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VIETNAM ACADEMY OF SOCIAL SCIENCES GRADUATE ACADEMY OF SOCIAL SCIENCES Le Thi Khanh Ly THE DEVELOPMENT OF SUPPORTING INDUSTRIES FOR AUTOMOBILE IN VIETNAM REGARDING THE EXPERIENCE OF THE REPUBLIC OF KOREA AND THAILAND Major: International Economics Code: 9.31.01.06 PHD THESIS IN ECONOMICS Hà Nội - 2019 The thesis is completed at: GRADUATE ACADEMY OF SOCIAL SCIENCES Supervisor: Assoc Prof Dr Đinh Công Tuấn Assoc Prof Dr Phạm Thị Thanh Bình Referee 1: Prof Dr Do Duc Binh Referee 2: Assoc Prof Dr Le Xuan Ba Referee 3: Assoc Prof Dr Do Huong Lan The thesis is protected infront of Board of Doctorial Exmanination at Graduate Academy of Social Sciences At hour minute date month year The thesis can be found at : National Library Library of Graduate Academy of Social Sciences PREFACE The urgency of the the dissertation The automobile industry is considered the spearhead industry of many countries The development of the automobile industry results in the growth of related industries, and also create a great number of jobs The automobile industry is part of Vietnam's national industrial development strategy towards an industrialisation, modernisation and integration Decision 1168/2014/QĐ-TTg approved the strategy for Vietnam's automobile industry to 2025 with vision to 2035, and Devision 1211/QĐ-TTg approved the the planning for the automobile industry to 2020, with vision to 2030 These decisions affirmed the government's interest in this sector The automobile market in Vietnam is considered potential with the highest average growth rate in South East Asia, and the government also implemented many support measures However, Vietnam has not had a true automobile industry The main cause is the underdeveloped supporting industries The automobile industry in Vietnam mainly relies on the assembling stage with low added value Most of the spare parts are imported, only few simple spare parts are manufactured domestically but with limited quantity Besides, the trend of free trade is creating huge challenges as domestically produced automobiles have to rival imported cars which have competitive prices Moreover, in order to benefit from the tariff preferences of FTAs, automobiles manufactured in Vientam must satisfy the requirement of goods origin For the above mentioned reasons, strong supporting industries is the key factor for the existence and development of Vietnam's automobile industry, and also help Vietnam integrate further in the global value chain, especially when more and more multinational corporations are investing in the automobile sector in Asia The automobile supporting industries were formed behind schedule, and encountered numerous difficulties, but Vietnam had a chance to learn from the experience of more developed countries in the process of planning strategies the Republic of Korea (RoK) and Thailand are among successful automobile supporting industries models in the region The RoK was able to build up its own automobile supporting industries which are independent in terms of technology and design Thailand became the spare part assembling and manufacturing hub of the world's leading car brands The successes and limitations in the development process of both the RoK and Thailand are valuable lessons for Vietnam so that the country can make automobile industry its speadhead industry The policies for automobile supporting industries in Vietnam are not up-to-date nor suitable In order to have good policies, a nation must consult theory and practice A theoretical base of supporting industries is not yet formed systematically In fact, a number of countries in the world have made notable achievements in the developing automobile supporting industries, such as the RoK and Thailand However, without theory, the application of their experience will not be practical, and can be wrongly appied in Vietnam With those reasons, the author chose the topic "Developing automobile supporting industries in Vietnam regarding the experience of the Republic of Korea and Thailand" for the Ph.D dissertation The author hopes that the dissertation will play a part in analysing the theoretical and practical processes of building and developing the automobile supporting industries in the RoK and Thailand The ultimate aim is to create a valuable source of reference for Vietnam's policies Purpose and mission of the research 2.1 Research purpose: Contributing to the improvement of theoretical base of the automobile supporting industries in Vietnam in international integration Building a legal framework for the development of automobile supporting industries Analysing and assessing the lessons of the RoK and Thailand Evaluating the possibility of applying the experience of the mentioned countries to Vietnam 2.2 Research mission: Systematising the theoretical base of automobile supporting industries in international integration Analysing the development of automobile supporting industries in the RoK and Thailand Evaluating the successes and limitations of automobile supporting industries in the RoK and Thailand, and putting foward proposals for improvement Applying the experience of the RoK and Thailand to develop automobile supporting industries in Vietnam Subject and range of research 3.1 Research subject: the subject of the research is automobile supporting industries Automobile supporting industries are defined as the industries which produce the spare parts for automobile assembling 3.2 Range of research 3.2.1 Geographical range: The dissertation researches automobile supporting industries in the RoK, Thailand and Vietnam 3.2.2 Time range: Automobile supporting industries in the RoK from 1962 till today, automobile supporting industries in Thailand from 1959 till today, automobile supporting industries in Vietnam from 2002 till today 3.2.3 Content: Systematising the theoretical base and analysing the development of automobile supporting industries; Analysing the method of development of automobile supporting industries in the RoK and Thailand; Evaluating the successes and limitations during the development process of automobile