For Sound Development of the Motorbike Industry
in Vietnam
byThe motorbike Joint Working GroupPDF created with pdfFactory trial version www.pdffactory.com

Publication of this volume was supported by the 21st Century Centre of
Excellence (COE) Program of Japan’s Ministry of Education, Culture,
Sports, Science and Technology (MEXT).
© Vietnam Development Forum, 2007
Printed in Vietnam
All rights reserved. No part of this publication may be reproduced ortranslated into another language in any form or by any means, including
photocopy or website uploading, without permission in writing from theVietnam Development Forum.

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CONTENTS

An Explanatory Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .i
About the Motorbike Joint Working Group . . . . . . . . . . . . . . . . . .1
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
Chapter 1 The Role of Motorcycles in Vietnamese Society . . . . . .7
Chapter 2 Industrial Structure and Production Orientation . . . . . .25
Chapter 3 Demand Forecast . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .39
Chapter 4 Supporting Industries and Industrial Human
Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .49
Chapter 5 Urban Planning and Transport Modes . . . . . . . . . . . . . .67
Chapter 6 Reducing Traffic Accidents . . . . . . . . . . . . . . . . . . . . . .87
Chapter 7 Environmental Protection . . . . . . . . . . . . . . . . . . . . . .103
Chapter 8 Intellectual Property Rights . . . . . . . . . . . . . . . . . . . . .117
Chapter 9 Policy Measures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .131

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This volume contains the policy proposal of the Motorbike Joint Working
Group submitted to the Ministry of Industry of Vietnam in May 2007.
The Motorbike Joint Working Group is a non-government group of
producers, experts and officials which was formed in Spring 2006 to work
jointly for the purpose of drafting the motorbike master plan.
This document is not the same as the motorbike master plan approved by
the Minister of Industry and Trade in August 2007.
The Vietnam Development Forum (VDF) is a joint research project
between the National Graduate Institute for Policy Studies (GRIPS) in
Tokyo and the National Economics University (NEU) in Hanoi. VDF
served as coordinator and secretariat of the Motorbike Joint Working
Group.

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An Explanatory Note
This introductory note explains the background for the policy proposal
contained in this volume.
MOI and VDF
In Vietnam, a large gap has emerged between the old methodof drafting economic policies and the rapidly changing reality undermarket-orientation and global integration. Many of the officials at the
Ministry of Industry (MOI)1 are well aware of this situation, and seekpractical and concrete intellectual inputs to revise their policy formulation
method.
Since its establishment in 2004, the Vietnam Development Forum (VDF),
a policy research project between Vietnam and Japan, has cooperated
closely with MOI to improve industrial policy. Many workshops, symposiums
and publications were sponsored by VDF in cooperation with MOI for
this purpose.
In 2005 and 2006, VDF and MOI organized three joint missions toThailand, Japan and Malaysia to collect key industrial policy documents
and study how these countries conducted industrial policies. From thesemissions we identified two major weaknesses of Vietnam's industrial policy
formulation in comparison with the neighboring countries, namely, (i) thelack of stakeholder involvement, especially the business community; and(ii) the lack of inter-ministerial coordination, in the process of drafting,
implementing and monitoring industrial policy2.
VDF and MOI continue to work together to take the initial step in
improving policy formulation. The formation of the Motorbike Joint
1 In August 2007, the Ministry of Industry was merged with the Ministry of Trade to become the
Ministry of Industry and Trade. In this volume, the term Ministry of Industry, abbreviated MOI,
is used throughout to indicate the Vietnamese ministry responsible for the motorbike industry.
The terms motorbike and motorcycle are also used interchangeably.
2 The missions' findings are published in VDF, Industrial Policy Formulation in Thailand,
Malaysia and Japan: Lessons for Vietnamese Policy Makers, 2006, in Vietnamese and English.
VDF also has a number of related publications on industrial policy, supporting industries,
Japanese development, etc. free of charge in hardcopies or downloadable from www.vdf.org.vn.

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Working Group and its activities to draft the motorbike master plan in2006 and 2007 were part of such effort.
Initiation of joint work
The drafting of industrial strategies and master plans3 is the responsibilityof the Industry Policy Strategy Institute (IPSI) under MOI. Apart from the
Ministry's regular work schedule to draft key industrial master plans one
by one, the drafting of the motorbike master plan was one of the 44
agreed items for action (Item no.41) in the Vietnam-Japan Joint Initiative
Phase 1 (2003-2005) for the purpose of improving business environment
with a view to strengthen Vietnam's competitiveness. The Japan
International Cooperation Agency (JICA) dispatched an industrial expert,
Mr. Taizo Otani, to IPSI in late 2005 to support the drafting process.
Subsequently, the drafting of the motorbike master plan was assigned toan IPSI team headed by Mr. Nguyen Anh Nam (see footnote 3 for the
distinction between strategy and master plan). During 2005 Mr. Nam hadsought VDF's advice in preparing another master plan (supporting
industries). Mr. Nam re-approached VDF in early 2006 for joint work
toward the drafting of the motorbike master plan, and VDF consented on
the conditions that (i) the work must involve stakeholders deeply,
especially major motorbike producers; and (ii) methodology, content andstructure should not be constrained by past practices.
A small informal gathering was arranged to mutually introduce IPSI,
experts, and major motorbike producers. In a separate meeting, VDF
asked the general directors of Honda and Yamaha, the two largest
motorbike assemblers in Vietnam, about their intention to actively
participate in the drafting of the master plan. They both highly welcomed
the opportunity to work with MOI although that would take a large
amount of their time and the end result was still uncertain. Both IPSI and
3 In Vietnam, it is customary to produce a short strategy (chiÕn l­îc) before drafting a moredetailed master plan (quy ho¹ch). Both are submitted to prime minister or responsible minister,with possible revisions before final approval. The master plan is accompanied by a short summary
document which is signed by prime minister or responsible minister for approval. The motorbike
strategy was approved by the MOI Minister in September 2006 and the motorbike master plan
was approved by the MOIT Minister in August 2007.

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the two assemblers requested VDF to be the coordinator and facilitator of
joint drafting. VDF supported the drafting process through networking,drafting, editing, translation and interpretation, logistic support, andadditional funds supplementing the IPSI budget.
In April 2006, preliminary study meetings were organized to work out thescope, framework and time schedule. Participants included IPSI, Honda,
Yamaha, Japanese industrial experts, and VDF. Subsequently, preliminary
study meetings were upgraded to the Joint Working Group (JWG), which
was officially recognized by MOI and the Vietnam-Japan Joint Initiative
Phase 2 (2006-2008) as a joint drafting body of this master plan. The
VDF and MOI signed an agreement for joint work in September 2006.
Purposes and activities
The most important purpose of joint drafting, which deviated from MOI's
existing procedure, was to produce a master plan which can be owned andsupported by both producers and government. For this, joint work basedon mutual trust was considered absolutely necessary from initial design
to drafting and implementation. JWG also aimed to make progressin correcting the two weaknesses of Vietnam's policy formulation
mentioned above, namely, the lack of stakeholder involvement and thelack of inter-ministerial coordination.
The diagram below shows the drafting framework. Within JWG,
officials, assemblers, and experts were brought together under VDF's
coordination. This triangular structure copies Thai industrial policy
formulation under the Thaksin Administration but on a much smallerscale4. Due to limited financial and human resources, as well as the trial
nature of this scheme, the size of JWG had to be kept small. It consisted

4 Under the Thaksin Government (2001-2006), several industrial institutes were set up to activate
policy making among businesses, officials, and experts. For example, the Thai Automotive
Institute, headed by Mr. Vallop Tiasiri, played an instrumental role in tripartite dialogue as wellas in drafting and implementing the automotive master plan. The Thai system differed from ourframework in the following aspects: (i) official status of the institute; (ii) strong directives fromthe prime minister; (iii) much broader participation of stakeholders; (iv) direct private-sector
access to the prime minister; (v) the fact that the master plan did not require official approval tobe effective, etc.

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Ministry of Industry
Master Plan for approval
Motorbike Joint Working GroupIPSI/MOI

Relevant
ministries
andagencies

VDF
Coordinator
Experts

Assemblers

Information& analysis

Opinions

Assemblers

Part
suppliers

Expertsof 10 core members (4 officials, 3 producers, 3 experts) and 8 non-core
members5. JWG enjoyed active participation of members including thegeneral directors of Honda and Yamaha. All JWG work was on a voluntarybasis; no member or supporting staff received remuneration for theirwork.
Even with limited time and budget, involving as many stakeholders(assemblers, suppliers, officials, experts, and consumers) was regarded asvery important. Using the information and networks of MOI and VDF,
JWG communicated drafting information to all motorbike-related assemblers
and suppliers that could be located and contacted. Assemblers other than
top 3 and all of part suppliers, who were not JWG members, were consulted
through factory visits and producer meetings organized in the North andSouth of the country.

5 There were personnel rotations of general directors at both Yamaha and Honda toward the end of
the drafting period. The new general directors replaced the old in JWG membership.

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Transparency was also emphasized. Key drafts, minutes and resentationmaterials were posted in the VDF website (www.vdf.org.vn/jwg.htm)
except in a few cases where sensitive corporate information had to beprotected.
Throughout the drafting process, and especially during the first several
months, a large amount of time was spent on administrative matters.
Since JWG tried to break from the routine, many operational issues had
to be debated and solved regarding official status, budgeting, timeframe, allocation of responsibilities, etc. One issue that consumed a
considerable amount of time was the nature of the document being drafted.
The non-government members of JWG wanted assurance that their output
would become the substantive core of the master plan, even with subsequent
revisions, rather than an attachment or a reference paper6. Another issue
was the deadline; JWG hoped to secure one-and-half years of work to
produce a good draft, as administrative matters were sure to cut into thetime available for discussing substance. However, MOI needed to produce
tangible output within an annual budget cycle. Ultimately, the deadline ofend May 2007 was agreed. This meant that JWG had about one year fordrafting.
In all, JWG had 27 internal meetings. In April and May 2006, JWG mainly
discussed administrative procedures. From May to August 2006, JWG
held 9 brainstorming sessions to share basic information and identify
possible issues. External experts were also mobilized for information andviews. In September 2006, the skeleton draft was completed anddrafting assignment by chapter was decided. Drafters included both JWG
members and outside experts. Additional 14 meetings were held during
drafting and one more meeting was held in October 2007 after theapproval of the master plan.
On two occasions, in November 2006 and March 2007, JWG organized
hearing sessions and related factory visits in the North and South to report
drafting progress to motorbike assemblers and suppliers and receive their
6 JWG did receive such assurance from MOI. However, the JWG final draft did not become thecore document of the approved version as explained below.

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opinions. Also in March 2007, VDF conducted consumer surveys onstreets and in electronic media7, and organized a motorbike symposiumin Hanoi. From January to March 2007, JWG received three groups ofJapanese experts to assist the drafting work8. In addition, the results of
the VDF-MOI joint survey of part suppliers in the North and South inFebruary-March 2006, and ongoing VDF research in supporting industries,
were also used as reference materials9. The JWG completed the final draftin Vietnamese and English and submitted it to MOI at end May 2007.
The JWG final draft
The main features of the JWG final draft can be summarized as follows.
First, as intended, this document deviates significantly from the norm set
by MPI for all master plans and by MOI for industrial master plans inparticular, in both content and structure. The traditional master plan
typically starts with the general review of domestic, regional and global
markets. Vietnam's situations are further analyzed including positive andnegative factors. Then the vision, targets, and plans were presented oftenwith detailed instructions for production, investment, technology andgeographical distribution. A list of policy measures, which are relatively
short and without concrete actions or schedule, follows. At the end,
allocation of responsibilities among different ministries and agencies isshown. Since this format was not suitable for what JWG intended topropose, a new structure was used instead. However, it remains unclear

7 Street interviews were conducted from March 5 to 18, 2007 in Hanoi, HCMC and Can Tho with
1,981 respondants. Separately, online surveys were conducted in the websites of Vnexpress,
Dantri, Thanhnien and VDF from March 5 to 20, 2007 with 7,763 hits (about 4,000 people). Bothasked the same simple questions about the volume of motorbikes, and whether or how theyshould be controlled. The combined direct and online surveys showed that 50.3% prefered control
with a roadmap, while 26.3% did not want any control and 23.4% wanted immediate control.
Among those favoring control, 49.0% recommended administrative measures and 51.0% preferred
economic measures. Although these surveys may not have been strictly scientific, they were
nonetheless conducted to raise consumer awareness and publicize master plan drafting activities.
8 Mr. Kiyoyuki Minato (Japan Automobile Research Institute) for air pollution analysis; Mr. Shosei
Hiroe (Expect Consulting) for supporting industries; and Mr. Taisuke Kawashima (Yamaha), Mr.
Hiroshi Nakagawa (Honda), and Japan Automobile Manufacturers Association (JAMA) officials
for intellectual property rights.
9 These are available in both hard and soft copies from VDF.

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whether the indicated structure is required for official approval or just a
guideline that may or may not be followed.
Second, unlike most other industrial master plans which are mainly
concerned with supply-side issues, this document places equal weights on
supply-side issues and social issues such as people's mobility and comfort,
air pollution, and traffic congestion and accidents. This is a special featureof the Vietnamese motorbike industry which may not be repeated in otherindustries. MOI recognizes that FDI producers dominate and will continue
to dominate the domestic motorbike market. For globally competitive
FDI producers, support of the Vietnamese government in R&D, technology,
finance etc. is hardly necessary. At the same time, in view of the fact thatthe motorbike has become such an important factor in Vietnamese life,
uncontrolled growth of its use which causes serious damage should not
be tolerated. The sound development of Vietnam's motorbike industry
thus requires proper management of social issues related to motorbike
use. This is the reason why social issues are highlighted as an area that
requires effective policy actions.
Third, on the supply side, the government should present clear policy
direction and assist Vietnamese producers to improve competitiveness, inwhich the promotion of supporting industries and industrial humanresources are the key factors. The JWG final draft argues that production,
investment, export, and choice of technology should be left to individualcompanies and market competition. The private sector is the leader andthe government is the follower. The government should not hand down
numerical targets to businesses unilaterally.
Fourth, to elaborate further on numerical targets, we do not think thatnumerical targets are always undesirable. If government and businesses
trust each other and always work closely together, it is natural to havesome indicative targets. For example, in the Thai Automotive Master Plan
2002-2005, output, export and localization targets were spelled out
for automobiles and motorbikes. However, these targets were agreed byproducers' collective initiative and not imposed by the Thai government.
In Vietnam, however, trust and cooperation between government andbusinesses have not reached the level where numerical targets can bevii

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safely set. Under such circumstances, unilateral setting of numerical targets
without sufficient consultation with businesses only causes problems.
That is why JWG did not propose any supply-side numerical targets.
Fifth, the JWG document contains a large amount of analysis on current
situations. In many countries, industrial master plans do not dwell much on
past or current situations and go directly into goals, action plans, andmonitoring criteria. However, that the JWG document is verbose andexplanatory is largely intentional. As we noted above, trust and cooperation
between government and businesses is still weak in Vietnam, and we wanted
to provide as many background materials as possible to foster common
understanding on the status of the industry, a process we consider is stillnecessary in Vietnam. In the future, when government-business relations
improve significantly, Vietnam will be able to draft leaner and more
operational master plans.
Sixth, the JWG document was drafted by Vietnamese and Japanese authors.
This partly reflects the fact that three out of four largest FDI motorbike
assemblers in Vietnam are Japanese, and partly because of the difficulty oforganizing a multinational group for an entirely new process like this.
VDF's access to non-Japanese FDI companies was limited, and it had notime, budget or personnel to include others. However, when the inclusive
process is well established and necessary resources become available, every
master plan should seek participation of all related parties regardless ofnationality.
Finally, while stakeholder involvement and inter-ministerial coordination
were the two main goals for JWG, there was not enough time to activate thelatter because JWG had only one year to complete the draft. By May 2007,
JWG was able to stimulate participation of a fairly large number ofstakeholders, but policy proposals were still general and unready to be
discussed by relevant ministries, agencies and donors. Nevertheless, JWG
still believes that concretizing actions, resources, timetables and monitoring
criteria is crucial for effective implementation. It hopes to continue to assist
in this matter provided that conditions are favorable.
JWG admits that its final document, produced under the constraints of time,budget and existing procedures, is far from perfect. It should however beviii

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recognized that this is the first industrial master plan draft in Vietnam thatwas discussed jointly by government and major producers from the
beginning to the end of the drafting process.
Revision and approval
After the JWG final draft was submitted to MOI, it was reviewed by the
MOI's master plan review committee. Internal views as well as the viewsof Vietnamese producers were heard. JWG was not informed of the plan
for revision. While the internal review of the motorbike master plan wasin progress, the government proposed to merge MOI and MOT and
create the Ministry of Industry and Trade (MOIT), a proposal which wasapproved by the National Assembly in August 2007. There were alsochanges in ministers.
On August 29, 2007, news media reported the approval of the motorbike
master plan by MOIT Minister Vu Huy Hoang. VDF obtained the text of
the approved master plan, studied the content, and convened JWG todiscuss it. Unfortunately, the approved master plan differed substantiallyfrom the JWG final draft10. While using a large amount of arguments andproposals of JWG, which amounted to 80% of the JWG final draft
according to IPSI, the approved version was a newly drafted document
rather than a revised JWG final draft.
Major differences included the following: (i) chapter structure wasaltered and reverted to something close to the traditional format; (ii)assertion that government should not impose numerical targets was
rejected and such targets, including export and local supply targets, wereinserted; (iii) the weight of supply-side issues was increased relative tosocial issues; and (iv) policy goals and supporting measures for enhancing
local enterprises were newly introduced.
Non-government members of JWG regretted that such significant
revisions were made and officially approved without consulting JWG in
advance.

10 The approved motorbike master plan is available from IPSI or VDF. An unofficial English
translation will also be made available from VDF shortly.

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While the JWG final draft did not become the core of the motorbike masterplan this time, JWG wishes to report its drafting process, including
achievements and limitations, and publish it for the record. Improvementof policy formulation is a long-term process. Members of JWG sincerely
hope that Vietnam will overcome its policy problems and draft manyeffective industrial master plans in the future.

