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JICA and JETRO Reports Target Vietnam’s Growth
By: V V G Staff and standard sources
International Cooperation Agency (JICA), armed with the responsibility of
reporting to Japanese government and large corporations on the appropriateness
of ODA funding, seeks to set its goals while targeting Vietnam’s future.
External Trade Organization (JETRO) is the small sister organization that helps
provide investment advice to Japanese large and small businesses.
is by far Vietnam’s largest Overseas Development Assistance (ODA) donor. Where
the earlier task was for Vietnam to meet the requirements for accessing these
important funds, today’s task is to insure that the donor nations continue
their generous assistance until Foreign Direct Investment (FDI) grows to
sufficient levels. Targeting where
foreign investors will want to put their funds 15 to 20 years out is always a
ODA funds are received at the cost of FDI funds if their targets are the same.
Therefore, early ODA funds have been for infrastructure development, not
a favored target of multi-national foreign investors.
has also been a traditional concept of ODA funding that the projects are open to
bids from companies from all nations. While there are exceptions to most
traditions (it does snow in Vietnam - one day a decade in Sapa), few projects
funded by Japan’s ODA fail to include a healthy Japanese construction
when JICA and JETRO write of their views of Vietnam’s growth opportunities, it
is wise for all investors to pay attention. Other nations are wise to follow the
guide set by JICA and JETRO for their own ODA and FDI funds, and their
projections thus seem to become self-fulfilling prophesies.
recent survey of labor costs in Vietnam increased by 25% in Ho Chi Minh City but
by only 2% in Hanoi.
touted as a place for low-cost labor, Vietnam has sought to shun that reputation
and grow in a higher tech, higher cost sector.
Progress can be seen but there is a long way to go. With over 81 million
people and half of them under 25 years old, this labor market must be prepared
for the long term if Vietnam is to sustain its compositeness.
raising the wages without the level of skills can destroy growth.
Witness the Nam Con Son pipeline where Thai laborers were imported to
work on the 400 km, US$ 1.5 billion project.
loyal, able and willing to learn quickly, and hard working are traits that often
escape a description of the Thai labor force while they are attributes used to
describe the Vietnamese labor force. However,
the need for speed and the absence of time to train with its resultant loss of
productivity, both contributed to not hiring domestic Vietnamese for this
important and very profitable work.
found that the year 2001 HCMC average worker’s salary increased from US$
90/month to US$ 120/ month from the prior year (2000).
The increase for the average Hanoi worker went from US$ 93/month to US$
95/month over the same time period. The minimum wage in both cities is US$
Bangkok the minimum wage is US$ 120/month but the average wage for workers is
US$ 141/month, while in KL the average monthly wage is US$ 198 for the same time
period. The average worker in
Singapore receives over US$ 421 per month.
for the short term Vietnam will remain the low cost producer. In order to
succeed in the mid and long term (10 to 20 years out), as the most competitive
economies are also the best educated with the most modern plants and equipment,
Vietnam must meet the competition that already demands highly educated and well
trained workers and managers.
and Export Projections
findings have a similar, near explosive potential to change Vietnam’s economy
for the better.
found the per capita GDP to be US$ 350, contrasting Vietnam’s own GDP per
capita proclamation of from US$ 400 to $2,000 (pursuant to a Parity
Purchase Power method - see GDP at Economic
projections are for this to rise to US$ 500 in 2005, to U$ 700 by year 2010, and
to US$ 1,300 by year 2020.
contrast, war torn Afghanistan has a reported per capita GDP of US$ 2,000 in
case any should doubt the extent of the continuing challenge ahead of Vietnam to
simply catch up. Vietnam cannot afford to fall further behind.
reports that “Vietnam should be able to maintain compositeness in
labor-intensive industries like garments and shoes manufacturing until 2010,”
during which time “capital intensive industries such as chemical fibers will
have difficulty developing… because Vietnam will lack any competitive
report concludes that “Vietnam will gradually loose its competitiveness in
labor-intensive industries during the period 2014to 2020 … when Vietnam will
need to facilitate the transition of export industries to more knowledge based
is possible if changes are implemented immediately to further encourage FDI that
exports could reach US$ 120 billion. Where
JICA reports that Vietnam’s 2001 exports reached US$ 15.1 billion in year
2001, Vietnam’s own reports claim exports reached US$ 16.74 billion in the
in economic reporting will go a long way to improving the FDI climate in Vietnam
so that such discrepancies in export earnings (over 8%) will not appear.
reported by JICA for the long-term period (2014to 2020) are that “Machinery
manufacturing will not contribute significantly to Vietnam’s exports [after
2014but the present] development of this sector is essential to raising the
competitiveness of Vietnam export industries as it constitutes a supportive
industry” for long term growth.
the long term period (2014to 2020], JICA “expects the electronics sector to
account for the lions share” of Vietnamese exports “with US$ 40 billon to
US$ 50 billion, with textile and garment manufacturing the second largest
contributor at around US$ 15 billion to US$ 20 billion.”
Vietnam previously hoped that the crude oil sector would overtake garments and
textiles to be the top exporter, fluctuations in the world oil prices have kept
that merely a dream.
factors stressed by JICA that would shape Vietnam’s export future are:
China emerging as a major economic power
A shift in Vietnam’s competitiveness factors, and
Vietnam’s liberalization of international trade.
clear emphasis is on IT, where JICA says the emerging Vietnamese Information
Technology industry will create an opportunity for Vietnam to leapfrog more
advanced countries that have a greater concentration on high-growth industries.
leaders have watch as their nation missed other opportunities such as wasting 10
years of associate gas flared off shore, not more quickly seizing the BTA with
the US, and not more quickly liberalizing the FDI sector when Southeast Asia
first floundered in 1997. Many hope
that this window, if it in fact is open, will not close with a repetition of
past lethargy or stubbornness.
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