supporting industries in the RoK and Thailand; Analysing the current situation of automobile supporting industries in Vietnam and identifying the factors that hinder development; Evaluating the possibility of applying experience in the RoK and Thailand to Vietnam Research methodology: Collecting figures: the figures used in the dissertation are mainly quoted from the reports on automobile supporting industries published by authorised ministries, departments and divisions such as the General Customs Department, the Ministry of Industry and Trade, the Ministry of Planning and Investment the General Statistics Office, officers, associations and organisations that support enterprises in Vietnam and other countries The dissertation also inherits a number of achievements of previous researches; The methodology of classifying and systematising documents: arranging the documents related to the automobile supporting industries of the RoK, Thailand and Vietnam into groups of issues with the same nature in logical theoretical system; Analysis methodology: looking into the current situation of automobile supporting industries development in the RoK, Thailand and Vietnam, indentifying the causes and effects of policies on automobile supporting industries that the mentioned countries applied; methodology of summarising: the analysis of solutions that the RoK and Thailand applied serves come up with lessons and principles in the development of automobile supporting industries; Comparison methodology: comparing the solutions and results achieved in the development strategies of automobile supporting industries in the RoK and Thailand, in order to identify the advantages and disadvantages of the two models The socio-economic situations of Vietnam, the RoK and Thailand are compared to effectively apply development models; Modelisation methodology: building Vietnam's automobile supporting industries development models in different periods of time, to put forth solutions based on the experience of the RoK and Thailand Scientific value of the dissertation: Analysing and clarifying the establishment and development of automobile supporting industries on the perspective on theoretical international economics; identifying the role of automobile supporting industries in the industrialisation and modernisation and international integration; the dissertation contributes to the theoretical base of supporting industries in general and automobile supporting industries in particular; clarifying the conception of automobile supporting industries in terms of definiation, role, affecting factors and indicators of the sector The above mentioned tasks contribute to building a model of analysis for automobile supporting industries with the approach of global value chain Practical value of the dissertation: the dissertation analyses the factors of success for automobile supporting industries in the RoK and Thailand, points out the lessons that can be applied in Vietnam The dissertation assesses the current situation of automobile supporting industries in Vietnam, analyses the cause and solutions based on the experience of the RoK and Thailand Structure of the dissertation: Apart from the openings, list of abbreviations, list of tables and images, conclusion, the main contents of the dissertation are divided into chapters: Chapter 1: Overview of automobile supporting industries; Chapter 2: Theoretical base of automobile supporting industries; Chapter 3: The development of automobile supporting industries in the Republic of Korea and Thailand; Chapter 4: Direction for automobile supporting industries in Vientam Chapter OVERVIEW OF AUTOMOBILE SUPPORTING INDUSTRIES 1.1 Researches into automobile supporting industries 1.1.1 Researches into the theory of automobile supporting industries In 1985, the definition of "supporting industries" was first mentioned in “White paper on Industry and Trade” - a research of Japan's Ministry of International Trade and Industry (MITI) Supporting industries were first used to refer to small and medium sized enterprises which contribute to the development of infrastructure in Asian countries in middle and long terms In 2004, the US's Department of Energy released a publication named "Supporting industries is the future", which defines supporting industries as the industries providing needed materials and procedures to manufacture the products before the products are launched into the market Michael Porter affirmed his viewpoint that an industry needs to rely on a number of factors, strategy of competition, supporting industries and the diamond model to develop This was mentioned in “Competitive Advantage of Nations” 1.1.2 Researches into the solutions for supporting industries development Japanese researchers analysed the role of Japan's multinational corporations in the development of supporting industries in Asian countries in the report “Survey Report on Overseas Business Operations by Japanese Manufacturing Companies" The report was released in 2004 by the Japan Bank for International Cooperation (JBIC) The multinational enterprises extended their networks in different countries There, their factories promoted the development of local supporting industries Ryuichiro Inoue and his "Future Prospects of Supporting Industries in Thailand and Malaysia"; The group of experts including Halim Mohd Noor, Roger Clarke, and Nigel Driffield with the research "Multinational Enterprises and Technological Effort by Local Firms: A Case Study of the Malaysian Electronics and Electrical Industry" analysed the connection of multinationals and domestic enterprises Multinational enterprises (MNE) invested in supporting industries in Thailand and Malaysia The link between MNR and domestic enterprises is the drive for technological advances of the nation 1.1.3 Researches on policies for supporting industries development in Vietnam Trần Đình Thiên and his work "Supporting Industries Development Current Situation and Result" analysed the policies for supporting industries in a number of Asian countries such as Japan, Thailand, Malaysia, China in order to seek lessons for