Hanoi, October 2007
The Motorbike Joint Working Groupx

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The master plan for the development of
the motorcycle industry

Final Draft
Hanoi, May 2007

The motorbike Joint working group

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ABOUT THE MOTORBIKE JOINT WORKING GROUP

The Motorbike Joint Working Group was established in the spring of2006 at the request of the Vietnam-Japan Joint Initiative Phase 2, a bilateraleffort to improve Vietnam's business conditions. The members consisted ofpolicy makers, motorcycle businesses, and industrial experts. The
Vietnam Development Forum (VDF) acted as a coordinator. In
September 2006, the Ministry of Industry (MOI) and VDF signed anagreement to cooperate in drafting this master plan. The Industrial Policy
Strategy Institute (IPSI) of MOI was the official drafter of this masterplan working closely with the Motorbike Joint Working Group.
The Motorbike Joint Working Group aimed to introduce new methodology
and content by involving related businesses in the entire drafting process
and interacting actively with major stakeholders, including consumers,
assemblers and parts makers, related ministries and other official bodies,and experts and researchers. It worked for about one year, holding 27
internal meetings, organizing four opinion hearing tours, surveys andsymposiums, and receiving three groups of foreign experts. The final
draft was submitted to MOI in May 2007.
The members of the Motorbike Joint Working Group were as follows.
Asterisks indicate core members. Some served only part of the time due
to personnel rotation within their organizations.
Nguyen Anh Nam (IPSI/MOI) *Ngo Van Tru (MOI) *Pham Gia Thuc (IPSI/MOI) *Duong Hong Quan (IPSI/MOI) *Hiroaki Funami (Honda Vietnam) *Koji Onishi (Honda Vietnam) *Takahiko Takeda (Yamaha Motor Vietnam) *Masaki Asano (Yamaha Motor Vietnam) *1

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Yoshihiko Kakei (Vietnam Suzuki) *Kyoshiro Ichikawa (JICA expert) *Shizuo Iwata (ALMEC) *Kenichi Ohno (VDF/GRIPS) *Atsushi Kikuchi (Honda Vietnam)
Kazushige Sasaki (Yamaha Motor Vietnam)
Tetsuji Masujima (ALMEC)
Tsuneo Takahashi (JICA expert)
Yoshito Nakajima (Japanese Embassy)
Mai The Cuong (VDF)
Ngo Duc Anh (VDF)
Le Ha Thanh (VDF)2

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INTRODUCTION

Methodology and content
As the process of market orientation and international integration deepens
in Vietnam, industrial strategy formulation must adapt to the changes which
are brought about by this process. Market forces and global competition
increasingly determine the performance of each industry as well as thewinners and losers among enterprises. In many industries, private enterprises,
including foreign private enterprises, are becoming major players insteadof state-owned enterprises. Multinational corporations decide products,
output, production sites, procurement, investment, export and import asintegral parts of their global business strategies. This means that a large
portion of industrial activity in Vietnam is now taking place outside thedirect control of the government. These trends are also visible in the
motorcycle industry. This master plan tries to respond to these changes byadopting a new drafting methodology and a new content structure.
With respect to drafting methodology, stakeholder involvement andinter-ministerial coordination have been strengthened. For any industrial
master plan, the most important stakeholders are business enterprises thatmust carry out the plan. In the second quarter of 2006, the Joint Working
Group (JWG) was formed to draft the motorcycle master plan under theofficial recognition of and in close cooperation with the Ministry ofIndustry. Its members included policy makers, businesses and experts.
The Vietnam Development Forum, a joint research project between the
National Economics University in Hanoi and the National Graduate
Institute for Policy Studies in Tokyo, acted as a coordinator. JWG conducteda large number of internal discussions, and received information andviews from motorcycle-related enterprises and researchers as broadly as
possible. In preparing each chapter and determining policy measures,consultations with related ministries and agencies were held. Thesemethodological innovations were pursued within a relatively tight schedule
under which JWG worked. Except for a few confidential cases, key

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documents and meeting minutes of JWG were uploaded in a website for
openness and transparency.
With respect to content structure, demand-side issues are given
approximately the same weight as supply-side issues. User concerns suchas traffic safety, congestion and air pollution are analyzed fully in separate
chapters, in addition to more standard chapters dealing with production,
demand forecasts and industrial capability. The future of motorcycles is
considered to be not only an industrial issue but also a social issue. Thisis necessitated by the fact that motorcycles take up a very unique positionin the Vietnamese society, whose popularity and density in use, especiallyin urban areas, have an enormous bearing on the quality of life of all people,
including motorcycle riders and non-riders. For this reason, the present
master plan covers a much wider ground than the existing guideline formaster plan content set forth by the Ministry of Planning and Investment
and the Ministry of Industry.
The role of government
In an increasingly integrated market with a large presence of foreign
producers, such as the motorcycle market in Vietnam, the basic role of thegovernment should be to support the healthy growth of the industry byunderstanding and responding to its needs instead of dictating it. Private
business enterprises are the primary decision-makers and executors ofindustrial dynamism, but the government also has an important role ofproviding supportive visions, rules and measures to ensure that the industrial
playground is predictable, fair, and in line with the general interest of thenation.
More specifically, three roles of the government are identified as crucial
for the healthy growth of the motorcycle industry, and chapters arearranged accordingly to discuss them. First, the government should
clarify policy orientation and make indicative projections so that enterprises
can use them as a basis for their business decisions (chapters 1-3).
Second, the government should set and enforce realistic and meaningful
standards for quality, safety, environment and intellectual property rights(chapters 5-9). Third, the government should help to upgrade Vietnam's

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industrial capability with particular attention on supporting industries andindustrial human resources (chapters 4 and 9).
This master plan contains projections of motorcycle use, sales andproduction in chapters 2 and 3. These are the results of intensive discussion
among businesses, policy makers and experts. They are meant to be
indicative and guiding, and subject to modification as circumstanceschange, rather than rigid targets that are set officially and must be fulfilled
under any circumstances.
About policy measures
Chapters 4, 5, 6, 7 and 8 contain general policy directions. Some of them
are developed into proposals of concrete policy measures in chapter 9.
Other policy directions are desirable but not developed into concretemeasures. This selectivity is partly due to the limited time and humanresources available to JWG, and partly for the purpose of increasing thepossibility of properly implementing proposed measures in the current
policy environment of Vietnam.

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Chapter 1
The Role of Motorcycles inVietnamese Society

1-1. Overview
When society develops, demand for personal and commercial transportalso rises. The means of transport must respond to increasing demand in
all aspects of quantity, quality, and modal diversification. Each transportmeans has its merits and demerits. The problem is to select and combineeach transport means in a way that maximizes merits and overcome
demerits, under the specific natural, economic, and social conditions of
our country in this particular development stage. We must satisfy people's
travel need by providing convenient transport modes while at the sametime ensuring traffic safety, clean environment, and other social demands.
During the period 1995-2005, the Vietnamese economy continued to operate
under the market mechanism with socialist orientation, achieving relatively
high growth of 8% or higher in consecutive years. As a result, the speedof urbanization as well as demand for trips and commercial transport also
increased. Since public transport systems are currently underdeveloped,
people tend to possess personal means of transport such as motorcycles
and automobiles to satisfy their travel demand.
According to the data of the National Traffic Safety Committee and theTraffic Police Road and Railroad Department (Fig. 1-1), motorcycles andautomobiles have long been the two principal means of transport in
Vietnam in terms of absolute volume as well as contribution to cargotransport in the whole country, especially urban areas and economicallydeveloped areas. Between them, motorcycles are by far the dominantmeans of transport.

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The Role of Motorcycles in Vietnamese Society

Fig. 1-1 Motorcycles and Automobiles in Circulation
Million20
18

Motorcycles

16

Automobiles

14
12
10
8
6
4
2
0

1900

1991

1992

1993

1994

1995 1996

1997

1998

1999

2000 2001

2002

Motorcycles

2.77

2.81

2.85

2.90

3.28

3.58

4.21

4.83

5.20

5.60

6.48

8.36

10.27 11.38 13.38 16.09

Automobiles

0.25

0.30

0.29

0.30

0.32

0.34

0.39

0.42

0.44

0.47

0.49

0.56

0.61

2003

0.68

2004

0.77

2005

0.89

Source: National Traffic Safety Committee. Auto data in 1990-1994 are obtained fromVRA.

At the end of 2005, Vietnam had 16.09 million registered motorcycles
and 0.89 million registered automobiles in use. Compared with the year
1990, this is an increase of 5.8 times for motorcycles and 3.6 times forautomobiles. The use of both transport means rose very rapidly, especiallymotorcycles.
The studies of Hanoi and HCMC urban planning by the Ministry ofTransport and JICA confirm that motorcycles are the dominant transportmode of residents in large cities1. In 2005, motorcycles served 62.7%(Hanoi) and 77.9% (HCMC) of travel needs, while the shares of passenger
cars and taxis were only 3.5% (Hanoi) and 5.9% (HCMC), and the sharesof buses were 8.4% (Hanoi) and 5.9% (HCMC). Clearly, the motorcycleis the preferred choice of urban population, providing personal mobility
in relatively short distances and frequent trips, under the condition thatpublic transport is underdeveloped, cars are beyond the reach of the general

1 The Study on the Urban Transport Master Plan and Feasibility Study in Ho Chi Minh
Metropolitan Area (HOUTRANS), 2004, and the Hanoi Integrated Development andEnvironmental Programme (HAIDEP), 2007. Both plans were supported by JICA technical assistance.

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The Role of Motorcycles in Vietnamese Society

public at the current income level, and motorcycles often travel fasterthan automobiles. Many people also use motorcycles to make living.
Although the "Master Plan for Transport Infrastructure in Hanoi and
Ho Chi Minh up to the Year 2020" prioritizes investment in transport
infrastructure such as roads, railroads, subways, and public buses, it also
foresees that the use of motorcycles in Hanoi and HCMC will remain
relatively high in the future, namely 30% in Hanoi and 35% in HCMC
in 2020.
At the same time, living conditions in rural areas are expected to improveby 2020, and rural road systems are also likely to be upgraded. Under
these circumstances, rural demand for motorcycle use will surely rise,especially in light of the fact that current density of motorcycle use inrural areas is still very low (about 6 person/unit).
At present, the geographical distribution of motorcycle use is not uniform
within Vietnam. In absolute volume, the registration and circulation of
motorcycles are concentrated naturally in cities and provinces with alarge population or a dynamic economy, or both. They include HCMC,
Hanoi, Dong Nai, Hai Phong, An Giang, Thanh Hoa, and Nghe An. In
terms of density of use, Hanoi and HCMC again lead the nation with one
motorcycle for every two persons, followed by Da Nang, Binh Duong,
Dong Nai, Quang Tri, Ba Ria-Vung Tau, and Khanh Hoa, where there is
at least one motorcycle for every four persons. All other cities andprovinces have fewer motorcycles per person. Incidentally, the density of
automobile use is positively correlated with the density of motorcycle use(Fig. 1-2).
The above considerations lead us to the conclusion that motorcycles willcontinue to contribute significantly to road transportation in Vietnam, atleast up to the year 2020. Thus, the development of motorcycles is anobjective requirement for Vietnam, and we should continue to study how
motorcycles can co-exist harmoniously with other transport means andhow they can better serve consumers' needs.

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The Role of Motorcycles in Vietnamese Society

Fig. 1-2 Motorcycle and Automobile Density by Province, 2005
Automobiles per 1000 persons
60
Hanoi
50
HCMC
40

30
B. Duong

Danang20
BR-VT
D. NaiK. Hoa10

Q. Tri

0
0

100

200

300

400

500

600

Motorcycles per 1000 persons

Source: National Traffic Safety Committee. See appendix to chapter 1 for original data.

1-2. Development of the motorcycle industry from1990 to 2005
Before 1995, Vietnam had a relatively small motorcycle stock in use, at
about 2-3 million units, and it increased slowly by tens of thousands ofunits per year. All of the motorcycles were imported.
During the period 1995-1999, FDI motorcycle assemblers invested in
Vietnam and began production, at first using imported parts but gradually
increasing parts localization. Consumers' demand for motorcycles
increased annually. However, production volume remained relatively low
during this period, and prices were high in comparison with the income
level of most people.

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The Role of Motorcycles in Vietnamese Society

Around 2000, local motorcycle assemblers suddenly increased in number,producing motorcycles with parts originating mostly in China, with average
to moderate quality and at reasonable prices relative to people's income.
From 2000 to 2003, this type of motorcycles occupied as much as 60-70%
of the domestic market. In response, FDI enterprises adjusted businessstrategies and changed models to regain market share. Some FDI producers
introduced popular, low-priced models while other FDI producers targeted
up-markets with fashionable style and new colors. At the same time, people's
living conditions continued to improve. As a result, motorcycles in use
increased rapidly by about 2 million units per year, except in 2003 when
Hanoi and HCMC applied policies to limit the number of motorcycles.
At the end of this process, over-capacity and severe competition exerted
significant downward pressure on the prices of "Chinese" motorcycles produced
by Vietnamese assemblers. Many consumers also turned away from theirproducts which failed to satisfy their quality demand. This prompted
them to revise business strategies for survival, which included enhancing
in-house production, becoming suppliers of FDI assemblers, building
supplier networks, turning to sales and marketing, or exiting from theindustry. Direct parts import from China fell and domestic production of"Chinese" parts increased.
From around 2003 to present, motorcycle demand continued to expand
strongly, with market shares shifting decisively back to FDI assemblers.
Apart from robust income growth, motorcycle demand has been fueledby the removal of demand-restrictive measures such as parts importquotas (2002-2005) and registration control in large cities (2003-2005).
By 2006, Vietnam's motorcycle market reached nearly 2 million units per
year, with an expectation of further expansion in the future. This domestic
demand size is sufficient for major assemblers to aggressively introduce
new models and for parts suppliers to willingly invest in Vietnam.

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The Role of Motorcycles in Vietnamese Society

1-3. International comparison and Vietnam's uniquenessAsia dominates the global market of motorcycles, with roughly 95% of
total production originating in several Asian countries. Asianmarkets are also dynamically growing in sharp contrast to saturated markets
in developed countries. China, India and Indonesia are the top three
producers, with annual production volumes of 17.2, 12.7 and 5.1 million
units each. Japan, Thailand and Taiwan also have significant production
size, with each producing 1.8, 1.5, and 1.4 million units in 20052. Withan expected production volume of over 2 million units in 2007, Vietnam
has now joined the group of largest motorcycle producers in the world.

Fig. 1-3 Motorcycle Holdings in Asia, 2000
Registered motorcycles per 1000 persons

600
500
400
300
2005
200
2000

Pakistan

Philippines

China

Indonesia

Vietnam

Mauritius

Cambodia

ThailandTaiwan0

Malaysia

100

Source: Fukuda, Nakamura, and Takeuchi (2004)-see footnote 4.

There are three reasons for the popularity of motorcycles in Asian developing
countries. First, the region contains large tropical and subtropical areas
with high temperature and frequent showers, a climate particularly suitable

2 Honda, World Motorcycle Facts and Figures, 2006.

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The Role of Motorcycles in Vietnamese Society

for motorcycle use. Second, rapid income growth, and associatedindustrialization and urbanization, are boosting individual trip needs.
Third, despite that, public transportation generally remains underdeveloped.
For example, Bangkok, Jakarta, Manila, Hanoi and HCMC have no or
few urban rail lines in comparison with more advanced cities such as
Tokyo, London, Paris and New York which have extensive networks ofcommuter rails and buses, subways, sky trains and other urban mass rapidtransit (UMRT) systems.
But even by Asian standards, Vietnam's use of motorcycles is highly
intense and unique. The motorcycle is a "popular vehicle" in Vietnam
across all ages, genders and occupations. It is used not only for deliveringcommercial goods but for virtually all personal purposes--commuting,shopping, dating, visiting friends, shuttling children to and from school,and even for sheer fun3. Motorcycle use is particularly heavy in urban
areas, where it is by far the preferred means of transport for all residents.
Both Hanoi and HCMC have flat terrain, compact urban areas relative topopulation size, and deep and narrow lanes crisscrossing the built-up
areas. These characteristics are particularly amiable to motorcycle use.
The contrast between severe shortages of automobile parking and welldeveloped motorcycle parking at present also tends to sustain the popularityof motorcycles. Thus, the motorcycle is the key determinant of the mobility,
comfort, safety, and health of the Vietnamese people, with great influenceon their life style and life quality.
Additionally, the motorcycle market in Vietnam has the following features
which are not seen in most other developing countries.
First, motorcycle use in Vietnam is disproportionately high relative to its
automobile use. There are only 12 countries in the world where the number

3 The survey by Prof. Atsushi Fukuda (Nihon Univ.) conducted on 130 families in Hanoi in March
2003 shows that 97% of families possess at least one motorcycle, and each motorcycle is often
used by more than one person. Top reasons for the primary user are commuting (54%), going toschool (14%), relaxing (10%), going to hospital (7%), shopping (4%), and dating (3%). Top
reasons for other users are relaxing (28%), commuting (18%), going to school (10%), shopping(15%), additional study (8%), and dating (7%). It can be said that most people use motorcycles
for multiple purposes, in addition to the basic use of commuting or going to school.

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The Role of Motorcycles in Vietnamese Societyof registered motorcycles surpasses that of registered automobiles4.
Among them, Vietnam is by far the leading country, with the ratio ofmotorcycle stock to automobile stock of 13.3 in 2000 and 18.1 in 2005.
According to the 2000 data, the next country in this ranking was India(5.6), followed by Thailand (5.4), Indonesia (4.6), Cambodia (4.2), China(3.1), Pakistan (3.0), Taiwan (2.4), Bangladesh (2.4), Philippines (1.6),
Mauritius (1.3), and Malaysia (1.3).
Second, as noted above, there is a significant urban-rural gap inmotorcycle use. Motorcycles in Vietnam are concentrated in two largest
cities and their vicinities. In rural and remote areas where income levels
are still low, fewer motorcycles are owned per person (Fig. 1-2). Vietnam's
urban markets are near saturation in terms of number of motorcycles, but
rural markets are likely to grow strongly and the urban-rural gap is
expected to narrow in the medium to long run. Although Taiwan,
Malaysia and Thailand had higher motorcycle-per-person ratios than
Vietnam in 2000 (Fig. 1-3), cars are far more visible than motorcycles in
Taipei, Kuala Lumpur or Bangkok. This is because motorcycles in thesecountries are more uniformly spread geographically5. National averagecomparison hides the unevenness of motorcycle distribution within Vietnam.
Third, the Vietnamese motorcycle market is very dynamic. Not only thesale has increased, but what consumers expect from motorcycles is alsochanging rapidly. Until the late 1990s, the motorcycle was considered ameans of saving that retained good value over time as well as a practical

4 Compiled from Atsushi Fukuda, Fumihiko Nakamura, and Kenzo Takeuchi, "Current Situation ofMotorcycle in Metropolis of Southeast Asia and its Issues," Kokusai Kotsu Anzen Gakkaishi(Journal of International Association of Traffic and Safety Sciences), vol.29, no.3, Dec. 2004 (inJapanese). However, numbers in the text should be treated with care since international comparison
data are somewhat inconsistent.
5 In Thailand, the urban-rural gap is not very large. In 2003, there were 2.47 persons for each
motorcycle in Bangkok, and 3.61 persons for each motorcycle in all other areas, with the national
average of 3.46 persons per motorcycle (IDE-JETRO, Motorbike Industries in Asia, 2005, inJapanese). In Vietnam, the corresponding figure in 2005 for Hanoi and HCMC was 2.16 persons
for each motorcycle, and 6.14 persons for each motorcycle in the rest of the country, with thenational average of 5.11 persons per motorcycle (Appendix to Chapter 1). Hanoi and HCMC havehigher motorcycle density than Bangkok, but rural Vietnam has lower motorcycle density thanrural Thailand.

