important more important is the total value of the capital invested Therefore, the Government needs to intervene directly to promote industrial development However, it is also the focus of much controversy Opponents of the industrial policy view argue that economic growth in the post-industrial era in developed capitalist countries places an emphasis on the service sector, becoming the center of economic activity…Therefore, the Government's interventions in the direction of prioritizing the industrial sector without focusing on the development of the service sector are not only unnecessary but also have a negative impact on the economy Industrial policy will hinder the natural selection mechanism of the market and prevent the reallocation of scarce resources of the economy to the service sector, thus negatively affecting the long- term growth prospects economy (Burton-1983's view) But the structural change in the direction of service development is not simply because people want to consume more services when life improves The primary reason for this structural shift is the relative inflation cost of the service sector's slow growth in productivity, rather than actual shifts in demand market towards the service sector as income increases In addition, the trend toward de-industrialization observed in some industrialized countries is an inevitable long-term outcome of the labor productivity gap between these two sectors, not necessarily the region's industrial sector is less competitive Even economies with strong export-oriented industrial products such as Japan and Germany are also affected by deindustrialization In other words, deindustrialization and the decline of the industrial sector are two different concepts, although the decline of the industrial sector can affect the degree of deindustrialization Therefore, it is not possible to conclude that the industrial sector of an economy is in decline based on the manifestations of deindustrialization that it is experiencing as defined above 6