Vietnam The policies recommended for Vietnam include contents on small and medium enterprises, associations, human resource, strategic products, FDI and industrial clusters Kenichi Ohno and Nguyễn Văn Thường analysed the policies for supporting industries development in Japan and a number of ASEAN nations in the book "Improving The Industrial Development Strategy in Vietnam" Especially, the authors placed emphasis on specific industries such as electronics, texitles, leather footwear, automobiles and recommended policies for each sector The authors stressed the role of FDI in industrial development 1.1.4 Researches on the situation and solutions for automobile supporting industries in Vietnam The dissertation for economics Ph.D "Automobile Supporting Industries in Vietnam" by Trương Nam Trung presented the theoretical base of supporting industries in Vietnam, factors that may cause an impact, and indicators to assess the development of automobile supporting industries He analysed and evaluated the situation of automobile supporting industries in the period of 2011 - 2016, and concluded that automobile supporting industries were underdeveloped The reason is the quality had not meeting the demand, weak links between enterprises, limited technological capacity, low competitiveness From the evalations, the author proposed a number of solutions for the government and enterprises based on the experience of some countries which were successful in developing automobile supporting industries The dissertation for economics Ph.D "Developing automobile supporting industries in Vietnam" by Vũ Anh Trọng analysed the theoretical issues of supporting industries, and briefed the experience of supporting industries of China and Thailand He analysed enterprises data to assess the situation of automobile supporting industries in Vietnam The author concluded that automobile supporting industries were still underdeveloped Automobile supporting companies are small sized, and have weak technological capacity, their products have low added value, and low localisation rate The solutions proposed were improvement of policies, information system, and enterprises' self-reliance 1.1.5 Researches on the role and solutions for the development of automobile supporting industries in the Republic of Korea and Thailand Researcher M Fujita and his work “Industrial Policies and Trade Liberalization: The Automotive Industry in Thailand and Malaysia” looked into the effects that globalisation has on the development of the automobile industry in Thailand and Malaysia It points out the necessary need for linking and expanding manufacturing of automobile industries in developing countries Globalisation, notably the domination of multinationals, created a tight link between domestic automobile manufacturers and domestic spare parts manufacturers The research into the relationship between automotive spare parts providers and automobile assemblers in Thailand showed the tight links between the system of level 2, level providers with the first level Researchers found that the strong links resulted in more products at significantly lower cost Therefore, the development of automobile spare parts industries means better competitiveness thanks to lower costs The statement was made in the research “Innovation Capability of Thailand’s Automotive Industrial Network” by Chawalit Jeenanunta and Veeris Ammarapala Globalisation led to the changes in policies of the Republic of Korea (RoK) From a country with protectionism policies, the country became a nation that attracts investment of foreign automobile corporations, and created conditions for the globalisation of the automobile market The RoK joined the gloval value chain of the automobile sector by developing the domestic spare parts industry, stressing the special role of multinational enterprises in promoting domestic enteprises' competitiveness The content was affirmed in the work “Politics of Scale and the Globalization of the South Korean Automobile Industry” by Park Bae-Gyoon; and the research “The Development of Automotive Parts Suppliers in Korea and Malaysia: A Global Value Chain Perspective” by Peter Wad 1.2 The void to be filled by the research 1.2.1 Identifying the void 1.3.1.1 Issues that were resolved by previous researches: The analysis of supporting industries, the range and sectors of supporting industries, the differences in the definitions of supporting industries among ocuntries, the steps taken to establish supporting industries in the world, the viewpoint of supporting industries and the development models of supporting industries in the RoK adn Thailand The evaluation of the role of supporting industries in socio-economic development in general, and in the automobile industry in particular, explaning the establishment of the value chain in the automobile industry, affirming that the birth and development of automobile supporting industries are inevitable The analysis of automobile supporting industries in the RoK and Thailand in historical periods, the successes and failures of the two nations The conditions and policies they used such as protectionism, manufacturing management innovation, developing human resources, boosting FDI, promoting the efforts of domestic enterprises, direct and indirect supports, creating an investment and business environment, developing science and technology, supporting small and medium enterprises, expanding the market Assessment of the situation of supporting industries in Vietnam in general, and automobile supporting industries in particular The researches agreed that automobile supporting industries in Vietnam are underdeveloped, which is the challenge to attracting FDI and joining the global value chain, and also hinders national competitiveness The author pointed out that supporting industries are necessary for a developing country which relies much on FDI like Vietnam Automobile supporting industries in Vietnam are still weak, so the prices of Vietnamese produced cars are not competitive, enterprises are dependent in assembling The reasons mentioned include objective factors such as market