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The Role of Motorcycles in Vietnamese Societymeans of transport. Around 2000, with a large inflow of cheap but low-quality"Chinese" products, the motorcycle suddenly became a commodity. After
2003, the popularity of "Chinese" motorcycles declined as demand shifted
toward high-quality, stylish motorcycles and scooters, especially in urban
areas. These shifts are brought about by an interaction of changing consumer
tastes, international influences, and manufacturers' business strategies.
Now, with a domestic market of over 2 million units per year, motorcycle
assemblers will have many business options including the broadening ofmarket segments with new models and reorganizing domestic and global
suppliers.

1-4. Transport modal balanceCars, motorcycles and public transportation systems are three pillars ofroad transportation in any developing country. Each of these transportmodes has merits and demerits. It is people who make the final modal
choice based on their income, travel need, climate and geography, and theexisting state of transport infrastructure. However, policy can also makea significant difference by guiding people's choice. The crucial
policy question is how to combine the three principal modes to achieve
maximum transport benefits while reducing social and economic costs.
This will require encouragement of certain modes and restraint on otherswith effective policy instruments under a consistent roadmap.
The motorcycle excels in personal flexibility, allowing the rider to makedoor-to-door trips at any time without waiting, walking or transfer. It is also
efficient in space use, occupying about one-fourth of space on road andin parking in comparison with a car when motorcycles are
dominant, and about one-half of space of a car in mixed traffic. Its small
size and agility permit faster urban travel than a car, which reduces
congestion and overall pollution. However, if motorcycle use andmaintenance are unregulated, there is a risk of excessive traffic accidents
and exhaust emission.

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The Role of Motorcycles in Vietnamese Society

The strength of the automobile is comfort and privacy. In closed
air-conditioned space with soft seats, travelers can enjoy scenery, audio
or conversation, or just take a rest. For this reason, private car use
becomes increasingly popular as income rises. However, automobiles are
generally not very efficient in space and energy use, especially in single
occupancy. If urban road capacity is insufficient, peak-hour travel time
becomes very long and highly unpredictable in comparison with othermodes.
The urban mass rapid transit (UMRT) system, which combines commuter
rail networks with rapid bus transit, is highly desirable in modern cities withlarge travel demand. If it is operated competently and used by mostpeople, it can significantly reduce road congestion, traffic accidents andenvironmental damage. Cities such as Tokyo, Seoul, London and Paris all
have extensive UMRT systems that crisscross the entire urban and suburban
areas. While public transport commuters in these cities sacrifice personal
flexibility, comfort and privacy, they usually feel better off because air iscleaner, travel time is shorter and more predictable, and there is no needto compete with other drivers.
Tab. 1-1 Comparison of Three Principal Modes in Vietnam's Urban Travel Setting

Motorcycles

Automobile(personal use)

Urban Mass Rapid
Transit (UMRT)

Personal flexibility

HighHigh to moderate

Low

Comfort and privacy

Moderate

High

Low

Space efficiency

High to moderateLow(moderate if mixed traffic) (depends on occupancy)

High

Energy efficiency

Low to moderateLow(depends on occupancy) (depends on occupancy)

High

Moderate

Low

High

Traffic safetyLow(if unregulated)

Moderate(if unregulated)High

Environment
friendlinessLow(if unregulated)Low(if unregulated)

High

Predictability ofpeak-hour travel time

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The Role of Motorcycles in Vietnamese SocietyMotorization, or the expansion of personal car use, is inevitable in any
rapidly growing developing country, but its speed is controllable by policy.
In more developed countries, personal means of transport shifted frommotorcycles to automobiles as income rose. Vietnam's motorization is at
a very early stage, and it is expected to continue for a considerable time,
provided that robust GDP growth is sustained. However, a rapid increaseof automobiles from a small base even now is already causing traffic conflicts
with motorcycles and bicycles in urban areas. Vietnam's cities are not yet
equipped with infrastructure required for a large number of automobiles,
such as expressways, bypass and ring roads, multi-lane trunk roads,
overpasses, bridges, tunnels, and parking facilities. Building them insufficient numbers will take time and large financial resources.
The need for public transport systems, such as commuter rails, subways,
sky trains, and rapid bus transit, is keenly recognized in Hanoi and
HCMC. Many projects are planned, and some are already underconstruction. In the long run, public transport should become the mainmeans of urban and suburban mobility in Hanoi and HCMC as in thelarge cities of advanced countries. This will greatly reduce road congestion
as car and motorcycle use is reduced. However, completing theseinfrastructure projects will also take a large amount of time and money.
While very desirable, an efficient and comprehensive UMRT systemcannot be realized in the short run, and can only be partly realized in themedium run, in Vietnam.
Fig. 1-4 illustrates two hypothetical modal combinations in a rapidly
developing country. In Scenario A, motorcycle use is discouraged bypolicy while motorization proceeds rapidly without restraint. Building oftransport infrastructure, including UMRT, is assumed to be slow. In this
scenario, severe urban congestion is inevitable, and commuters are forced
to spend a long time in gridlocks in the absence of alternative transportmeans. With severe congestion, fuel consumption rises and air quality
deteriorates. This is a situation observed in many mega cities around theworld, including Bangkok in the early 1990s where one had to allow atleast two hours to get from one part of the city to another. In contrast,
Scenario B suggests one possible way to avoid such a disastrous situation,

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The Role of Motorcycles in Vietnamese Society

by allowing motorcycles to be phased out only gradually and building
public transport sufficiently and on time. As a result, motorization
proceeds modestly, and traffic time loss and environmental damage canbe minimized.
Fig. 1-4 Rapid Motorization vs. Controlled Motorization in Urban Areas
Scenario A

Scenario B- Rapid motorization- Controlled motorization- Strong restriction on motorcycles- Co-existence of multiple transport modes- Slow construction of transport infrastructure- On-time construction of transport infrastructure

Travel demand

Travel demand

Automobile

Automobile
Motorcycle
Motorcycle

Public transport

Public transport
Time

Time

The view that motorcycle use should be curbed immediately byadministrative measures to reduce pollution, congestion and accidents
is short-sighted. Suppressing travel demand by depriving people ofmotorcycles, without giving them alternative transport modes, can beconsidered a policy failure. Traffic demand is predictable, and there
should be a long-term strategy to respond to it well in advance. Both
Hanoi and HCMC have drafted urban master plans6 which aim to provide
public transport services for about 30-50% of total travel demand by
2020, as compared with less than 10% today. These goals are highly
consistent with the policy direction of this master plan. Motorcycles
should be the principal mode of urban transport in Hanoi and HCMC until
new public transport systems are introduced, step-by-step, to replace

6 See footnote 1.

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The Role of Motorcycles in Vietnamese Society

them. Moreover, this transport strategy must be accompanied by anotherset of policies to deal effectively with the problems associated with
continued motorcycle use, as explained below.

1-5. Policy direction
Policy that affects the use and production of motorcycles should bedesigned from a broad perspective, which includes the life style and life
quality of the people, urban and traffic planning, and industrial
promotion. Motorcycle policy should be consistent with, and constitutean integral part of, an overall transportation master plan as well as an
overall industrial master plan. For this purpose, all related ministries andorganizations should have close and continuous consultation to coordinate
their policies.
Motorcycle policy should pursue the following four objectives.
(i) People's mobility and convenience--in the circumstance of risingincome and increasing travel demand, people's mobility andconvenience associated with transportation should be ensured. At
present, the residents of Hanoi and HCMC enjoy relatively shorter
commuting and more frequent trips than the residents of otherlarge cities in the region (chapter 5). This situation should bemaintained while modal options for non-motorcycle transportshould be expanded.
(ii) Quality of life--traffic congestion, traffic accidents and air pollution
associated with transportation should be reduced for the safety,
health and comfort of the people. Even though travel demand
increases, these situations should be improved, not just be prevented
from worsening, in comparison with the current situation.
(iii) Reasonable cost and timing of building transport infrastructure-Vietnam must build many subways, trains, expressways, roads,
bridges, tunnels, and so on. However, the total cost of building
them is enormous, and time required for planning, financing,

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The Role of Motorcycles in Vietnamese Society

resident relocation and construction is substantial. Motorcycle
use should partly cover the increasing traffic need while new transport
infrastructure is being built at a reasonable and realistic speed.
(iv) Leveling-up of industrial capability--Vietnam's motorcycle industry
has reached a domestic demand size which is sufficiently large
for aiming at production efficiency and supporting industry
development. With proper policy support, the motorcycle industry
should strengthen its role as a core industry for industrial
agglomeration and technology improvement, with spillover effects
to other industries. Capability of parts production should be raisedwith respect to quality, cost and delivery. Industrial property
rights should be protected and illegal copies should be eliminated.
These objectives can be restated as follows: motorcycles should continue
to be used to ensure people's mobility and reducing infrastructure cost per
year, provided that sound and sustainable solutions are found andeffectively implemented to cope with traffic congestion, traffic accidents,
environment, and industrial property rights. At the same time, the motorcycle
industry should become the principal industry by which supporting
industry base is built and indigenous industrial capability is promoted.
It is noteworthy that, in the case of motorcycles, the Vietnamese government
does not have to worry about the competitiveness of major producers,
since motorcycle production in Vietnam is dominated by FDI assemblers
with high technology and global reputation. The government has to beengaged in close dialogue with them to compile and revise policies, but there
is no need to dictate their production, investment, marketing, export or
R&D activities. These are decided by markets as well as business strategies
of individual companies. Instead, supply-side policies should be mainly
directed to the promotion of supporting industries and industrial humanresources, which improves local capability and indirectly helps FDI
assemblers, and additionally to reorganize or streamline Vietnamese
assemblers. Apart from supply-side policies, people-oriented policies toimprove motorcycle use, as discussed above, are extremely important in
the case of motorcycles, since motorcycles have great impact on the general
welfare of Vietnamese people.

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The Role of Motorcycles in Vietnamese SocietyMotorcycle industry promotion and addressing the problems associatedwith motorcycle use are not contradictory. In fact, from the long-term
perspective, addressing these problems adequately is the pre-condition
for the healthy growth of Vietnam's motorcycle industry. Industrial
development and comfortable life have been achieved simultaneously inmany advanced countries. Motorcycle manufacturers should not pursue,
and policy makers should not allow, unregulated expansion of motorcycle
sales at the severe social cost of increasing deaths, injuries, and healthproblems of the general public. The industry can develop sustainably andcompetitively only if producers accept corporate social responsibility
associated with their products and if the government adopts policies tocope with them effectively.

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The Role of Motorcycles in Vietnamese Society

Appendix to Chapter 1
Registered Motorcycles and Automobiles by Province, 2005
Population
x1000

Number ofMotorcycles

Ha Noi *

3,145

1,565,641

163,796

498

52.1

HCMC *

5,891

2,619,525

275,160

445

46.7

Da Nang *777

315,041

17,311405

22.3

Binh Duong

915

313,002

20,775342

22.7

Dong Nai

2,193

640,143

29,913292

13.6

Quang Tri

622

178,920

5,605

288

9.0

Ba Ria-Vung Tau

913

253,990

13,640278

14.9Khanh Hoa

1,123

301,272

12,900268

11.5

Can Tho *1,135

268,001

9,722

236

8.6

Tay Ninh

1,039

242,062

7,593

233

7.3

Hai Phong *1,793

409,229

5,352

228

3.0

Lam Dong

1,161

252,009

8,996

217

7.7

Tien Giang

1,701

357,664

9,026

210

5.3

City or Province

Phu Yen

Number of Motorcycles/ Automobiles/
Automobiles 1000 persons 1000 persons

861

180,187

3,892

209

4.5

Thai Nguyen

1,109

222,809

9,352

201

8.4

Thua Thien-Hue

1,136

222,797

7,972

196

7.0

Dak Lak

1,711

329,385

10,994193

6.4

Binh Thuan

1,151

220,155

5,587

191

4.9

Ninh Thuan

562

105,737

2,922

188

5.2

Quang Ngai

1,269

237,587

6,180

187

4.9

Binh Dinh

1,557

283,446

12,417182

8.0

An Giang

2,194

393,462

5,541

179

2.5

Gia Lai

1,115

198,743

12,612

178

11.3

Long An

1,413

243,945

5,638

173

4.0

Quang Ninh

1,079

180,049

16,991

167

15.7

Quang Nam

1,463

240,007

8,396

164

5.7

Dong Thap

1,655

268,252

4,560

162

2.8

Vinh Long

1,055

170,386

4,364

161

4.1

Ben Tre1,352

217,577

2,166

161

1.6

Hai Duong

1,711

271,244

16,352

158

9.6

Kon Tum

375

56,790

2,299

151

6.1

Binh Phuoc

796

118,980

5,181

149

6.5

Phu Tho

1,328

196,855

11,644

148

8.8

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Bac Ninh

998

147,935

4,883

148

4.9

Vinh Phuc

1,169

166,740

7,679

143

6.6

Tuyen Quang

727

103,232

3,252

142

4.5

Tra Vinh

1,028

145,205

2,807

141

2.7

Nam Dinh

1,961

270,991

6,508

138

3.3

Bac Giang

1,582

217,321

4,974

137

3.1

Ninh Binh

919

125,595

5,316

137

5.8

Bac Lieu

798

104,795

2,866

131

3.6

Ha Tay2,526

325,896

15,786129

6.3

Yen Bai

732

94,275

2,796

129

3.8

Lang Son

739

94,971

4,678

128

6.3

Dak Nong

398

50,435

4,544

127

11.4

Quang Binh

842

106,472

3,807

126

4.5

Lao Cai

576

72,644

3,617

126

6.3

Hung Yen

1,134

140,647

4,165

124

3.7

Thai Binh

1,861

230,223

4,443

124

2.4

Bac Kan

299

36,611

1,692

122

5.7

Kien Giang

1,655

199,828

5,660

121

3.4

Nghe An

3,042

360,325

13,596118

4.5

Cao Bang

515

58,652

3,864

114

7.5

Soc Trang

1,272

142,964

3,436

112

2.7

Ha Tinh

1,301

138,697

7,608

107

5.8

Son La989

103,385

4,532

105

4.6

Hoa Binh

813

83,231

3,701

102

4.6

Thanh Hoa

3,677

367,736

12,418100

3.4

Dien Bien

450

44,875

2,421

100

5.4

Ha Nam823

74,007

5,265

90

6.4

Ca Mau1,219

84,498

2,671

69

2.2

Ha Giang

673

45,297

2,578

67

3.8

Hau Giang

791

27,733

648

35

0.8

Lai Chau

314

10,958

805

35

2.6

83,120

16,251,066

887,865

196

10.7

Total or average

Source: National Traffic Safety Committee. The asterisk shows five cities under central
administration.

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Chapter 2
Industrial Structure andProduction Orientation
2-1. Current situation of production
The motorcycle industry of Vietnam was born about a decade ago anddeveloped quickly, especially in the period 2001-2005. At first, four
foreign-invested firms, VMEP, Honda, Yamaha and Suzuki, assembled
motorcycles in the 1990s. Subsequently, a large number of indigenous
firms entered the market to assemble motorcycles, initially with parts
imported from China, but later with locally produced parts with Chinese
and Vietnamese technology.
During 2001-2005, at least 67 firms existed in the motorcycle industry,
which were located all over the country and collectively produced nearly
2.2 million units at the peak time. Supporting industries also began toform, which belonged to various ownership types and included suppliers ofdifferent nationalities such as Taiwan, Japan, Thailand, China andVietnam.
Prior to 2000, total production was only hundreds of thousand units per
year, which was mainly attributable to FDI assemblers and a handful of
local assemblers. Motorcycle prices up to that time were relatively high, andthis prompted a number of local producers to set up assembly lines to
produce low-priced motorcycles of Chinese origin in 2000 and 2001.
Since new comers' prices initially matched the income levelof consumers, their production rose sharply to capture 87% of the market
in 2001.
However, in 2003 and 2004, almost all assemblers had to reduce output
due to a number of policy reasons, including the imposition of import part
quotas, restriction on motorcycle registration by some localities, and stricter

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Industrial Structure and Production Orientation

regulation over production activities of assemblers. However, by 2005,
these policy constraints on motorcycle assemblers had all been lifted, andproduction volume began to surge.
Under the price pressure from the so-called "Chinese" assemblers, FDI
assemblers adjusted business strategies, reorganized production, developed
new supplier systems and after-sale services, and gradually regained
customer base. By 2005, their combined market share rose to 53.6%.
Meanwhile, the sales of inexpensive motorcycles with Chinese origin
dropped significantly.
According to Vietnam Register (Table 2-1), in 2006, only 18 assemblers
which had the sales of more than 20,000 units of motorcycles per year
collectively occupied the market share of 88% with four FDI firms
accounting over 50%. Six of the local assemblers, whose sales exceeded
40,000 units expanded their collective sales and market share. Including
two other local assemblers, which produced more than 39,000 units, thetotal sales of the leading 8 local assemblers is 770,000 units with themarket share of 30%. The number of assemblers with sales of 20,000 to
40,000 units decreased to 6 compared to 10 in 2005. Those with sales of
10,000 to 20,000 units also fell from 14 in 2005 to 9 in 2006. The rest
were the local assemblers with the sales less than 10,000 units, which
operate irregularly and seasonally. 20 of them even did not have any
product officially registered in 2006.
It can be said that, among totally 54 motorcycle assemblers (three of
which were approved to operate since 2006), there are only 10 firms,
three of which were FDI firms, i.e. Honda, Yamaha, Suzuki and VMEP,
operated efficiently.
Tabs. 2-1 and 2-2, which contain similar data, are compiled from different
sources and show some discrepancies between them, which are sometimes
quite large. The main reason for the gap is that some motorcycles produced
during the year, mainly by local assemblers, are registered by producers
but are not sold within that year. Unsold vehicles are sometimes re-modeled
and re-registered, which causes double counting. Another reason seems
to be that, in some remote areas, unregistered motorcycles are put into use.

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Industrial Structure and Production Orientation

Tab. 2-1 Development of Motorcycle Assembly Production
2001
Newly registered motorcycles (x1,000)
Scooters
Manual transmission
Market share (percent)
FDI assemblers

2002

2003

2004

2005

2006

2,485.6 1,818.6 1,789.6 2,138.8 2,188.4 2,553.6
22.43

82.17

101.47180.98192.32n.a.

2,463.17 1,736.43 1,688.17 1,957.81 1,996.10

n.a.

100%

100%

100%

100%

100%

100%

12.94% 42.37% 47.59% 51.71% 53.55% 54.53%

Honda

6.84% 21.02% 23.68% 23.85% 28.63% 31.57%

Yamaha

0.92%

3.78%

6.77%

9.80% 11.72% 13.74%

Suzuki

1.04%

2.31%

2.88%

3.59%

3.89%

1.69%

VMEP

3.18% 13.55% 11.80% 12.02%

7.75%

5.87%

Other

0.97%

1.56%

1.65%

Local assemblers

1.71%

2.47%

2.46%

87.06% 57.63% 52.41% 48.29% 46.45% 45.47%

Over 40,000 units/year (6 firms in 2005)

8.07% 10.20% 12.59% 19.35% 22.42% 27.09%

20,000-40,000 units/year (10 firms in2005)

40.54% 31.10% 30.64% 24.57% 13.43%

7.35%

10,000-20,000 units/year (14 firms
in 2005)

21.07% 10.03%

Less than 10,000 units/year (in 2005) 17.38%

6.29%

9.16%

4.20%

8.83%

5.46%

0.03%

0.16%

1.77%

5.57%

Source: Compiled from Vietnam Register data.

As of September 2005, cumulative capital invested in the motorcycle
industry was about 9,000 billion VND, of which one-third (3,200 billion
VND) was by local producers. FDI firms, as a group, had a total registeredcapital of 394.4 million USD and at present are continuing to expand output
capacities of assembly and part production.
Under strong competitive pressure, smaller FDI enterprises have re-oriented
their business strategies. For example, Lifan Vietnam reduced output ofcompleted motorcycles and shifted to engine production for the domestic
market. Vina-Siam started to assemble scooters from parts which arealmost all imported, and simultaneously supply a number of components
such as brake, chain gear, brake cable, speedometer cable, shock
absorber, etc. with reasonable quality for the domestic market. GMN was
split into new GMN which handled trading and VAP which produced
automobile and motorcycle components. VAP has become a Honda group27

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Industrial Structure and Production Orientation

member and a part supplier of Honda Vietnam, with the latter contributing
70% of its capital.
Tab. 2-2 Market Share by Assembler
1998

1999

2000

2001

2002

2003

2004

2005

302

475

1686

1983

2058

1280

1437

1641

Honda

27.2

19.5

9.7

8.6

19.4

33.3

35.7

36.9

Honda (import)

40.0

43.6

9.7

3.3

0.0

0.0

0.0

0.0

Yamaha

0.0

2.7

1.0

1.3

2.7

7.7

13.3

13.2

Suzuki

7.2

3.6

1.0

1.4

2.2

4.0

4.9

4.1

VMEP

11.7

4.2

2.3

3.3

7.4

13.6

15.6

7.5

Total sales (x1,000)
Share (percent)Scooter CBU

0.4

2.5

1.1

1.7

3.4

3.7

1.0

2.7

Local and other

13.5

23.8

75.2

80.5

65.1

37.8

29.6

35.7

Source: Compiled from Enterprise Survey Data.

As for local assemblers, which initially relied on imported parts from
China, some of them invested in internal part workshops to respond to thegovernment policy of localization. However, such investment often
lacked effectiveness and balance. When the government abolishedlocalization requirement, many of them gave up internal part production
and began to use purchased parts again.
As for R&D, the four largest FDI assemblers all belong to a global groupwith the parent company conducting most of the key R&D activities.
Assemblers in Vietnam conduct supplementary research only, such as
market survey and adjustments on the group's basic models. However, it
is notable that VMEP is now investing in the R&D center in Dong Nai.
For FDI companies, the largest obstacle in R&D is the dearth of high skill
human resources. On the other hand, R&D activities of local suppliers
remain insignificant at present.

2-2. Current situation of supporting industries
The supporting industries (part suppliers) of the motorcycle industry are
the largest in number and production volume among all supporting28

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Industrial Structure and Production Orientationindustries in Vietnam, thanks to the rising production volume of finishedmotorcycles in recent years. For some Japanese assemblers with large
volumes, the process of building the part procurement system isapproaching the final stage.
During the period 2000-2003, partly due to the policy to encourage
localization, many assemblers invested or helped to establish supporting
industry activities, which contributed to the rising localization ratio. At
present, almost all parts of manual transmission motorcycles, including
engine parts, can be produced domestically. Apart from internal partproduction of assemblers, there are several hundred enterprises that produce
motorcycle parts in Vietnam, although part production is often a side job
or part-time activity for most of them. However, the quality and cost ofsuch parts are not always satisfactory in comparison with imported parts.
Important and difficult parts, such as engine parts and functional parts,
are at present not produced completely or in reliable quality in Vietnam.
Nevertheless, an increasing number of local suppliers invest in necessary
equipment to improve quality, and some of them can now supply parts
with international quality. These suppliers have become a part of FDI
assemblers' procurement system.
For manual transmission motorcycles, the Ministry of Industry survey
shows that local assemblers have achieved relatively high part localization,some of which have a localization ratio above 80% for all parts, and above
60% for engine parts. As for FDI assemblers, localization is also relatively
high, ranging between 70% and 90% depending on production volume
and the company's procurement strategy. For scooters, localization is still
low since production volume is small at present.
By 2002, over 80 FDI part producers came to Vietnam to supply parts to
Honda, VMEP, Suzuki and Yamaha with the total capital of 260 million
USD. In particular, VMEP initially brought 11 suppliers to an industrial
cluster in Dong Nai, and their number subsequently increased. The average
quality of parts is highest among Japanese FDI and lowest among
Vietnamese, with Taiwanese FDI coming in the middle. However, quality
differs significantly across individual suppliers. Some Vietnamese suppliers

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Industrial Structure and Production Orientation

perform better than some Japanese FDI suppliers in terms of quality, costand delivery (QCD).
In addition, assemblers also produce parts internally. In 2004, VMEP
achieved a localization ratio of 70% for engines and exported 18,000
engines. In 2005, Honda installed an integrated engine production line on
the premise. In 2006, Yamaha invested in a new factory to produce head
cylinders and mission gear sets for internal use as well as for export toJapan.
Among three Japanese assemblers, the current situation and future
strategy of part procurement differ significantly, depending on
production size as well as the global procurement strategy of the parent
company (see Appendix to Chapter 2 for collective procurement patternof Japanese assemblers). For assemblers with large volume, the localization
ratio has already reached or is about to reach 90%, which can be considereda saturation point. In globally integrated markets, procuring everything
locally goes against scale economy and optimal allocation of production
sites around the globe. For such assemblers, the part procurement system
is nearly complete, and there is no strong need to increase localization
further. However, diversifying domestic suppliers for each part to avoid
the risk of relying on only one supplier, or switching to new supplierswith better QCD performance, still remains desirable for them. In contrast,
assemblers with relatively small volume still look for new domestic suppliersin order to replace low-performing suppliers. For them, the part procurement
system remains incomplete and there is urgent need to increase the numberof domestic suppliers and the localization ratio.
Notwithstanding these differences, part procurement of Japaneseassemblers shows a clear pattern. Tab. 2-3 indicates their combined
procurement structure in 2007 based on part item counts (not necessarily
proportional to value). For engine parts, imports from Thailand are thelargest supply while the rest are supplied mainly by Taiwanese andJapanese FDI firms and in-house production. For electric parts, which are
relatively difficult, Japanese FDI firms dominate. Exhaust and body parts
are mainly supplied by Japanese and Taiwanese FDI firms. Vietnamese

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suppliers mainly supply "other" items and some body and electric parts,
which have relatively low value.
Tab. 2-3 Part Procurement Structure of Japanese Motorcycle
Assemblers, March 2007
(Percent of part items)
InhouseDomestic purchase

Imports

JPTW

VN OtherJP

TH INDO MAL TWN Other

Total

All parts

2.6

28.1

28.4

10.6

4.0

2.3

19.5

2.3

0.7

0.7

1.0 100.0

Engine

6.3

14.3

16.1

5.4

0.0

2.7

47.3

4.5

1.8

0.9

0.9 100.0

Exhaust

0.0

50.0

50.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0 100.0

Body

0.8

32.0

44.3

9.0

9.0

0.0

3.3

0.0

0.0

0.8

0.8 100.0

Electric

0.0

75.0

7.1

10.7

3.6

0.0

0.0

3.6

0.0

0.0

0.0 100.0

Other

0.0

15.2

24.2

36.4

0.0

12.1

6.1

3.0

0.0

0.0

3.0 100.0

Source: VDF Survey, 2007.
Note: JP: Japan, TW: Taiwan, VN: Vietnam, TH: Thailand, INDO: Indonesia, MAL:
Malaysia. These percentages are based on the questionnaire on supply sources of 82 part
items conducted on three Japanese motorcycle assemblers in Vietnam (see Appendix to
Chapter 2). The results are combined over all assemblers. Since each part item may
contain more than one individual part, and there may be more than one supplier for eachpart item, numbers in the table are not proportional to the number of individual parts ortheir value.

Since 2005, there is a sharp increase in the marketing activity and even
investment in Vietnam by FDI part producers from India, Thailand,
Indonesia, and Malaysia as well as from more traditional source countries
such as Japan and Taiwan. They vigorously approach large motorcycle
assemblers in Vietnam in order to receive orders from them. This reflects
the attractiveness of Vietnam's motorcycle part market with increasingly
large volume, as well as the improved capability of these foreign suppliers,
many of whom already have business relations with Japanese FDI assemblers
in their home countries. Japanese FDI assemblers all state clearly that
QCD is the primary criteria for selecting suppliers and that they haveno particular preference as to the nationality of suppliers. Under thesecircumstances, the remaining niche in the localization need of Japanese

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Industrial Structure and Production Orientation

FDI assemblers may be filled by new FDI part producers rather than
Vietnamese part producers, since the latter do not engage in equally
aggressive marketing (chapter 4).

2-4. Exports and imports
The exports and imports of motorcycles and their parts arepresented in Tab. 2-4.
Tab. 2-4 Exports and Imports of Motorcycles and Parts
2000

2001

2002

2003

2004

2005

2.2

6.2

9.0

22.9

46.4

70.8

Complete units

12.1

1.4

3.3

1.6

0.6

0.5

CBU

0.0

0.0

53.4

66.7

57.2

47.5

Engines

0.0

0.0

0.0

1.9

10.8

24.4

Engine part set

0.0

0.0

0.0

0.0

0.9

0.0

Separated parts

87.9

98.6

43.3

29.8

30.5

27.6

810.4

713.3

465.2

319.6

451.6

541.4

Export value (million USD)
Share (percent)

Import value (million USD)
Share (percent)Complete units

0.1

0.3

0.3

12.8

8.8

12.0

CBU

95.5

88.2

64.2

28.0

0.0

0.2

Engines

0.0

0.1

1.6

0.7

0.5

1.1

Engine part set

0.0

4.7

2.4

3.0

2.9

0.2

Separated parts

4.5

6.8

31.6

55.5

87.9

86.5

Source: Compiled from General Customs Office data.

Exports rose dramatically, albeit from a very low base, from 2.2 million
USD in 2000 to 70.8 million USD in 2005. Main export products are
CKD parts, engines and loose parts. Honda is the largest exporter ofmotorcycles and parts in Vietnam, with the Philippines, Laos andIndonesia as main destinations. The second largest exporter following
Honda is VMEP. Exports of complete units have been mainly for marketingand providing samples only, and never exceeded 1,000 units per year.
Only FDI assemblers, especially VMEP, conduct such exports.

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Industrial Structure and Production Orientation

Meanwhile, Honda and VMEP are the only producers that have exported
engines in recent years. Two companies with Taiwanese capital, Machino
and Chunfun, also export motorcycle parts, together accounting for 13%
of total export of this industry in 2005. Overall, Japanese FDI assemblers
in Vietnam mainly target the domestic market and do not seem to haveclear export strategy, especially beyond Southeast Asia, at this point. On
the other hand, VMEP, a Taiwanese FDI assembler, has a clear strategy tobuild an export base in Vietnam and already exported to EU. Vietnamese
assemblers are also exploring the possibility to export to such markets as
Africa, Middle East and Latin America, but outcome is yet to be seen.
Imports exhibited a declining trend in the period 2000-2003, from 810
million USD to 320 million USD, as the supporting industries for motorcycle
continued to develop in Vietnam. However, this trend was more than offset
in the period 2004-2005, with imports rising to 541 million USD in 2005,
by the increased parts import by FDI assemblers which raised production
volume in response to strong domestic demand. As to the structure ofimports, CKD parts fell drastically and loose parts and complete units
increased. Imports of complete units are mainly scooters of average tohigh quality. Complete units of the value over 2,000 USD, such as SH,
Dylan, @, and Vespa come mainly from EU, US and Japan, while complete
units of the value less than 1,000 USD come mainly from China andMalaysia. In 2005, Vietnam imported 45,700 complete units with thetotal value of 65 million USD, with the average unit price of 1,424 USD.
Urban demand for expensive scooters is rising rapidly.
If the motorcycle industry of Vietnam develops successfully in the future,with a sufficiently large domestic market, broad-based supporting industries,
and high-quality industrial human resources, it is quite possible that
Vietnam may be able to participate in the vertical or horizontal division oflabor in global motorcycle production, and secure a meaningful position in
the global value chain. The Vietnamese government generally and strongly
encourages such development, and urges domestic motorcycle producers,
FDI and local as well as assemblers and part suppliers, to seize every
opportunity to increase exports with ambitious business plans.

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Industrial Structure and Production Orientation

Nevertheless, feasibility and desirability of exports constitute a crucialpart of the decision making of each enterprise, and are also strongly affectedby competition and market trends. At this point, it is not yet clear where
Vietnam's dynamic comparative advantage lies in the motorcycle industry.
Moreover, for FDI producers, the decision to export or import usuallybelongs to the parent company in the context of its global business strategy.
For Vietnamese producers, ability to conduct effective international marketingand build an efficient global supply chain is lacking. In either case, concrete
planning for export seems hardly possible at this point. For this reason,
the government does not set any numerical export targets for the period
up to 2010 with a view to 2020.

2-5. Business architectureWith high production technology, design initiative, and large market
share, FDI assemblers are the leaders of Vietnam's motorcycle market
and play an important role in its development. However, competitiveness,
output trend, investment plans, and marketing orientation differ significantly
according to nationality as well as each firm. Using the terminology ofProf. Takahiro Fujimoto of Tokyo University, business architecture canbe classified into two main types: integral manufacturing and modular
manufacturing7. Japanese manufacturers are mostly integral and Chinese
manufacturers are mostly modular. This observation also applies to themotorcycle industry.
The basic feature of integral manufacturing is that products are designed
and produced with parts that are unique to each model. Such parts haveoriginal design which continues to evolve and improve over time, andwhich cannot be used in any other model. The industrial structure of
integral manufacturing consists of a system of vertically organized

7 Takahiro Fujimoto, The Monozukuri Philosophy of Japan, Nihon Keizai Shimbunsha, 2004, inJapanese; Takahiro Fujimoto and Junjiro Shintaku, eds, Architecture-based Analysis of Chinese
Manufacturing Industries, Toyo Keizai Shimposha, 2005, in Japanese; Kenichi Ohno and
Takahiro Fujimoto, eds, Industrialization of Developing Countries: Analyses by Japanese
Economists, GRIPS, 2006, in English and Japanese, Vietnamese edition forthcoming in 2007.

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Industrial Structure and Production Orientation

producers which have close, long-term relations with each other. At thetop, there is an assembler that designs products, sets standards, and provides
technology and market for suppliers. Suppliers in turn produce parts
which satisfy quality, cost and delivery (QCD) required by the assembler.
Through this process, original technology is created and internalized. If
successful, this architecture can produce high quality products and capture
high-end markets. To be effective, however, integral manufacturing requires
a business environment characterized by healthy and fair competition,
stringent protection of intellectual property rights, and strong linkage
between assemblers and suppliers based on long-term trust, reputation,and protection and active development of industrial secrets. Moreover,long-term perspective is required since it takes a long time for efforts tobear fruits.
According to the Japanese motorcycle producers in Vietnam, there arevery few local suppliers at present that can participate in such a rigorous
manufacturing system. For this reason, they have so far had to rely heavily
on FDI part producers, especially Japanese, as well as internal part production.
They have met many difficulties in trying to expand this system toinclude local suppliers. This problem should be solved with the help ofpolicy measures proposed in this master plan (chapters 4 and 9).
By contrast, modular manufacturing uses parts which are common to allmodels and available in the market. Part purchase contracts are short-termand depends on the price and quality offered. In such a market, there is noneed to organize suppliers into long-term, vertical production system. The
market is characterized by free entry and excess competition, where low
price is the only winning strategy. The merits of modular manufacturing
are speed and flexibility, appeal to low-income consumers, and dynamic
outsourcing of resources. On the other hand, its demerits are low quality,
low profit and low R&D. Motorcycles produced by modular manufacturers
show little difference among models, and their quality is low to average.
Part suppliers are also under strong pressure to lower prices, so the qualityof parts is also low and unstable. Illegal copies and other violations of theintellectual property law are rampant. Crucial technology is not created or

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Industrial Structure and Production Orientation

accumulated within producers. This is the vicious circle which Prof.
Fujimoto calls "technology lock-in."
Modular manufacturing is practiced widely in China as well as in
Vietnam. Since little capital or technology is required, this type of
manufacturing is very popular among local producers in many developing
countries. Moreover, in such countries, the business environment
required for integral manufacturing, as noted above, often does not exist.
The market is not fair or stable, business practice lacks trust and transparency,
and policy is highly uncertain which prevents long-term investment.
Under such circumstances, only modular manufacturing is possible.
In Vietnam, all Japanese motorcycle assemblers are integral manufacturers.
They have built a system of suppliers that are long-term, interactive anddisciplined. Their production processes are standardized and strictlysupervised from raw material to part production, inventory management,
quality control, delivery, and contract settlement. Meanwhile, productionof Chinese and local firms is organized according to the modular model,using common, interchangeable parts to reduce the cost. Some of thesefirms have also built a system of suppliers, by inviting part investors fromthe home country as well as using some local suppliers.
For a latecomer country like Vietnam, parallel development of integral
and modular manufacturers is acceptable and even inevitable. Modular
manufacturing provides employment and income, and can be organizedeasily by local entrepreneurs without government assistance. However,
because of "technology lock-in," modular manufacturing has little scopeof upgrading skills and technology. Moreover, the possibility of modular
motorcycle production, which heavily relies copied models, may be
severely limited if standards on quality, environment and intellectual property
rights are strictly enforced. Government assistance should target local
firms that are learning to become integral, rather than helping all local
firms across the board.