scale, historical situation, the changes of the world economy, domestic socio-economic development The subjective causes include policies, enterprises' selfreliance, quality of human resources, technological level The authors proposed a number of solutions including financial ones, linking enterprises, creating a favourable investment environment, improving the information system, consistency of supporting policies 1.3.1.2 Issues that remain unresolved: The theoretical base of automobile supporting industries has not been complete: Previous researches mainly analysed the theoretical base of supporting industries in general, these theories cover many industries including textile, footwear, electronics Only a few researches have insights into the automobile industry but the theoretical base is not complete and clear The role of automobile supporting industries in the economy and the automobile industry in particular, and the factors of automobile supporting industries have not been analysed in detail The socio-economic development situation had not been up-to-date: Changes in the demand of automobile worldwide; the trend of trade liberalisation; the industrial revolution; the Achieving the target of product quantity needs the increase in the scale of enterprises and the number of enterprises Enterprises that produce a certain number of products means target achievement in terms scale, in enhancement of professtionalisation The increase in the number of enteprrises aims to give more choices of suppliers, creating competition and encouring self-reliance of assemblers in choosing their partners The number of suppliers can be measured by the total number of suppliers and the ratio of the number of suppliers over one assembler The rise of product quality means satisfying the demands of assemblers in terms of product technical features Suppliers change their role from sub-contractors dependent on orders and demands of assemblers to the suppliers solutions and consultations for products Enterprises in supporting industries need to reach a certain level of science technique, to catch up with the trend of automobile producers and the demands of consumers to manufacture products from the design phase to the piloting phase 2.2 The role of automobile supporting industries: Promoting industrialisation and modernisation; Enhancing competitiveness of the automobile industry; Attracting foreign direct investment; Helping countries participate in the global value chain; Expanding the labour market 2.3 Characteristics of automobile supporting industries: Automobile supporting industries were established to respond to professionalisation and trade liberalisation needs; Requiring a large amount of investment and technology; Automobile supporting industries have different levels of links; Products of automobile supporting industries can serve domestic demand as well as exports demand; 2.4 Stage of automobile supporting industries development On a technological perspective, the development of automobile supporting industries in developing countries can be divided into main stages - Stage 1: Automobile industry mainly uses imported spare parts Domestic supporting industries have not been formed, or there are just small enterprises that produce low added value products at underdeveloped level Assembling companies are mainly FDI companies 11 - Stage 2: When the domestic assembling demand is high enough, more capable enterprises start to emerge and produce high added value products Technology transfer takes place but still depends on FDI companies - Stage 3: There is a high localisation rate, but domestic enteprises have not been able to design the products themselves The products rely on foreign technology and designs - Stage 4: Localisation rate is high, the development of manufacturing technologies and product design also improve 2.5 Methods of production for automobile supporting industries The number of companies in automobile supporting industries: the total number of enterprises supplying spare parts for automobile industry satisfy the manufacturing demand in terms of quantity; Technological capacity of companies in automobile supporting industries: the capability to enhance product quality; Links between enterprises in the automobile industry: guarantee of the information and stability of the supply; The capability to participate in the global value chain of the automobile industry: satisfying the domestic demand and international standards; Localisation rate of the automobile industry: self-reliance to supply domestically 2.7 The content of automobile supporting industries development 2.7.1 Government's viewpoint on automobile industry development: direction for strategic model of automobile industry development, range of development, groups of key enterprises, 2.7.2 Industrial structure: the balance between basic industries and automobile industry; enterprises in group 1,2,3; big enterprises and small and medium enterprises, 2.7.3 Human resource: quantity and quality of human resources trained for the automobile industry 2.7.4 Linking: Linking horizontally and vertically between enterprises, the link is formed by the information system and the development of sectors 2.7.5 Level of technology: it represents the innovation in manufacturing, which decides the position of product in the market 2.7.6 Market capacity: the market determines the quantity of goodssold, ensuring the output of enterprises 12 CHAPTER AUTOMOBILE SUPPORTING INDUSTRIES DEVELOPMENT IN THE REPUBLIC OF KOREA NAD THAILAND 3.1 Stages of development of automobile supporting industries in the Republic of Korea and Thailand 3.1.1 Stages of development of automobile supporting industries in the Republic of Korea: - Technology accumulation: Assembling automobiles with imported spare parts (1962 - 1971) The most notable policy in this period is protectionism, putting a cap on imported completely built-up automobiles (CBU units) and spare parts, prioritising spare parts which cannot be produced in the country In order to resolve the technological challenges, the government promoted joint ventures with