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Industrial Structure and Production Orientation

Appendix to Chapter 2
Part Procurement of Japanese Motorcycle Assemblers
in Vietnam, March 2007

Section No.

Part

1 Head cylinder
2 Cover cylinder head
3 Gasket
4 Body cylinder
5 Crank shaft
6 Connecting rod
7 Pin crank
8 Piston
9 Piston ring
10 Pin piston
11 Valve
12 Valve spring
13 Rocker arm
14 Cam shaft assy
15 Guide stopper
Engine 16 Cam chain
17 Cam chain tensioner
18 Oil pump assy
19 Joint carburetor
20 Air cleaner assy
21 Carburetor
22 Crank case23 Cover crank case24 Mission gear set
25 Kick cranck assy
26 Starter clutch
27 Clutch assy
28 Shift cam assy
29 Fork shift
30 Shift shaft assy
31 Shift pedal

InhouseBody

Thai Indo Malay Tai
Other Japan
Other
land nesia sia
wan

o

o
oo
ooo

oo

o
ooo

oo

oo
o

o
oo

o

oo
oo
oo
ooo
oo
o
o

o

o
o
o
ooo
ooo
ooo
ooo
ooo
oo
oo
ooo
o
ooo
oo
oo
o
o
ooo

o
o

oo

o

o

o

oo

o
oo
o

ooo
oo
oo

o

oo
oo
oo
oo

32 Pipe exhaust
Exhaust33 Muffler assy
34 Frame complete
35 Stay
36 Bracket
37 Fender
38 Leg shield
39 Side cover
40 Graphic
41 Rear arm

Imports

Local purchase
Ja
Tai
VN
panese wanese

o

o

oo
oo

o
oo
oo
ooo
ooo
oo
ooo
oo

oo
oo
ooo
oo
ooo

o
o
o

o
o

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Industrial Structure and Production Orientation

Appendix to Chapter 2 (Continued)oooo

42 Rear shock absorber
43 Front fork assy
44 Fuel tank
45 Fuel cap
46 Double seat
47 Handle seat48 Rim49 Spoke
50 Nipple
51 Hub52 Tire set
53 Wheel assy
54 Cast wheel
55 Brake
56 Disk plate
57 Sprocket
58 Drive chain
59 Handle complete
60 Cable wire
61 Rear view mirror
62 Head light
63 Tail light
64 Speedometor assy
65 Side stand
66 Main stand
67 Foot rest
68 Brake pedalooo

69 Rotor assy
70 CDI unit
71 Startor assy
72 Starting motor
Electric
73 Ignition coil/switch
74 Battery
75 Electronic wire
76 Switch set

ooo
ooo
ooo
ooo
oo
oo
ooo
oo

Body

Other

77 Rubber parts
78 Plastic parts
79 Bolt nut washer
80 Bearing
81 Tape82 Tool kit

oo
oo

ooo
oo
ooo
ooo
ooo
ooo
ooo
ooo
ooo

oo
oo
o

ooo
oo
oo
o

ooo

oo
ooo
ooo
ooo
o
ooo

oo
o

oo
oo

o

o

ooo
ooo
oo
oo
oo
oo
oo

oo
ooo

o
o
o
o
o

o
o

oo
o
o

ooo
o
ooo
o

oo
o
oo
oo
oo
ooo

o
o
ooo
o

o
o

o

Source: VDF survey, 2007.
Note: This table shows the part procurement situation of three Japanese motorcycle
assemblers, Honda, Yamaha and Suzuki, as of March 2007 when this survey was conducted.
The procurement manager of each firm was asked to fill in a questionnaire, followed byan interview by VDF staff at the factory. Each circle represents one of these companies.
An assembler may outsource any part from more than one supplier, so the number of circles
for each part may exceed three. An assembler may procure the same part from more than
one supplier in the same nationality or source country. Part procurement information fromother assemblers was unavailable.

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Chapter 3
Demand Forecast
3-1. Benchmark and assumptions
At present, the Vietnamese motorcycle market is booming, and strong
demand is expected to continue in the near future. However, as thedomestic market approaches the saturation point, increases in the ownershipand sales of motorcycles are likely to slow down. In Vietnam, the urban
market and the rural market must be considered separately. The former isalready near saturation (2.16 persons per motorcycle), while the latter hasless motorcycles at present (6.14 persons per motorcycle) with moreroom to grow before saturation is reached.
For projection purposes, we take Thailand as the benchmark. Past andcurrent Thailand has many similarities with Vietnam regarding climate
and culture, road traffic situation, and economic development patterns.
Vietnam is expected to reach the per capita income level ofcurrent Thailand by 2020 or earlier. Thailand has the population of 65.4
million and the motorcycle stock of 22.4 million in 2005, which meansthat there is one motorcycle for every 2.9 persons (Fig. 3-1). Moreover,the urban-rural gap is small-there was one motorcycle for every 2.5
persons in Bangkok, and for very 3.6 persons in the rest of Thailand (2003
data)8. This situation can be regarded as reasonably close to saturation at
the national level. In the future, motorcycle production in Thailand will
mainly satisfy replacement demand and exports, rather than expanding
new domestic market segments. In any country, the person-to-motorcycle
ratio of between 2 and 3 is the maximum limit, since that implies almost
everyone, except very young, old, and weak, has a motorcycle.

8 IDE-JETRO, Motorbike Industries in Asia, 2005, in Japanese.

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Demand Forecast

Fig. 3-1 Thailand as the Benchmark: Motorcycle Ownership
Persons per motorcycle
16
14

Rural

12

AverageBangkok

10
8
6
4

2.9

2

2005

2004

2002

2003

2001

2000

1999

1998

1997

1995

1996

1994

1992

1993

1991

1989

1990

0

Source: See footnote 8. Regional division is unavailable for 2004 and 2005.

In projecting the motorcycle market in Vietnam, it is assumed that relatively
high economic growth will continue from present to 2020. People's living
standards will rise, and urbanization will also proceed rapidly. Up to2010, no significant completion of large urban transport infrastructure is
expected while rural roads will continue to be upgraded gradually. For
these reasons, popular demand for motorcycles is likely to be robust. The
saturation point of motorcycles for the country is expected some time
between 2015 and 2020. However, even after saturation, Vietnamese
people may continue to use motorcycles in various travel needs, if not as
intensively as in urban areas at present.
We first forecast motorcycle stock demand (circulation) up to 2020 using
three alternative approaches. They all yield very similar results. After that,flow demand (annual sales) is projected under different assumptions.

3.2 Stock demand
Approach 1-Persons per motorcycle
In this approach, it is assumed that the person-to-motorcycle ratio willreach 3.67 by 2010 and about 3 by 2015, after which this ratio stabilizes.
This development is considered to be consistent with the expected GDP

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Demand Forecast

growth, construction of urban and rural infrastructure, and people's
attitude in the coming years.
Tab. 3-1 Stock projection from the person-to-motorcycle ratio
2000

2005

2010

2015

2020

Population (x1000)

77.63583.12088.63394.15499.675Motorcycle stock (x1000)

6.387

15.67024.15131.70233.561

Persons per motorcycle

12.16

5.30

3.67

2.97

2.97

--

19.7

9.0

5.6

1.1

Growth in motorcycle stock (%/year)

Approach 2-Motorcycles per household, with urban-rural gap
The saturation point in terms of household ownership of motorcycles is
considered to be about 2 motorcycles per family at the national level. By
2020, the average urban household is expected to have 4-5 family members
and own 2.65 motorcycles, while the average rural household is expected
to have 6-7 family members and own 1.51 motorcycles. Saturation at thenational level will begin from 2015, but even after that, there will be ashift of motorcycle use from urban to rural families. With these assumptions,the following projection is produced.
Tab. 3-2 Stock projection from the motorcycle-to-household ratio
2000

2005

2010

2015

2020

12.24413.17614.181

15.19916.233

Urban

4.037

4.555

5.318

6.120

6.977

Rural

8.207

8.621

8.863

9.079

9.256

0.52

1.19

1.69

2.00

2.00

Urban

2.32

3.08

3.34

2.65

Rural

0.59

0.85

1.10

1.51

15.67024.10830.39832.465Urban

10.56216.60020.42318.511

Rural

5.108

7.508

9.975

13.954

Households (million)

Motorcycles per household

Motorcycle stock (million)

6.387

Approach 3-Persons per motorcycle, with urban and rural gap
Recent data confirm that, while urban areas have high density of motorcycles
per person, the speed of increase in motorcycle ownership tends to slow

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Demand Forecast

down. The annual increase of motorcycles in the five large cities undercentral administration fell from 666,800 in 2001 to 323,600 in 2005.
Similarly, the corresponding figures for the next tier of economically dynamic
cities were 166,500 in 2001 and 125,300 in 2005. By contrast, the annual
increase in all other areas slightly increased from 1.192 million to 1.264
million during the same period.
From this, it is assumed that, in the period 2006-2015, urban motorcycles
will continue to increase by 500,000 and rural motorcycles by about 1
million annually. After that, growth will slow down in both areas for anumber of reasons, including the availability of other transport modes(rails, cars, buses, etc.), leveling off of urban travel demand, and improvementof rural life and rural infrastructure. Eventually, increases of motorcycles
in both areas are expected to converge to a lower level, say 200,000 per year.
Tab. 3-3 Stock projection from the urban and rural person-to-motorcycle ratios
2000

2005

2010

2015

2020

Population (million)

20.18522.77526.59030.60034.886

Persons per motorcycle

8.63

4.82

3.61

3.10

3.21

Motorcycle stock (million)

2.340

4.730

7.368

9.868

10.868

--

2.390

2.638

2.500

1.000

Population (million)

57.45060.34562.04363.55464.789Persons per motorcycle

14.20

5.52

3.30

2.92

2.84

Motorcycle stock (million)

4.047

10.93918.80221.80222.802

--

6.892

7.863

3.000

1.000

Urban

Increase over previous period (million)
Rural

Increase over previous period (million)
All nation
Persons per motorcycle

12.16

5.30

3.39

2.97

2.96

Motorcycle stock (million)

6.387

15.66926.17031.67033.670

The results of these three approaches are fairly similar, with the stock
demand for motorcycles of about 24 million in 2010, about 31 million in2015, and about 33 million in 2020 (Fig. 3-2).
The above projections show that, even if other transport modes develop,
Vietnam will continue to be a country that uses a large number of42

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Demand Forecast

motorcycles into the foreseeable future. A good motorcycle policy istherefore required to respond to this market demand.

Fig. 3-2 Alternative Forecasts for Motorcycle StockMillion motorcycles

Persons per motorcycle

40
35
30
25
20
15
10
5
0
2000

14
Approach 1

12

Approach 2

10

Approach 3

86

Approach 1

2005

2010

Approach 2

4

Approach 3

2

2015

2020

0
2000

2005

2010

2015

2020

3.3 Flow demand
Based on the stock demand projections above, annual demand for new
motorcycles is now forecasted. In general, the ratio of motorcycle stock
to annual sales depends on two factors.
First, a period of dynamic growth of the motorcycle market is associatedwith a relatively low stock-to-flow ratio of 5 to 10. In such a country,
annual sales are large compared with the stock, because there is significant
new demand (by first-time users) in addition to replacement demand (byexisting users). Currently, this situation is observed in China (stock-to-flow
ratio of 5.4), India (6.6), Indonesia (7.1), Thailand (7.4) and Vietnam(8.8). By contrast, in a more mature market, where there is only replacement
demand and little new demand, the stock-to-flow ratio tends to rise to 15-20.
Taiwan (20.5) and Malaysia (17.9) belong to this group9. This domestic
market dynamics can explain the long-term trend in the stock-to-flow
ratio.

9 These figures are for 2005, except Indonesia (2003), China (2003) and India (2001). The original
data comes from Honda, World Motorcycle Facts and Figures, 2006.

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Demand Forecast

Fig. 3-3 Motorcycle Density and Stock-to-flow Ratio, 2005
Persons per motorcycle
100
India (6.56, 909)

80
Pakistan
Philippines

60

China

40
Indonesia

200Vietnam
Cambodia

Malaysia

TaiwanThailand

0

5

10

15

20
25
Stock/sales ratio

Source: See footnote 9.

Another factor is temporary shocks. For example, in Thailand, thecollapse of domestic market in the aftermath of the Asian financial crisis
pushed up this ratio to an abnormally high level in 1998, from which thecountry recovered only slowly. In Vietnam, a large inflow of inexpensive"Chinese" motorcycles artificially reduced this ratio during 2000-2002.
Such temporary shocks are inevitable in any market economy underglobalization. However, since they are unpredictable and do not lastforever by definition, we ignore them in our projection.
Fig. 3-4 Vietnam and Thailand: the Motorcycle Stock-to-flow Ratio
25
Vietnam

20

Thailand15
10
5

Source: Honda, World Motorcycle Facts and Figures, 2006.

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2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

0

Demand Forecast

Vietnam, with its dynamically growing motorcycle market, has astock-to-flow ratio of about 10 at present. However, this does not meanthat each motorcycle is on average used for 10 years before it is scrapped.
Because annual demand is a sum of new demand and replacement
demand, even if Vietnamese people ride each motorcycle for 20 years,
the stock-to-flow ratio can be much lower than 20 if vigorous new
demand exists. But when the saturation point is reached and new demand
is diminished, the stock-to-flow ratio may rise toward 15-20.
However, there are two possible reasons that may make Vietnamese
people continue to purchase a large amount of new motorcycles even after
the saturation point. The one is concerned with economic life-cycle and theother is concerned with physical life-cycle of motorcycles.
First, purchase frequency will be high if the motorcycle is regarded as a
fashion product (as with ladies' dresses) rather than a practical product (suchas an electric fan). In the former case, people (especially young people)
will switch to new models even if old ones still run. Producers may also
cultivate such consumer behavior through business and marketing strategy.
Second, if some existing models are low quality, and break down quickly
or fail to pass quality and environmental tests required by the government,
consumers are forced to buy other products. In the past, Vietnamese people
usually repaired motorcycles many times before scrapping them. Thistendency may continue, but there is also a possibility that they willabandon them sooner as income and wage rise, the repair cost also
rises relative to the price of new models, and charges and penalties fornoncompliance of various standards are increased.
Currently, Vietnam's motorcycle scrap market is virtually non-existent.
However, as the stock rises and market characteristics change, Vietnam
may have more "normal" second-hand and scrap markets for motorcycles
as in advanced countries. Old models will then be sold in the second-handmarket, exported, or scrapped.
Since the future stock-to-flow ratio is uncertain, three alternative scenarios
are examined.

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Demand Forecast(i) High Scenario—the stock-to-flow ratio will stay at 10 throughout
the period. In this case, annual demand will be 2.43 million in
2010, 3.18 million in 2015, and 3.35 million in 2020.
(ii) Middle Scenario—the stock-to-flow ratio will gradually rise to11, 12 and 13 in the years 2010, 2015 and 2020, respectively.
Annual demand will be 2.21 million in 2010, 2.65 million in2015, and 2.58 million in 2020.
(iii) Low Scenario—the stock-to-flow ratio will rise sharply to 12, 15
and 18 in the years 2010, 2015 and 2020, respectively. Annual
demand will be 2.02 million in 2010, 2.12 million in 2015, and1.86 million in 2020.
Fig. 3-5 Alternative Scenarios for Annual Domestic Demand
Million
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
2005

2010

2015

2020

High

1.65

2.43

3.18

3.35

Middle

1.65

2.21

2.65

2.58

Low

1.65

2.02

2.12

1.86

The results are illustrated in Fig. 3-5. It is evident that annual demand will
be significantly affected by consumer behavior and market characteristics,
even under the same assumed path of stock demand.
Comparing stock forecasts and these flow demands, it is possible to calculate
the implied share of replacement demand in total annual sales. For the
middle scenario, this share is 28% in 2010, 46% in 2015, and 85% in
2020. The rising share of replacement demand is consistent with our46

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Demand Forecast

assumption of approaching saturation. The high and low scenarios also
produce similar results10.
It should be noted that, even under the same assumption on the motorcycle
stock, the level of traffic congestion or air pollution attributable to motorcycles
in urban area is also affected by the number of trips made per motorcycle
per day as well as the duration of each trip. The former depends on thecharacteristics of the motorcycle as a transport means (for example,
whether it is used for daily commuting or only occasionally), and the latter
depends on the average distance of travel as well as road infrastructure,traffic management and the degree of mixed traffic.

10 The share of replacement demand in total flow demand is 35% in 2010, 55% in 2015, and 88%
in 2020 under the high scenario, and 22% in 2010, 33% in 2015, and 79% in 2020 under the low
scenario.

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Chapter 4
Supporting Industries andIndustrial Human Resources4-1. The new phase of supporting industry development
It is generally stated that Vietnam's supporting industries are at an earlystage of development, and assembly-type manufacturing industries cantherefore achieve only low part localization. However, in the case of the
motorcycle industry, the traditional negative view of Vietnamese
supporting industries no longer applies.
The situation surrounding the supporting industries of Vietnam's motorcycles
is changing rapidly in the last several years for three reasons. First,
domestic demand, which now surpasses 2 million units per year, is large
enough to build strong supporting industries. Second, free trade
initiatives at the global, regional and national level, including Vietnam's
accession to WTO, completion of AFTA, and a number of FTAs involving
Vietnam in particular and ASEAN in general, is changing the dynamics
of production site allocation of multi-national corporations. Third,
competitiveness of supporting industries in some of the neighboring
countries, such as Thailand, Indonesia, Malaysia, China and India, has
improved significantly thanks to their large domestic demand or longeffort of promotion.
These developments have led to the following new phenomena in
Vietnam (see also chapter 2).
First, the part procurement structure of FDI motorcycle assemblers, especiallythose with large and growing sales, has deepened. From international
experiences, the part localization ratio of about 90% can be regarded as
optimal, combining in a most efficiently way local parts which are simple,
bulky or requiring frequent adjustments and just-in-time delivery, with49

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Supporting Industries and Industrial Human Resources

imported parts which are compact, subject to scale merit, or too difficult
to produce locally11. Some FDI assemblers in Vietnam have alreadyreached this stage, and their localization ratios are not expected to risefurther toward 100%. Other FDI assemblers hope to reach this stage withina few years, provided that strong domestic demand continues. Still other
FDI assemblers need a longer period before completing their procurement
systems.
Second, competition among existing and potential suppliers is increasingly
harsh. The fact that FDI assemblers' procurement structure has matured
does not mean that competition is over or existing suppliers are secure
within that structure. Far from that, suppliers are constantly challenged by
the possible entry of new players and the desire of assemblers to have morethan one procurement source to reduce cost and diversify risk. Previously,
the supplier of any part had a captive market in Vietnam. But now, they
have to compete with rivals from all over the world. Selection of suppliers
is becoming more sensitive to differences in logistics, lead-time, taxes,
tariffs, and other trade-related cost elements. Procurement pattern may
change drastically, especially when a new model is introduced or when
new policy is introduced.
Third, despite increasing competition, foreign suppliers are now willingto invest in Vietnam even without special incentives. This is because
domestic demand has reached a size that is highly attractive to partproducers, who require relatively large volume in order to operate
efficiently and reduce cost. Since around 2005, motorcycle part suppliers
from neighboring countries such as Taiwan, Thailand, Japan, India,
Malaysia and Indonesia are aggressively entering the Vietnamese market.
They have the advantage over Vietnamese suppliers in terms of higher
performance in QCD, more experience in working with FDI companies athome, and strong networks and skillful marketing. Meanwhile,

11 See VDF, Improving Industrial Policy Formulation, Publishing House of Political Theory, 2005,
in Vietnamese and English, especially ch.5; VDF, Kenichi Ohno, ed, Building Supporting
Industries in Vietnam, vol.1, VDF, 2007, in Vietnamese and English; Kenichi Ohno and Nguyen
Thi Xuan Thuy, "Part Procurement of Japanese Motorbike Assemblers in Vietnam: Situation and
Prospects as of Spring 2007," VDF, 2007, in Vietnamese and English.

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Vietnamese suppliers are slow to seize this opportunity. One procurement
manager of an FDI assembler predicts that these new comers will crowdout Vietnamese suppliers in the part procurement structure of motorcycle
assemblers.
While foreign suppliers are formidable competitors for Vietnam's
burgeoning part manufacturers, that does not mean the end of the gamefor Vietnamese suppliers. The entry of new foreign suppliers is inevitable,
and even desirable, from the viewpoint of long-term development ofVietnam's motorcycle industry. A strong supporting industry base, of any
nationality, will boost the competitiveness of motorcycles assembled in
Vietnam. This in turn further broadens the domestic part market andbusiness opportunities, albeit under severe competition among suppliers.
Vietnamese suppliers should not hope to win over foreign suppliers in the
short run, or erect barriers to prevent their entry. Vietnam's policy target
should be the leveling up of local suppliers in the medium tolong run. As long as domestic motorcycle assembly continues to growdynamically with frequent model changes, assemblers are always willingto switch to Vietnamese suppliers if they improve QCD performance andmarketing. At that time, it becomes possible to re-capture the domestic
part market from at least some of the foreign suppliers that entered
Vietnam earlier, under the condition of open and fair competition. That is
the natural process of part localization which Vietnam should pursue,
rather than artificial part localization under coercive policies.
When that is achieved in the medium to long run, the supporting
industries of the motorcycle industry will become the foundation of otherassembly-type manufacturing industries as well as the source ofinternational competitiveness. Motorcycle part suppliers may, forinstance, also produce parts for the electronic and electrical industry or
the automobile industry, although they may need to upgrade skills or
invest in new equipment to get new customers. In Vietnam, the supporting
industries of the motorcycle industry are the largest and most advanced

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Supporting Industries and Industrial Human Resourcesamong all supporting industries to take up this responsibility and create apositive nexus of development.
Ultimately, development of supporting industries will depend on theeffort of the business sector. However, Vietnam's market mechanism is in
the process of forming and the indigenous private sector is still weak. In
this situation, the government should initially assist the nascent market
mechanism and remove barriers that impede the development of supporting
industries.

4-2. The need for high-quality industrial humanresources
The importance of human resource development in industrial growth iswell known. However, with limited time and financial resources available
to Vietnam, the types of human resources to be promoted must be carefully
selected with concrete targets and effective policy measures. As noted
above, we expect the motorcycle industry to become the principal industry
around which strong supporting industries are created, human skills are
upgraded, and competitiveness of all assembly-type manufacturing industries
in Vietnam is improved. Human resource policies must support this goal.
There are three groups of industrial human resources needed by the
motorcycle industry that merit official support.
First, Vietnam needs a sufficient supply of top-level professionals who canmanage manufacturing enterprises or design and supervise production
processes competitively. This elite group must be educated at the university
level or higher, for example at the institute of technology, the engineering
faculty of a university, or a foreign university. They need to study basic
theory, relevant skills and knowledge, proper attitude toward manufacturing,and international perspective. To make this possible, good instructors,
curriculums, teaching materials and equipment are necessary, withemphasis on practicality and relevance to the competitiveness of global
manufacturing enterprises. The government should improve each of these
ingredients, with international support if necessary.

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Supporting Industries and Industrial Human Resources

Second, factory workers must be upgraded. This is particularly importantfor production processes that heavily rely on machinery and equipment
and their proper design, adjustment and operation, and where workers
must accumulate skills and knowledge over a number of years. Such
manufacturing enterprises need a large supply of multiple-skill workers
who can perform various tasks and know the overall production process.
They should initially study at a technical high school or an industrial
college, then move to the factory floor to receive on-the-job training.
Good instructors, curriculums, teaching materials and equipment which
are practical and relevant are needed, as in the case of the elite group. In
supplying them, close cooperation between schools that teach thestudents and enterprises that plan to hire them is essential. By contrast,
official support is not required for single-skill assembly workers or garment
workers that undertake cut, make and trim (CMT), for whom the required
level is low and short-term training provided by the factory is sufficient.
Third, general directors, factory managers, engineers and multi-skill
workers who face difficulties in their work but have the right mindset andwillingness to learn should be assisted. Among these, the attitude andenthusiasm of the general director is by far the most crucial, without
which no company can improve performance. Once the serious commitmentof the top management is confirmed, a company-specific problem-solving
program should be launched with the help of an experienced industrial
expert ("factory doctor") or a consultant company specializing in such
improvements. The content, method and duration of the program may
differ in each case. Additional support may be mobilized from FDI
partners, government or foreign organizations. Such order-made diagnosis
and cure is the most effective. However, ready-made external courses canalso be used if the problem is clearly identified and suitable courses areavailable at a convenient time and location for the company.
In many countries, there is social prejudice that professionals who workin clean, air-conditioned offices are "superior" to factory managers andengineers who work in noisy and humid factories with lower-level workers.

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Supporting Industries and Industrial Human Resources

Such stigma does not exist in Japan, where Mr. Sakichi Toyota (18671930), Mr. Konosuke Matsushita (1894-1989), and Mr. Soichiro Honda(1906-1991) initially were all engineers happily working on greasy
workshops. Japan's monozukuri (manufacturing) spirit, which pursues
manufacturing with skill, pride and long-term dedication, was born fromsuch positive attitude toward factory operation. However, in Vietnam,
manufacturing does not seem to be accorded with the same social respectas lawyers, doctors, or web designers. Students prefer business, banking
and computer classes rather than engineering. To promote industrialization,
the Vietnamese government should change such attitude by initiating a
campaign to re-orient people's mind, giving social recognition andrespect for talented factory managers and engineers, and prioritizing andsupporting technical education and training.
Industrial human resources and supporting industries are the two sides ofthe same coin, the one dealing with human aspects and the otherhighlighting physical aspects, which together enable a country to achieve
excellence in industrial production. This will enable Vietnam to breakthrough the low technology trap as well as cope effectively with the China
challenge. In the terminology of Prof. Takahiro Fujimoto, Vietnam
should master integral manufacturing (chapter 2). Industrial humanresources and supporting industries are the pre-conditions for mastering
integral manufacturing.
In what follows, policies to strengthen supporting industries and industrial
human resources are proposed.

4-3. Incentive measures
Preferential taxes and financial support are standard policy instrumentsfor promoting supporting industries. They are commonly used in ASEAN
countries, often in the form of SME promotion measures, because theimportance of supporting industries has been clearly recognized in thesecountries. In Vietnam, however, such policy is not yet in place, and incentive

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measures are mainly reserved for investing in "high-tech" sectors or
remote and mountainous areas. This master plan proposes that Vietnam
should introduce incentive measures for supporting industries, which arecompetitive enough to attract domestic and foreign investors vis-à-vis
neighboring countries, but not excessive. Incentive measures, while notsufficient by themselves, can prepare basic conditions in which investment
in skills and equipment is encouraged. To implement this policy, however,
the working definition of supporting industries must be clarified at first.
Generally speaking, supporting industries refer to a group of producers
located in a country, both local and FDI, that supply intermediate inputs toassemblers in that country. The precise scope of supporting industries
depends on each case as well as the intention of policy makers12. The scopeof supporting industries may be as narrow as just one particular industry or
as broad as all manufacturing industries including food, textile, garment
and chemicals. However, the term supporting industries was originallyused by Japan in the 1980s to refer to the suppliers of assembly-type
manufacturing industries only, such as automobiles, motorcycles, electronics
and electricals, and precision machinery.
The scope of inputs is another issue (Fig.4-2). One way to define supporting
industries is to include both physical inputs (parts and components) as well as
industrial services such as logistics, storage, distribution and insurance.
Another way is to include physical inputs only, but all the way from raw
materials. These two scopes have an overlapping segment, which can beconsidered the core scope of supporting industries. This core includes
parts and components which are made of metals, plastics or rubber, andprocesses of producing them such as pressing, casting, forging, welding,molding, machining, plating, and heat treatment. In particular, technology
of making, adjusting and repairing dies and molds occupies a central
position in the core scope.

12 Nguyen Thi Xuan Thuy, "Supporting Industries: A Review of Concepts and Development," in K.
Ohno, ed, Building Supporting Industries in Vietnam, vol.1, VDF, 2007, in English andVietnamese.

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Fig. 4-2 Scope of Supporting Industries

Final Goods
Assembly
Sub-assemble

SI (core scope)

Parts
Components

Production Services
Logistics
Storage

Capital Goods

Distribution

Tools

Insurance

SI (broad scope 1)

SI (broad scope 2)

Intermediate Goods

Machines

Materials
Steel
Chemicals

Source: see footnote 12.

Our definition of supporting industries, for the purpose of giving special
treatment for promotion, is a narrow one and includes only pressing, casting,forging, welding, and production of dies and molds, which are very
important for the healthy growth of machinery industries but
seriously lacking in both quality and quantity in Vietnam at present13.
The concept is limited for concentrating limited budget for promotingsome focal industries. But the scope of assistance can and should be
expanded in the future.
Preferential tax treatment is a standard policy instrument for promoting
supporting industries. Neighboring ASEAN countries, especially Malaysia

13 These five items have been identified as crucial in a number of interviews conducted by MOI and
VDF with motorcycle assemblers and suppliers in Vietnam.

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and Thailand, already provide such incentives under well-focused national
campaigns for upgrading SMEs. Exemption or reduction of corporate tax,
reduction of taxes or tariffs for machinery imports, and subsidies for
R&D are popular measures which should also be introduced in Vietnam
for the five activities mentioned above. In addition, a special financial
institution to provide loans to small, non-SOE companies should beestablished and its lending should be activated.
All incentive measures must available equally to all types of economic
sector, as.

4-4. Linking retired Japanese and young Vietnamese
In Japan, a large number of experienced factory managers and engineers
are reaching the retirement age of 60 ("The 2007 Problem"). Many ofthem are still healthy and want to contribute to improving industrial skillsof developing countries. However, they cannot realize this plan individually
due to language barrier, procedural complexity, and uncertain living
conditions abroad. On the other hand, Vietnam has a large number ofyoung people who can perform well in high-quality manufacturing if
proper instruction and training are given. But they are also unable toreceive such instruction and training since schools can teach only basic
theories and general skills.
It is therefore proposed that the Vietnamese government, in close cooperation
with the Japanese government and business community, should launch a
program in which retired Japanese talents work with Vietnamese managers
and engineers in Vietnam in order to transfer their manufacturing skills
and attitude in practical setting. The program, which may be called
Japan-Vietnam Skill Exchange, should include (i) registration and matching
services, (ii) administrative and procedural support, (iii) support forJapanese retirees to live and work comfortably in Vietnam including travel,
language, housing and medical services, (iv) reasonable but not highpayment for Japanese retirees, and (v) evaluation, monitoring andproblem-solving mechanisms. The style and duration of work should be

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flexible enough to accommodate the needs of both Japanese retirees andVietnamese enterprises.
The Vietnamese government should draft a preliminary proposal of thisplan and present it to the Japanese side, to be concretized and revised
subsequently. A special agency should be created to implement thisprogram. A pilot program may start in a small scale, which can be
expanded as experience is gained. Private and public assistance fromJapan should be sought if necessary. Through this program, Vietnam
should become the most favored destination among all developing countriesof old Japanese managers and engineers who want to transfer their skills
and knowledge.

4-5. Technical and vocational education and training
To supply a large number of high-quality human resources, existing
programs should be enhanced and new programs should be added
through joint public-private effort.
First, the government should subsidize 50% of the cost incurred byenterprises belonging to the five processes specified above--pressing,casting, forging, welding, and production of dies and molds--for the purposeof training their management, staff or workers, whether internal or external,
and including foreign dispatch. Eligible training activities are: (i) classes
given within an enterprise; (ii) on-the-job training; (iii) short-term andlong-term training courses offered by private, public or foreign agencies;(iv) dispatch of workers to another location, domestic or abroad, for training;and (v) worker competition such as QC Circle Olympics or Skill
Olympics in which workers belonging to the same business group in
different countries or locations meet in one place to compete for highperformance. In addition, existing training programs by public andforeign agencies, such as those listed in Tab. 4-1, should be fully advertised
and utilized.

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Tab. 4-1 Foreign-funded Technical Training
Programs Currently Available in Vietnam

Program

Location

SponsorMain activities

Association for Overseas
Technical Scholarship (AOTS)

On demandJapan

Supporting technical training
in Vietnam and JapanJODC expert service

On demandJapan

Expert service in industries

Vietnam Japan Cooperation
Center (VJCC)

Hanoi, CMC

Japan

Business courses, training,customized advice

JETRO - JEXSAOn demandJapan

Expert service

JETRO - J-Front

On demandJapan

Expert service

JETRO - Business matching
between Japanese andVietnamese enterprises

Hanoi, CMC

Japan

Japanese enterprises come toVietnam to look for partnercompanies

JBIC - Small and Medium Sized
Enterprises Finance Project

All nationJapan

Two-step loans via State Bankof Vietnam and financial
institutions

Hanoi
JBIC & JICA - Education
Development Supplier Project for
ITCP (internet telecommunication)
in Hanoi Industrial University

Japan

JBIC provides infrastructure
and JICA supports IT humanresource

JICA - Human Resource Project

HCMC

Japan

Upgrading teaching andadministrative staff atuniversities

JICA - The grass-roots
international exchanges

Hanoi

Japan

Supporting environmental
human resource

JICA - Vietnam Human
Resource Center

Hanoi

Japan
(Vietnam in
future)Business courses, Japaneseclasses, interchange project

MPI Technical Assistance Center Hanoi
(TAC)

Japan

Database, SME support

JICA experts

On demandJapan

Expert service

Vietnam-Singapore TechnicalTraining Center (VSTTC)

Binh Duong,
Hanoi

Singapore

Technical and vocational
training

GTZ Vietnam

On demand

Germany

Consulting service, training ofvocational school teachers

Abbreviations--AOTS: Association for Overseas Technical Scholarship; JICA: Japan
International Cooperation Agency; JBIC: Japan Bank for International Cooperation;
JETRO: Japan External Trade Organization; JODC: Japan Overseas Development
Corporation; JEXSA: JETRO Expert Service Abroad; GTZ: Deutsche Gesellschaft fur
Technische Zusammenarbeit.

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Second, teaching staff, curriculums and equipment at vocational schools,
colleges and universities must be strengthened in both quality andquantity to offer practical and up-to-date engineering education andtraining. Collaborative training programs involving both FDI firms andlocal suppliers should be strongly encouraged14. In such programs, teaching
method and materials must be determined and revised with strong
participation of client firms. A large number of FDI manufacturers
already express interest in participating in such programs, and even sending
their experienced engineers as instructors or making their equipment
available for training, provided that the government makes serious effort
to initiate such programs. The government should set up a framework to
implement such programs, and seek international cooperation if necessary.
Official support should also be provided to improve the quality of teaching
staff to an international level.
Third, a national certification system of Industrial Meisters (highly
skilled engineers or multiple-skill workers who can teach others) shouldbe established. The government should set up an agency for certifying
technical skills, with clear achievement criteria for each specific skills.
Nationwide exams should be organized and successful candidates should
be given Industrial Meister certificates. This system will broaden the baseof skilled workers and encourage good engineers to do even better and besocially recognized. The government should also encourage manufacturing
enterprises to link company personnel policy with national Industrial
Meister certificates. Certificate holders should be promoted and given
higher salaries in exchange for an obligation to teach young workers15.

14 One of the most successful programs in collaborative training is the Penang Skills Development
Centre (PSDC) in Malaysia. For details and possible lessons for Vietnam, see Junichi Mori,"Development of Supporting Industries for Vietnam's Industrialization: Increasing Positive
Vertical Externalities through Collaborative Training," Master Thesis, Fletcher School, Tufts
University, 2005.
15 In Japan, the Industrial Meister certification system is well developed and coordinated among
national, prefectural, and firm levels. For example, one large electronics company has an internal
meister system for lens polishing, painting, and electrical wiring. Candidates are classified into
three ranks A, B, and C. A-ranked engineers are sent to the Meister license offices of the central
or local government to receive official certificates. If they are successful, the company additionallyawards them with internal Meister titles and a bonus of 500,000 yen (about $4,200). Meisters inthis company are required to train two successors within two years.