foreign enterprises, and gave foreign exchange preferences for enterprises that achieve high localisation rate - Technology absorption: Establishment of a system of domestic producers with the support of FDI (1972 - 2000) The government abolished restrictions to increase the number of automobiles Domestic enterprises cooperated with foreign enterprises more strongly for technology transfer The number of suppliers increased rapidly Many of them are joint ventures or have sub-contracts with foreign partners to improve quality and promote exports Spare parts companies started to export - Technology innovation: power for reform (2001 - today) The Republic of Korea focused on investment strategies and technology development Budget for Research and Development (R&D) rose rapidly 3.1.2 Development stages of automobile supporting industries in Thailand - Technology accumulation: Assembling automobiles with imported spare parts (1962 - 1969) In this period, there is high protectionism and investment promotion These preferences attracted a large number of multinational enterprises to Thailand to put up their factories, most of them are from Japan However, the development of assembling did not result in the development of supporting industries 13 - Technology absorption: Establishment of a system of domestic producers with reliance on FDI (1972 - 2000) The government aimed for trade liberalisation, removed restrictions of the number of imported automobiles Thailand became the 13th countries in the world in terms of exported automobiles, and ranked third in Asia The automobile industry witnessed a boom in investment, especially in Research and Development (R&D) 3.2 The content of automobile supporting industries in the Republic of Korea and Thailand 3.2.1 The goverment's viewpoint on the development of automobile supporting industries - The Republic of Korea: a model with compulsory measures such as regulations on localisation rate, links between big and small enterprises The range of supporting industries include spare part indutries, machinery industries and materials such as steel and chemicals industries Big enterprises are the motivation of the development of small and medium enterprises - Thailand: Thailand develops its automobile supporting industries by combining the push and pull models The government creates such a business environment that is encouraging but also has compulsory measures Among the most notable policies are policies to attract FDI and for the development of small and medium enterprises The regulations on localisation rate and some protectionism measures such as tariffs and quota on imported automobiles are applied strictly Automobile supporting industries in Thailand does not include the production of materials FDI enterprises play the key role in development Policies planning involves the participation of many groups, including the business community 3.2.2 Structure of industry - The Republic of Korea: The Republic of Korea focuses on an independent industry with metallurgical industry and chemicals industry as pillars This helps supporting industries develop more self-reliantly The RoK prioritises the development of big enterprises (Chaebols) which have the enormous role Financial resources and favourable conditions for access technology are given to this group The RoK wants to make big enterprises the motivation to lift small enterprises The country aims to develop small 14 and medium enterprises horizontally by increasing the number of enterprises, then focus is shifted to technology investment - Thailand: Thailand does not focus on basic industries Most of materials for production are imported The country wants to make foreign investment a drive for the growth of the automobile industry so most policies revolve around FDI attraction FDI enterprises play the key role in lifting domestic small and medium enterprises 3.2.3 Improving the quality of human resource - The Republic of Korea: The RoK has a high level of education, so the average quality of human resource is relatively good People of the RoK are hardworking, and the labour is low cost, which is an advantage of the country's automobile industry Keeping the labour cost low led to some strikes of workers, and then manufacturing is delayed The RoK focuses on managing labourers and chances to learn from the technology overseas - Thailand: Thailand expands its educational system by cooperating with enterprises in training labourers Japanese enterprises play an important role in training as well as providing expert trainers, and equipment for practice However, the training programmes remain too academic, and is far from the actual situation The Thailand Automotive Institute cooperated with Jaoan to implement the human resource development programme Thailand's educational model mobilises all social resources from the state, the private sector, the FDI sector to use in training human resource 3.2.4 Promoting enterprises links - The Republic of Korea: The RoK starts with horizontal links to create large scale enterprises, then forms vertical links to achieve the goals of localisation rate The independent automobile strategy of the RoK is also the factor that fosters the links Manufacturers also place emphasis on opening associations to provide information and enhance cooperation between enterprises The RoK paves the way for sectoral clusters with favourable financial and technological supports to establish links between enterprises of the same location - Thailand: Thailand forms links with compulsory measures such as regulations on localisation rate Since FDI enterprises play a crucial role, the regulations force FDI enterprises to cooperate with domestic enterprises The compulsory links in the context where domestic enterprises 15 have not been able to provide are the barrier of development The government has to abolish regulations on limiting ownership rights Thailand also has a system of supporting industries associations with positive supports and favourable policies (especially in terms of finance) for main industrial clusters 3.2.5 Expanding the market of spare parts - The