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4-6. Strategic FDI marketing
Strategic FDI marketing, based firmly on marketing theory and backed
by strong commitment of the Vietnamese government, is needed toaccelerate the inflow of FDI part suppliers into targeted sectors. Suchmarketing requires the following steps.
First, the targeted sector must be narrowed down. To initiate strategic
FDI marketing, Vietnam should know what kind of FDI suppliers it wants
to attract most. Supporting industries in general are too broad for
effective targeting. For the motorcycle industry, five specific processes ofpressing, casting, forging, welding, and production of dies and molds, as
proposed above, should be targeted in the period to come.
Second, aggressive marketing must be launched. Three basic measures
for investment promotion are: (i) seminars in foreign countries by central
government, local governments or industrial estate developers, (ii) invitingsite-visiting missions to Vietnam, and (iii) establishment of investment
promotion offices in potential foreign cities. Although Vietnam alreadyorganizes all of these activities, the quality and volume of information is
insufficient in comparison with, for example, Thailand or Malaysia.
Using these channels, Vietnam must approach targeted clients individuallyand vigorously instead of passive, general marketing. To save the cost of
maintaining offices abroad, targeted cities must be selected carefully.
Local governments may also want to outsource promotion services from apublic organization or NPO16. It should also be noted that potential foreign
investors are interested in hearing not just general merits of coming toVietnam but also province-specific information as well as any negative
aspect of investing in Vietnam.

16 While Hanoi has established an independent promotion office in Tokyo, Da Nang, Ha Tay, and
Lam Dong have set up promotion offices without regular staff inside the Vietnam Economic
Research Institute in Tokyo.

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Third, rental factories and industrial parks for attracting particular investors
should be built. Most FDI suppliers are SMEs in their home countries
with little international experience. Compared with big-namemulti-national corporations, they are highly risk-averse since any failure
in foreign investment will bankrupt their entire business. They are very
weary of policy uncertainty and procedural complexity, especially in
Vietnam. The risk is higher when SMEs come on their own, rather than
to follow and serve one large assembler. Such SMEs prefer to start withsmall scale since demand in Vietnam is likely to be small initially. To
minimize their risk and investment cost, Vietnam should build industrial
parks with good location, superb infrastructure, and responsive managementwith administrative and language support. Alternatively, apartment-type
rental factories with small lots of 300-400 m2, also with sufficient support,
may be built. Such industrial parks and rental factories are a goodmarketing tool which can convey the seriousness of host countries in
reducing the cost of doing business for foreign investors.
Well targeted FDI supplier marketing is routinely conducted by other
Asian countries, often in close cooperation with Japanese organizations.
Partnership between Tokyo's Ota Ward and Thailand's Amata Corporationis one example. The Board of Investment (BOI) in Thailand had targeted
Japanese mold and die makers to strengthen the automobile industry. Ota
Ward was selected as the suitable partner, and Amata Corporation was
asked to construct Ota Techno Park, apartment-type rental factories, inChon Buri near Bangkok, to receive Japanese SMEs. Eight factories in thefirst phase were rented out in 2006 and Amata is now building the second
phase. In India, the State of Rajasthan, in cooperation with JETRO, isbuilding Nimurana Japanese Industrial Park on National Highway No.8
near Delhi, near where Suzuki, Honda and Nissan assembly factories arelocated. The industrial park will have an area of 4.5 km2, to be completed
by January 2008. In Indonesia, the Indonesian Mold and Dies Industry
Association (IMDIA) was established in 2006, as a result of bilateralpublic-private cooperation between Indonesia and Japan to promote this
sector.

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4-7. Supporting industry database and businessmatching
In Vietnam, there is an information gap which impedes business interaction
between FDI assemblers and local suppliers. Although many FDI assemblers
desperately look for good local suppliers, they do not know where they
are located. To search for local partners, many FDI assemblers use telephone
directories or workers' personal connections. However, this is inefficientand time-consuming. A supporting industry database can greatly reducethe cost of finding potential suppliers.
However, domestic and international experiences show that most suchdatabases fail to be used by targeted groups because of poor design or lackof proper maintenance. To avoid such a situation, systematic preparation isnecessary before launching a database.
To be effective, a supporting industry database must understand andrespond to the supplier selection criteria of FDI assemblers. In addition tobasic information such as company name, contact address and main products,
FDI manufacturers usually need to know (i) general director's attitude,(ii) quality, (iii) cost, (iv) on-time delivery capability, and (v) production
scale, before deciding to even contact the candidate company. The
database must supply such information in order to be useful17.
Effective operation of databases is even more difficult than designingthem. The common problem is that SMEs do not participate actively indatabases which intend to help them. The database becomes useless iftargeted companies do not list or update their information. To solicit
participation, the database should be coupled with additional services thatare appreciated by SMEs, such as finding new customers, training workers,

17 For this purpose, the following items in the database are useful: (i) self-introduction statingcompany policy, special skills, JIT experience, and so on; (ii) production facility inventory including
machine models and names of manufacturers; (iii) processing accuracy in milli- or micro-meters;(iv) quality certification such as ISO; (v) customer list; (vi) annual sales; (vii) capital; and (viii)
number of employees. For details, see Junichi Mori, "Designing and Managing Supporting
Industry Databases," in VDF, Building Supporting Industries in Vietnam, vol.1, 2007.

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or business consultation18. For policy makers, close contact with suppliers
can be a valuable source of information for receiving business opinions
and responding to their needs.

4-8. Quality, safety and environmental standards
To build supporting industries that are internationally competitive, Vietnam
must have quality, safety and environmental standards that are consistent
with global standards. Vietnam-specific requirements may be added, if
there is a legitimate reason, but that should not make Vietnamese
motorcycles and parts inconsistent with global standards. Internationally
incompatible standards impede export and import and achievement of
optimal procurement pattern. They will also increase costs because
manufacturers must design and produce unique motorcycles and parts for
Vietnam instead of using globally common designs (within a company)
to enjoy scale merit.
For example, Vietnam requires that there should be only one headlight,
while most other ASEAN countries allow both one-beam and two-beamheadlights. Vietnam's regulation is also unique and stricter on beam
angles. This makes it difficult to export Vietnamese motorcycles to other
ASEAN markets without significant and costly re-modeling. Anotherexample is environmental standards which are different among East
Asian countries. Different national roadmaps on EURO air quality
standards make it difficult to trade motorcycles and related parts (chapter 7).
There should be a comprehensive survey on the compatibility of quality,
safety and environmental standards between Vietnam and the rest of theworld, with active participation of assemblers and part suppliers in
Vietnam. Except for a limited number of cases, if any, which respond to

18 In early 2007, MPI's SME Technical Assistance Center (TAC) organized a pilot program to invite
Mr. Tatsuya Hoshino, Japanese expert, to teach 5S and QCD to eight local SMEs and bring themto several Japanese FDI companies to practice marketing of their products. The program will be
expanded to include more SMEs. Such practical training can be usefully combined with theconstruction of a supporting industry database.

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Vietnam's unique road situation, global standards should be adopted toreduce the design and production cost of motorcycle manufacturers in
Vietnam.
Vietnam does not have clear industrial and safety standards comparable
to national standards of neighboring countries such as Malaysia's JBE
SIRIM and Thailand's TISI. The lack of consistent standards encourages
importation of low-quality finished products as well as low-quality parts,
making Vietnam a dumping ground for defective goods. Without
well-established grading criteria of rubber tires, for instance, it is impossible
to stop the inflow of low-quality tires. This is an undesirable situation for
consumer protection as well as for healthy industrial development.
Without national standards, it is also difficult for individual local suppliers
to set and aim at their own quality targets.
The Vietnamese government should provide timely information andeffective guidance on industrial, safety and environmental laws in othercountries which may affect enterprises in Vietnam. For example, inJanuary 2006, EU introduced the Law on the Restriction on Hazardous
Substances (ROHS) which prohibited importation of products containing
any of the six substances, namely, cadmium, lead, hexavalent chrome,
mercury, PBB, and PBDE. Although Vietnam has not adopted a similar
environmental law, any firm that wants to remain internationally competitiveand continue to do business with EU would adopt ROHS as soon as possible.
However, local suppliers in Vietnam have not been informed of ROHS
and are not prepared to supply ROHS-consistent parts. One Taiwanese
motorcycle part manufacturer complained that it could not switch to the
ROHS standard because there was no local supplier of trivalent chrome,
which was to replace the banned hexavalent chrome in metal plating.
Finally, to implement national standards effectively, Vietnam needs toestablish testing centers and accrediting agencies with sufficient staff andmeasuring equipment. They can help suppliers to check and prove theirproduct quality, eliminate low-quality products, and save testing costs
which are too large for individual producers. In Vietnam, the Directorateof Standards and Quality (STAMEQ) is currently responsible for setting

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standards, metrology and testing, and accreditation. STAMEQ has testinglaboratories in Hanoi, Da Nang, and HCMC, but they focus mainly on
textiles and food processing products. There should also be testing
centers for machinery products, either through creating a new organization
or expanding STAMEQ functions19. Moreover, entry of private accreditation
organizations should also be welcomed in order to expand services andintroduce competition.

19 UNIDO, EU and France each have conducted capacity building projects with STAMEQ.

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Chapter 5
Urban Planning and Transport Modes

5-1. Urban planning and development in Hanoi and
HCMC
Urbanization trend and impacts
Vietnam currently has a relatively low rate of urbanization, at 24% in2000 and 30% in 2005, but is likely to undergo continued rapid urbanization
as experienced in other fast-growing developing countries. Vietnam's
urbanization is expected to continue until the urbanization rate reaches
70-80%. This implies that Vietnam will face long-lasting challenges
associated with urbanization in the coming decades. It is estimated thaturban population of about 23 million in 2005 will double to nearly 47
million by 2030 and continue to grow subsequently.
Urbanization will be particularly significant in the two largest cities of
Hanoi and HCMC. In both cities, urban development master plans wererecently updated with technical assistance from the Japan International
Cooperation Agency (JICA). The Study on the Urban Transport Master
Plan and Feasibility Study in Ho Chi Minh Metropolitan Area
(HOUTRANS) was completed in 2004, and the Hanoi Integrated
Development and Environment Programme (HAIDEP) was completed in2007. This chapter relies heavily on the data and analyses of thesemaster plans.
Vietnam's urbanization is driven by strong economic growth propelled byindustrialization, foreign trade, and investment. With the recent accessionof Vietnam to WTO and continued Asian dynamism as background,
Vietnam's urbanization is expected to basically follow the path taken byother industrializing or industrialized Asian countries, such as Japan,
Korea, Malaysia, and China (Fig.5-1).

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Fig. 5-1 Urbanization Trend in Asian Countries

80
Korea

Japan

60

Urban Population Ratio (%)

Philippines
Malaysia
40

Vietnam, 2020
Indonesia
Cambodia
China

20
Thailand
Vietnam
0
10

100

1000

10000

100000GDP per capita (USD)

Source: HOUTRANS household interview survey.

Impacts of urbanization are extensive and include both positive andnegative sides. On the one hand, as national income grows, ownership ofcars and motorcycles rises which produce diverse service industries andchanges in people's lifestyle. Information access and people's mobility
improve, employment opportunities expand, and overall quality of life isenhanced. On the other hand, rapid urbanization exerts severe pressure on
existing infrastructure and people's living and working conditions, as traffic
congestion worsens, agricultural land is encroached upon, and environment
deteriorates. The key policy objective should therefore be to find an
effective way of maximizing the benefits of urbanization while minimizing
its negative consequences.
Urbanization in and around Hanoi and HCMC is proceeding at muchhigher rates than expected a decade ago, and these cities are starting toform greater metropolitan areas. It is expected that they will become
mega cities sprawling beyond the current administrative boundaries, with68

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Urban Planning and Transport Modesa population of about 5 million20 for Hanoi and about 10 million for
HCMC by 2020. The two cities will continue to play the leading role ineconomic development, attracting investments and human resources forfurther industrial growth and employment. The average urban householdincome is likely to increase from the current level of US$1,350 -1,460 to
US$5,000 -6,000 by 2020 (Tab. 5-1). This will accelerate ownership ofvarious durable goods. In particular, it is predicted that about 20% ofhouseholds in Hanoi and HCMC will own cars by 2020.

Tab. 5-1 Selected Indicators of Urban Growth in Hanoi and HCMC
Hanoi
2005

GRDP percapita

2020

2005

2020

921

921

2,095

2,095

Total (x1000)

3,183

4,500

6,240

10,000Urban (%)

62.5

87.8

83.9

100

VND million

20

90

22

75

US$

1,350

6,000

1,460

5,000

1,385

1,986

2,040

3,362

161

384

158

434

1,546

2,370

2,198

3,796

Area (km2)
Population

HCMC

No. of vehicles Motorcycles(x1000)4-wheeledTotal

Source: HAIDEP study team, 2006.
Note: GRDP stands for gross regional domestic product.

Urban master plan orientation
A large population with an increasingly high average income demands
better infrastructure services in many fields including transportation, watersupply, sanitation, telecommunications, education, health, and recreation,
all of which contribute to improved living conditions. In the future,
Greater Hanoi and Greater HCMC are certain to have an urban structure

20 Including the population of 500,000 in urban areas in adjoining provinces which will be integrated
into Hanoi.

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different from today's centripetal structure. As the urban area expands,
subcenters will emerge to provide services and employment. Whilebusiness and commercial activities will remain in the city center,
residents will move to outer areas for better living environment. Althoughboth cities are trying to check growth and create a mechanism for
managing future development, controlling urban development is not aneasy undertaking.
Both Hanoi and HCMC recently updated urban master plans in responseto rapidly changing socio-economic environment. Both cities plan to provide
public transport services that can cover about 45-50% of total trip demandby 2020 (Fig. 5-2)21. The bus system alone is incapable of providing
required public transport services, because road space is insufficient toaccommodate a large fleet of buses22. For this reason, both cities are
determined to build an urban mass rapid transit (UMRT) network,
composed of urban rail and rapid bus transit, as the backbone of public
transport. This policy direction is basically correct and is an effective way
for Hanoi and HCMC to solve urban transport problems in the future.

Fig. 5-2 Planning Target for 202010 million (Hanoi)
25 million (HCMC)

Total no. of trips/day
6.5 million (Hanoi)
13.9 million (HCMC)

Car/Truck

MotorcycleRail30-35%(indicative)
target)Bus
Present (2005)

Future (2020)

Source: HOUTRANS household interview survey (2002).

21 This is an ambitious policy target. In projecting modal share, we must also take into account thepossibility that this target is not reached in time.
22 Up to now, public bus systems have been unsuccessful in providing competitive services except forlimited market segments such as regular "to work" and "to school" trips over relatively long distanceusing much discounted monthly pass.

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In order to realize this scenario, a large amount of capital investment isnecessary. According to HOUTRANS and HAIDEP studies, each cityrequires a total of about US$14 billion to satisfy its transport needs by2020 (Tab.5-2). Main areas of investments are as follows:(a) Road development--this includes an early completionof missing links, improvement of bottlenecks, as well as theconstruction of a substantial length of primary and secondary
roads, especially in urbanizing areas. Flyovers, interchanges atcritical intersections, and bridges across the rivers must be built.
For efficiency, roads must be developed as an effective network,
rather than unconnected local improvements. HAIDEP proposeda total of 600 kilometers of main roads to be developed forGreater Hanoi by 2020 while HOUTRANS proposed a total of
750 kilometers of main roads including 46 kilometers of urban
expressways for Greater HCMC.
(b) UMRT network--this comprises of urban rail and bus rapidtransit (BRT) along major corridors to add transport carrying
capacity and improve accessibility of and mobility in the central
business district (CBD). HAIDEP proposed four UMRT lines
with a total length of about 200 kilometers in Hanoi, while
HOUTRANS proposed four UMRT lines with a total length ofabout 140 kilometers excluding BRT in HCMC.
(c) Improving traffic management--this includes various minor
improvements of roads as well as implementation of traffic
management measures and safety facilities such as traffic signals
and signs, pedestrian bridges, parking facilities, etc, to ensure asafe and smooth flow of vehicular and pedestrian traffic.
(d) Bus and other public transport services--even when UMRT
becomes operational, buses will remain the most important public
transport mode, providing services in non-UMRT corridors andfeeder services to UMRT. Other supplementary public transport,such as taxi, motorcycle taxi, and factory and school buses, arealso expected to play specific roles.

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Tab. 5-2 Required Investments in Urban Transport Sector
in Hanoi and HCMC, 2005 to 2020
Investment cost (US$ million)

Urban roads

Hanoi

HCMC

7,993

10,090Traffic management

444

520

Public transport

5,130

3,455

Total

13,567

14,065

Sources: HOUTRANS and HAIDEP.

5-2. Future demand for urban transport
Travel demand in Hanoi and HCMC has increased rapidly and is expected
to increase further in the future (Tab. 5-3). Changes are expected not onlyin transport volume but also in the composition of transport modes. Bothcities have experienced a significant shift from walking and bicycles tomotorcycles over the last decade, and a further shift from motorcycles tocars is very likely as experienced in other cities in the world. However,whether there will also be a shift to public transport is less certain because
it largely depends on government's policy intervention. In particular, thelarge share of public transport in Hanoi and HCMC projected for the
future will not be realized unless a high-quality public transport system iscreated as proposed in the HAIDEP and HOUTRANS plans.
A transport modal analysis by HAIDEP and HOUTRANS shows thatmotorcycles will account for a relatively high percentage of travel in
Hanoi (30%) and HCMC (35%) even in 2020. It must be stressed thatthese figures on future demand are subject to the availability of UMRT
and the management of cars. Without an effective UMRT system, theshare of private transport would be higher. Similarly, in the absence ofproper control measures on the use of private cars and motorcycles, theshare of public transport would be lower. In order to achieve the projectedhigh share of public transport in Hanoi (50%) and HCMC (45%) by 2020,

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Urban Planning and Transport Modes

it is necessary to develop the UMRT network and to control car use
through demand management measures such as high fees for parking andother pricing schemes.
Tab. 5-3 Travel Demand in Hanoi and HCMC
Number of trips (000/day)
City

Mode

2020

1995

2005

2020

19951)

20052)

2,257

1,598

452

73.2

24.6

4

Motorcycle

632

4,075

3,390

20.5

62.7

30

Car and taxi

7

226

1,808

0.2

3.5

16

Public

UMRT

-

-

4,294

-

-

38

transport Bus, etc.

165

547

1,356

5.4

8.4

12

Truck and other

21

57

-

0.7

0.8

-

BicycleHanoi

Share (%)

Total

3,082

6,503

11,300

100.0

100.0

100

Bicycle

2,633

1,988

106

32.0

13.6

0.4

Motorcycle

5,267

10,806

8,606

64.0

77.9

35

Car and taxi

82

212

4,709

1.0

1.6

19

UMRT
HCMC Public
transport Bus, etc.

-

-

4,551

-

-

18

247

7823)

6,792

3.0

5.9

27

1.0

-

100.0

100.0

100.0

Truck and other
Total

-

132

-

8,229

13,92024,764

Sources: DFID-MVA (1996, HCMC), HOUTRANS (2004), and HAIDEP (2007).
1) 1996 for HCMC.
2) 2002 for HCMC.
3) Including bus, lambro, motorcycle taxi, cyclo, private bus and ferry.