Republic of Korea: The RoK creates a market for the young industry with protectionism at high level This is the key for initial development when the competence of domestic enterprises is still weak - Thailand: Thailand focuses on regional development, financial supports in three main industrial regions in the east This is where Japanese and western manufacturers are based, they and their suppliers form a cluster of sectoral links 3.2.6 Expanding the market of spare parts - The Republic of Korea: The government implements policies to form big enterprises, that that leads to economic results When domestic demand is satisfied, the RoK promotes exports to expand the market and also control imports to ensure the benefits of exporters Enterprises also shift to module manufacturing to increase economic gains - Thailand: Thailand controls the number of assembled automobile to achieve economic gains on a certain scale Thailand focuses on developing road system and restricts imported automobiles to expand the domestic market Exporting automobiles is enhances to dominate the foreign market 3.2.7 Research and Development (R&D) - The Republic of Korea: The RoK invests strongly in R&D activities, builds research centres around industrial parks The government supports technology transfer from FDI enterprises Besides, the RoK also raises industrial standards to apply the requirements of foreign markets Research institutes were established in specific markets with different goals in each region The RoK performed a leap from absorbing technology to developing designs - Thailand: Thailand's manufacturing technology depends on FDI enterprises Technology transfer is only seen in simple products Thailand is not capable of producing main parts, but has to rely on foreign designs Currently, investment in science and technology increased notably to develop smart and environment friendly vehicles 16 3.3 Assessing the development process of automobile supporting industries in the Republic of Korea and Thailand Successes: - The RoK has been successful in establishing groups of lreading enterprises in the automobile industry - The RoK performed a series of measures focused on research and development both horizontally and vertically Automobile brands of the RoK place emphasis on R&D, they invest strongly in designs and experimenting, expand research centres in foreign markets to meet the consumers' demand in each region - The RoK was able to form a compulsory vertical link between enterprises at different levels in the supply chain Thanks to the link, the technological level of supporting industries companies improved clearly, and LCR rose rapidly - Thailand created a good investment business for FDI enterprises, and attracted a large number of automobile brands in the world so that they put their factories in Thailand - The policies to develop small and medium enterprises of Thailand relatively succeeded This group of enterprises are affirming their profile thanks to the governmental policies from opening specialised agencies to financial support and promoting links with FDI enterprises - The Thai government implemented strong and consistent measures in training Cooperation between schools and enterprises, the participation of experts, emphasis on practice, motivation for study, all proved effective - The two countries realised the role of protectionism and trade liberalisation Creating a market is the basic requirement for a young industry, and protectionism brings the conditions for the development of supporting industries horizontally Trade liberalisation brings competition and also the opportunities to access new technologies, a condition to develop vertically - To shift from protectionism to liberalisation, the governments of both countries had a roadmap and informed domestic enterprises The aim is give domestic enterprises enough time to prepare for the change, so that they will not be confused when facing competition from foreign enterprises 17 - The role of associations was appreciated by both governments They act as not only the government's information collector, but also the tool for governments to implement their direct supportive policies for the sector Limitations: - The procedure of building and implementing policies of the RoK is dictatorial, including orders given by the superiors and they must be obeyed without delay However, when these is a crisis, dictation is not longer suitable because it hinders the response capability - The RoK implements horizontal links to form big enterprises in the sector to improve competence However, this policy is not implemented at the same time with vertical links so in the first stage, there was not a close link between enterprises in the supply chain This makes the technology capability of supporting industries remain unimproved - The RoK applies protectionism to create conditions for its young automobile industry with measures such as restriction on imported completely built units, favourable tariffs for imported spare parts The country aims for the development of the manufacturing industry, and paves the way for supporting industries However, the measures were not applied at the same time with policies promoting supporting industries companies, so in a long time, manufacturing enterprises focused only on importing spare parts, and did not care much about supporting industries development - Protectionism in the beginning created the domestic market for the automobile industry in the RoK However, when the market expands overseas, automobiles models of the RoK could not compete because they did not meet the strict standards of the export markets The reason is limited technology level, the RoK develops their technology later, and did not take into account the role of joint venture to take advantage of the technology of more developed countries - Thailand implemented protectionism by a forced link with domestic enterprises through LCR regulations, but limited the ownership right to develop domestic enterprises based on FDI enterprises' technology However, the goal was not reached because of the ownership right restriction so that FDI enterprises were not willing to transfer their technology - The removal of ownership right limitation makes FDI enterprises in Thailand more motivated to share their technologies with domestic 18 enterprises However, Thai companies' capacity was too poor, so the automobile industry was still dominated by FDI companies The reason was Thailand did not prepare high quality human resource, therefore it was a challenge in accessing technology 3.4 Lessons from the process of automobile supporting industries experience in the Republic of Korea and Thailand - There needs to be a clear viewpoint on supporting industries and identifying the main group of industries to be the spearhead of development - Policy planning needs participation of enterprises - Using protectionism for a young industry and utilise FDI - Promoting both horizontal and vertical links in the sector, at the same time with technology transfer - Training human resource with regards to practical situation, with the participation of different parties in the society - Developing basic industries, self-reliance of input materials of supporting industries - Developing small and medium enterprises in terms of quality, financial support and technology, developing human resource and business environment - Developing clusters to form close ties between enterprises, and to easily implement supportive policies - Expanding the market by manufacturing connection and boosting exports CHAPTER DIRECTION FOR AUTOMOBILE SUPPORTING INDUSTRIES DEVELOPMENT IN VIETNAM 4.1 Overview of automobile supporting industries in Vietnam 4.1.1 The context of automobile supporting industries in Vietnam 4.1.1.1 International context - Trade liberalisation trend Economic integration in regional and international scale gives Vietnam opportunities in penetrating new markets, therefore Vietnam can attract investment in the automobile industry The favourable conditions in regulations on goods origin can help Vietnamese spare parts easily go into regional markets However, lowering tariff barriers is also a challenge for 19 Vietnamese automobile industry as imported automobiles and spare parts will become cheaper, and they will compete with domestic products - The 4th industrial revolution: The boom of the industrial revolution in automobile manufacturing changed the method of producing an automobile as well as spare parts Applying technological advances create products with outstanding quality with many functions The products are cheaper, the delivery time is shorter thanks to automation - Strategy of automobiles in the world The dominant trend of automobile brands is environment friendly automobiles such as electric car, and the reduction of internal combustion engine vehicles 4.1.1.2 Domestic context - Young and low cost labourers The population of working age is high percentage and low expense, which is a factor that motivates investors from Japan, the Republic of Korea, Taiwan This creates opportunities for domestic enterprises to access modern technology - Higher demand for automobiles Higher life quality leads to higher demand for automobiles Consumers' taste changes from just owning a means of transport to safety, smart, fuel saving, environment friendly and convenient vehicles - The emergence of Vietnamese automobile brands Vingroup officially constructed the Vinfast complex, which produces automobiles and electric bikes of Vietnamese brand in Hải Phòng The complex comprises of assembling area and supporting products area Vinfast's strategy is to building Vietnamese automobile brand by cooperating with German producers 4.1.2 Viewpoint on automobile supporting industries development - Automobile supporting industries development to foster the country's industrialisation and modernisation - Automobile supporting industries development is in line with the socio-economic situation of the country and serves domestic and export demands - Automobile supporting industries development creates competitive advantages to attract investment and participate in the global value chain 20 - Automobile supporting industries development is based on mobilising resources from economic entities, especially FDI and small and medium enterprises 4.1.3 Characteristics of automobile supporting industries in Vietnam - The number of enterprises is small, therefore not satisfying the assembling demand - Outdated technology, low quality products - Localisation rate below expectation - Exports of spare parts is on the rise - FDI invested in automobile supporting industries is rising but capital effectiveness is poor - Industrial clusters are located mainly in the northern and southern regions 4.1.4 Causes of limitations - Lack of awareness of the role of automobile supporting industries - Policies are impractical, and not consistent - A system of enterprises information not available - Competence of domestic enterprises still low 4.2 A number of proposals for automobile supporting industries development in Vietnam based on the experience of the Republic of Korea and Thailand 4.2.1 A clear viewpoint and direction of development needs to be in place - The role of automobile supporting industries in developing the automobile industry: Vietnam needs to have an accurate understanding of the role of supporting industries It should not consider automobile supporting industries a secondary sector, but the sector that creates the main value of the automobile industry In order to develop the automobile industry, the automobile supporting industries need to be developed - Clear direction for development: Vietnam needs to identify its position in the automobile supporting industries of the world to find the right door to join the suppy chain - The leading group of industries for development: At the beginning, FDI and small and medium enterprises need to be prioritised because the 21 capacity of domestic enterprises is still low There needs to be more FDI for capital and technology When domestic enterprises can absorb technology, more resources will be given to them so that they become the leading force of the sector - Enterprises to participate in policy planning: In the new planning, apart from the participation of experts and commitees, enterprises of supporting industries also need to play a part 4.2.2 Improving the industrial structure There is a demand for large scale enterprises that take the leading role of the sector, and stand high in the supply chain These enterprises will support enterprises at lower levels Small and medium enterprises are level and level suppliers Enterprises of basic products need to be developed so that there is enough input materials for both traditional and modern automobile supporting industries 4.2.3 Developing human resources Expanding training facilities for automobile supporting industries; Content of training must be suitable for the world's automobile industry rend; Training on demand of enterprises 4.2.4 Enhancing links between enterprises Improving the legal framework for enterprises links, enhancing information system between enterprises; Developing clusters of the sector 4.2.5 Increasing the capacity of the market Selecting the prioritised group of products based on consumers' trend and national competitive advantage; Improving financial policies to expand the market; Identifying the prioritised automobile model and promoting module manufacturing 4.2.6 Developing science and technology Investment in research and development, promoting technology transfer of FDI projects, preferential policies for venture enterprises 22 CONCLUSION There are several results brought by the research "The development of supporting industries for automobile in Vietnam regarding the experience of the Republic of Korea and Thailand": The dissertation systematised the theoretical base of automobile supporting industries such as definition, role of automobile supporting industries, characteristics, indicators, factors that contribute to the development of automobile supporting industries in intergration Automobile supporting industries are all industries that produce spare parts used in automobile assembling Automobile supporting industries is the sector that gathers the main value of the automobile industry, which contributes to the country's industrialsation-modernisation and joining the global value chian Automobile supporting industries have different levels, and include many enterprises tightly connected in a tower formation The classification of enterprises depends on the capacity of manufacturing The dissertation builds a legal framework to develop automobile supporting industries, comprising of factors and the indicators to assess the development of automobile supporting industries in globalisation Based on the legal framework, the dissertation analysed the development of automobile supporting industries in the Republic of Korea and Thailand, and evaluated the successes and limitations of automobile supporting industries in the Republic of Korea and Thailand Although they pursue two different models of development, they share a number of common things in the policy of developing automobile supporting industries, especially using protectionism The difference lies in the goal of development The RoK aims for an independent automobile industry, while Thailand wants the involvement of foreign partners so Thailand's policies focused on attracting investment The RoK relies on the country's internal strength Based on the analysis of the experience of the two countries, Vietnam can have a base for solutions in the development of automobile supporting industries Automobile supporting industries in Vietnam are still underdeveloped, the criteria of quality, quantity as well as the ability to join the global value chain is weak The cause is small and unattractive market Enteprises in automobile supporting industries lack capital and have not accesses technology The policy system is inconsistent and not in line with practical situation With regards to the analysis of current situation of the domestic 23 automobile industry, as well as the experience of the Republic of Korea and Thailand, the dissertation proposed groups of solutions that are suitable for the current state of globalisation The groups of solutions are based on the factors that affect the development of supporting industries in the theoretical and practical analysis in the Republic of Korea and Thailand The factors are: indentifying viewpoints and goals of development; creating tight links between enterprises; increasing market capacity; developing science and technology; improving the structure of industry; and developing human resources The result of the research can be a source of reference theoretically and practically for researchers who are interested in the development of automobile supporting industries in general, and automobile supporting industries in the Republic of Korea, Thailand and Vietnam in particular The research also aims to improve the policies for the development of automobile supporting industries in Vietnam, and to serve the country's goal of development in the integration context 24 LIST OF PUBLISHED SCIENTIFIC RESEARCHES BY Ph.D CANDIDATE Name of scientific researches Published on Supporting industries for automobile in Asia Pacific Economic Vietnam and the ATIGA 2018 tariff Review, No 491 April reduction roadmap 2017 Manufacturing links in automobile Asia Pacific Economic industry: Experience of the Republic of Review, No 514 April Korea 2018 The 4th industrial revolution and issues Asia Pacific Economic faced by the workforce of the automobile Review, No 536 March industry in Vietnam 2019 25 ... Supervisor: Assoc Prof Dr Đinh Công Tuấn Assoc Prof Dr Phạm Thị Thanh Bình Referee 1: Prof Dr Do Duc Binh Referee 2: Assoc Prof Dr Le Xuan Ba Referee 3: Assoc Prof Dr Do Huong Lan The thesis is protected... industries in Vietnam The dissertation for economics Ph.D "Automobile Supporting Industries in Vietnam" by Trương Nam Trung presented the theoretical base of supporting industries in Vietnam, factors... Vietnam opportunities in penetrating new markets, therefore Vietnam can attract investment in the automobile industry The favourable conditions in regulations on goods origin can help Vietnamese