5-3. Factors influencing motorcycle use
Extremely high presence of motorcycles in urban areas such as Hanoi and
HCMC is not seen anywhere else in the world. Their extraordinary
popularity seems to be related to history as well as collective psyche.
However, there are a number of factors which are certain to haveinfluenced the use of motorcycles in Hanoi and HCMC. Apart fromrobust income growth which enables continued purchase of consumer
durables, the following factors can be pointed out.

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Urban Planning and Transport Modes(a) Compact urban areas with narrow access roads--urban
areas of Hanoi and HCMC are compact and densely developedwith complex access roads which are too narrow for cars but
wide enough for bicycles and motorcycles. Besides the limited
coverage of main roads, distance from residence to a main road,where public transport is available, is usually too far to be reachedon foot. Moreover, land use is highly mixed, so much so thatbasic urban services can be obtained in relatively short distance.
(b) Lack of public transport services--the lack of attractive
alternative transport services has also contributed to the high useof private transport. Trams which once were popular have been
removed, the quality of bus services has been low, cyclos havebecome obstacles on main roads, and informal services such as
lambro and motorcycle taxi have limited capacity. In the past,
the government paid little attention to the development of
attractive public transport services. This led to the high ownershipof motorcycles (Tab.5-4).

Tab. 5-4 Ownership of Motorcycles in Hanoi and HCMC(% of households)
Hanoi

HCMC

2005

2002

8.5

5.8

One

33.9

37.5

Two or more

52.0

53.7

Car

2.1

1.7

None

3.0

1.3

Total

100.0

100.0

Bicycle only
Motorcycle

Sources: HAIDEP (2005) and HOUTRANS (2002).

(c) Affordability and convenience of owning motorcycles-people's long-lasting habit of riding bicycles and the uniqueurban structure mentioned above made transition to motorcycles

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Urban Planning and Transport Modessmooth and convenient. Income growth and increasing
affordability also contributed to a quick shift from bicycles tomotorcycles which are supplied with a wide price range.
(d) Weak regulation on the use of motorcycles--the way
Vietnamese people use motorcycles is extraordinary and canhardly be observed anywhere else in the world. Excessive
freedom given to drivers such as overloading, driving without
helmets, reckless driving, on-road parking without fees orwith minimum fees, etc. may have also encouraged the use of
motorcycles at the risk of traffic accidents23.
(e) Motorcycles being more than a simple transport mode-motorcycles in Vietnam are not simply a transport mode but also
an object to inspire the spirit and cater to people's broader needs.
Motorcycles are a means of recreation, a fashion item, and acommunication tool. Motorcycles are so much in tune not onlywith the physical structure of urban areas but also with the life
and activities of the people.

5-4. Motorcycles in urban planning
While motorcycles are inseparable from Vietnam's urban system, they
have not been incorporated adequately into urban planning anddevelopment. In the minds of planners, motorcycles were considered atransitional or supplementary mode and did not receive as much serious
attention as the so-called main modes of transport such as cars and urban
rail. In addition, the conventional methodology of urban and transport
planning fails to provide reliable data, adequate analytical methods, or
practical planning guidelines for motorcycles. In reality, motorcycles
have been a political target of criticism and control rather than something
to be supported and promoted.

23 Regulations concerning these behaviors are quite strictly enforced in other cities in Asia. In manylarge cities in China, motorcycle use is basically banned, while bicycles and buses are promoted.

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In contrast, international transport experts generally agree that motorcycles
and bicycles contribute to equity in mobility and service access in developing
countries, and generate positive impacts on urban development.
Vietnamese cities offer unique and interesting cases where motorcycles
already play such a dominant role in transport. Since motorcycles willcontinue to exist on Vietnamese roads in the foreseeable future, there isan acute need to define their proper role in the context of the entire
transport system, including their merits and demerits, and reflect this inindustrial and urban development policies.
Positive roles
The negative effects of a large number of motorcycles, as currently
operated on Vietnamese roads, are well known and analyzed in detail inthis master plan (chapters 1, 6, 7, 8). However, the positive effects ofmotorcycles must also be recognized clearly.
As mentioned above, motorcycles fit Vietnam's urban structure andpeople's lifestyle. At present, motorcycle use on the one hand and urban
and transport development in Hanoi and HCMC on the other arecomplementary in many ways, and urban residents can hardly stop using
motorcycles without sacrificing convenience. Contributions of motorcycles
can be summarized as follows.
(a) Motorcycles enhance mobility and accessibility—thanks tohigh ownership of motorcycles, average trip rates (number oftrips made by a person per day) in Hanoi and HCMC are
relatively high compared with other Asian cities24. Moreover,motorcycles can negotiate traffic congestion far more easily
than cars and buses, which cuts travel time for each trip. The
average travel time of a trip is 22 minutes in Hanoi and 18 minutes
in HCMC (Tab. 5-5). Trip length is longer but travel speed ishigher in HCMC than in Hanoi, probably because of better

24 Trip rates, including walking, in Hanoi and HCMC are 2.7 and 3.0 respectively, which are higher
than in Manila (2.2), Jakarta (1.7), Kuala Lumpur (2.5), Bangkok (2.3), Chengdu (2.6), or Tokyo (2.3).

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roads, better traffic management and better driving behavior in
HCMC.
Tab. 5-5 Average Travel Time of Motorcycle Users
Hanoi
Travel purpose

HCMC

Length
(km)

Time
(min)

Speed
(kph)

Length
(km)

Time
(min)

Speed
(kph)

To work

5.0

21.2

13.4

5.6

20.0

17.3

To school

4.5

20.8

12.4

4.7

16.4

16.4

Private

4.0

20.7

11.4

4.8

16.5

17.8

Business

4.6

26.4

12.1

5.3

28.2

16.2

All trips

4.8

21.9

12.5

5.1

18.2

17.3

Sources: HAIDEP (2005) and HOUTRANS (2002).

(b) Motorcycles are space-efficient--road space required bydifferent types of vehicle can be measured and compared byequivalent passenger car unit (PCU), which is a number ofpassenger cars that can occupy the space used by the vehicle inquestion. The PCU value of a motorcycle depends on actual
traffic situation and varies from 0.25 to 0.5. When motorcycle
traffic is dominant, its PCU is low. However, if traffic is more
mixed in vehicle type, friction between motorcycles and othervehicles increases, resulting in a higher PCU of a motorcycle.
This implies that the PCU of a motorcycle is low today but will
increase in the future when there are more traffic modes on road.
Space efficiency of motorcycles, cars, and buses under the current
condition is compared (Tab. 5-6). The number of passengers of
motorcycles per PCU is 5.4 and those of car and bus are 2.0 and
7.2, respectively. This clearly shows the efficiency of motorcycle
especially against car and even against bus when its load factor
is low.

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Urban Planning and Transport Modes(c) Motorcycles are cost-efficient--the cost of operating motorcycles
is also compared with cars and buses (Tab. 5-6). At the speed of
20kph, motorcycles cost VND435 per passenger-km, while cars
and buses cost VND1,573 and VND284, respectively. When thecost of maintaining pavement and other facilities, such as parking
lots and terminals, are considered, the advantage of motorcycles
further increases.
Tab. 5-6 Space and Cost Efficiency of Motorcycles, Cars,
and Buses under Current Traffic Conditions in Hanoi
Motorcycle
Space efficiency

Cost efficiency(VOC 2) at 20 kph)

Car

Bus

0.25-0.5

1.0

2.5

No. of persons/vehicle3)

1.36

2.02

17.9

No. of persons/PCU

2.7-5.4

2.0

7.2

VND/vehicle-km

582

3,178

5,078

VND/passenger-km

435

1,573

284

PCU1)

Source: Calculation using HAIDEP data.
1) PCU = Equivalent passenger car unit
2) VOC = Vehicle operating cost3) Actual figures obtained from the survey conducted by HAIDEP

Traffic simulations
Impact of motorcycles on the current overall urban traffic was assessedby converting the number of trips to PCU-km for motorcycles, cars, andbuses. In terms of number of trips, motorcycles meet 84% of current total
demand, while cars (including taxis) cover 5% and buses cover 11%.
However, in terms of PCU-km, motorcycles' share is 71% while cars(including taxis) and buses shares are 17% and 12%, respectively. Thismeans that car travel, although still at a low level, occupies relatively large
space on the road for the same amount of trips (Tab. 5-7).

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Tab. 5-7 Impact on Road Traffic in Hanoi, 2005
Trip demand
Mode

Averagetrip
length(km)

Averageoccupancy(persons
per vehicle)

PCU-km/day
PCU

Thousands oftrips per day%

Motorcycle

4,075

84

4.9

1.36

0.25

3,649

71

Car and taxi

226

5

7.9

2.02

1.0

847

17

Bus

547

11

8.2

17.92

2.5

627

12

4,848

100

-

-

-

5,123

100

All trips

Million%Source: HAIDEP (2007).
Note: PCU-km/day refers to demand in terms of vehicle-kms, which indicates spacerequirement on the road. Different types of vehicles are converted into passenger car unit
for comparing their space use efficiency.

To see the efficiency of motorcycles in the overall urban traffic, calculations
are made for Hanoi with alternative traffic mixes of motorcycles, cars, andbuses. The exercise was structured to answer the following questions:(i) if buses meet more demand, what will be the overall traffic efficiency?;(ii) if car traffic increases, to what extent will the traffic situation worsen?;and (iii) how does a change in the share of motorcycle affect overall
traffic efficiency? The main findings are as follows (Tab. 5-8).
(a) The current traffic mix dominated by motorcycles gives theleast impact on overall road traffic with a space use of 5.1 million
PCU-kms per day. If the bus load factor improves from 18 to 30
passengers per bus, traffic situation will further improve with a
total space use of 4.9 million PCU-kms per day.
(b) All other scenarios give a worse situation than the existing
condition. Even if bus traffic increases, total space load rises
because of an increase in motorcycle PCU25. A mix of large vehicles
and motorcycles generally leads to an inefficient use of road
space. The advantage of bus is offset by this effect.

25 As the percentage share of motorcycle traffic falls, the PCU of motorcycle rises due to increased
conflict with other traffic. The assumed PCU of a motorcycle is as follows: 0.25 when motorcycle
traffic share is 80% or above, 0.3 for 70%, 0.4 for 60% and 0.5 for 50% or below.

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Urban Planning and Transport Modes(c) Traffic load on roads will rise significantly when the share ofcars increases. For example, if car traffic occupies as much as
30% of the demand, required road space will double to more than
10 million PCU-kms.
(d) The development of UMRT greatly contributes to theimprovement of the situation. When the UMRT system
accommodates 30% of traffic demand, total road space load is
reduced to 4.2 million PCU-kms. However, if car demand ishigh, the benefit of UMRT is offset by the crowding effect ofcars and the overall situation may not improve.
The question is not simply choosing one preferred transport mode, butachieving the optimum mix of the three main modes of urban transport,
namely motorcycles, cars, and buses. They have different
characteristics and functions which compete with and complement eachother on the same road space. If motorcycles comprise the majority of
Tab. 5-8 Impact of Traffic Mix on Overall Traffic Efficiency in Hanoi
Assumed traffic mix (%)

Total PCU-km (000/day) 4)

M/C

Car

Bus

Bus loadfactor = 18

Bus loadfactor = 30

84

5

11

5,123

4,870

70

20

10

7,336

7,612

60

30

10

10,174

9,950

60

10

30

7,651

6,980

40

30

30

10,5909,919

Low car2)

40

10

20

4,217

3,951

High car2)

20

30

20

6,983

6,711

Scenario
Existing situation (2005)
1)

Moderate car2)

Without Poor bus
High car2)
UMRT
Low car2)(2020)
Good bus1)
High car2)
With UMRT 3) (2020)

Source: Calculated from HAIDEP data.
Notes:
1) "Poor bus" means a bus share of 10% of total transport demand while "good bus"means a bus share of 30%.
2) For car share, low, moderate and high represent 10%, 20%, and 30% of total transportdemand, respectively.
3) It is assumed that 30% of transport demand is served by UMRT.
4) Total PCU-kms were calculated from average trip length of passengers and averageload factor of bus, car and motorcycle.

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road users, they are efficient. However, when they are mixed with othervehicles, their advantages decrease significantly unless they are effectively
managed. As to car traffic, its increase poses a serious threat to the traffic
situation in the future. It must be properly regulated before the situation
becomes unmanageable as observed in other large cities in the region.

5-5. Concerns and drawbacks
While motorcycle users currently enjoy a high level of mobility andaccessibility which are also economically and financially advantageous to
the society, the situation is gradually changing. For one thing, traffic is
becoming more mixed. Moreover, as urban areas expand, longer travel isrequired for those residing in outer areas. According to the recent surveys
by HAIDEP (2005) and HOUTRANS (2002) in the two cities, the use of
motorcycles is becoming a serious concern of the residents under theheightened awareness of safety and travel distances. The surveys' findings
are as follows:(a) The main reason for choosing motorcycle as the preferredtraffic mode is convenience. As many as 60% of the respondents
in Hanoi and 64% of the respondents in HCMC say that they use
motorcycles for convenience. Other main reasons include noother choice, faster travel time, and comfort.
(b) Urban people are generally satisfied with their travel conditions.
In Hanoi, 52% of the motorcycle users find travel conditions
to be good, while 42% think they are so-so. In HCMC, thecorresponding figures are 20% and 65%, respectively. HCMC
people are less satisfied with the travel conditions. These
responses are surprisingly favorable in comparison with thelarge cities in the region. However, subjective perception canturn much worse when congestion and conflict among motorcycles
and other vehicles visibly increase. This situation is alreadybeginning to occur, and people's perception may become very
negative quickly.

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Urban Planning and Transport Modes(c) Safety is now the number one concern among motorcycle
users. The surveys clearly show that almost half of motorcycle
users worry about their safety on the road, although they still use
motorcycles for convenience and freedom (Figure 5.3).
(d) Travel distance is also becoming a concern. Surveys results
indicate that those who travel by motorcycle for 30 minutes or
longer feel uncomfortable. This may be one of the reasons forthe success of the bus transport capacity expansion policy
implemented in 2002 in Hanoi and HCMC.

Fig. 5-3 People's Assessment of Motorcycles in HCMC

Assess ment

Compared to
5 years ago

Good

Improved

So - soNo change

Bad

Worsened

60%
45.6
40%

14.8

20%

12.1

14.0
7.8

0%
SafetyComfortFreedom

Speed

Convenience

Source: HOUTRANS household interview survey (2002).

Another important fact is that motorcycles cannot serve everybody.
Although the majority of the adult population can take advantage of the
motorcycle, there are groups who cannot, including children, the elderly,
and the physically-challenged. Moreover, motorcycles should not be used
when drivers are tired, sleepy or drunk. Although they can still ridemotorcycles as passengers, riding on a motorcycle requires alertness andbalance. Passengers in a car or a bus (when not over-crowded) can restand even sleep, but motorcycle passengers will risk their lives if they do so.

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While the majority of residents in Hanoi and HCMC use
motorcycles, 95% of the respondents the HOUTRANS survey in HCMC
thought that the city should become more oriented toward public transport.
As many as 90% of the respondents support more regulation on urban
transport such as stricter control on the ownership and use of motorcycles,
provided that it does not impose excessive financial burden on users26.

5-6. The future role of motorcycles
The future role of motorcycles in Vietnam's urban areas will not be thesame as before due to newly emerging factors. Among them, an increasein car traffic and planned urban rail are the two critically important factors.
From the viewpoint of road space efficiency, the former is a negative factor
which will seriously aggravate congestion while the latter is a positive
factor which will greatly reduce congestion. The policy should aim
at properly regulating the expansion of car use while building an urban
rail system as soon as the budget allows. However, to be efficient an
urban rail system requires feeders, in which motorcycles can play a very
important role.
Car traffic inevitably increases as income and car ownership rise. It is
expected that about 20% of the households in Hanoi and HCMC will own
a car by 2020. As car traffic increases, conflicts in traffic flow will
escalate. Traffic congestion will become more serious, traffic accidents will
rise, and urban environment is likely to deteriorate if no regulatory
measures are taken and if no UMRT is available. This is highly predictablefrom the experiences of other cities such as Bangkok, Manila and Jakarta.
If this worst scenario happens, motorcycles will become an unpleasantprivate mode for people who are unable to own a car but do not want to

26 In the consumer interview survey conducted by the Vietnam Development Forum (VDF) during
March 5-18, 2007 in Hanoi, HCMC and Can Tho (1,981 valid answers), 62% of respondents
supported motorcycle control with a roadmap, while 21% wanted no control and 17% favored
immediate control. A separate VDF on-line survey during the same period (7,763 hits) gave thefollowing results: control with a roadmap (45%), no control (29%) and immediate control (26%).

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use low quality public transport. The current advantages of motorcycles
such as convenience and comfort will disappear and disadvantages suchas traffic accidents and air pollution will increase. Clearly, this situationmust be avoided.
On the other hand, policy orientation of Hanoi and HCMC authorities, as
stated in HOUTRANS and HAIDEP, is to realize public transport-based
urban areas, in which UMRT will be the backbone that provides fast, highquality services along major corridors as well as to, from and within thecentral business district. Buses will cover secondary corridors in most of
the urban areas in a way that is closely integrated with UMRT. Cars andmotorcycles must play the role of not only door-to-door transport, whichis their unique advantage, but also effective feeders to the public transportsystem. Along major corridors, priority should be given to public
transport and cars, while on secondary and local roads, motorcycles andbicycles should be prioritized, including the provision of roadsideparking for them. In the central business district, the UMRT network
should be configured in such a way that people can easily access an
UMRT station within a reasonably short walking time, while the use ofboth cars and motorcycles must be strictly regulated through physicalcontrols and congestion pricing to ensure smooth and comfortable traffic
flows.
Under this desirable scenario, motorcycles will continue to perform asignificant role particularly for short to medium distances and for private
travels, in an environment which is well organized for safety and amenity.
The benefits of motorcycle use will be further enhanced if it is closely
integrated with other transport modes, especially UMRT and buses. Since
physical structure in the existing urban areas in Hanoi and HCMC, suchas dense population and narrow lanes, is likely to remain basicallyunchanged in the future, motorcycles can continue to provide varioustransport services there. They will remain an important but complementarytransport mode which contributes to socio-economic activities of urban
residents, the urban transport system, and overall urban development.

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5-7. Policy recommendations
Motorcycles and bicycles have played critical roles in providing mobility
and accessibility to Vietnamese people. In the future, motorcycles willremain and can play better roles in urban transportation when they areproperly integrated into the overall urban transport policy framework. To
realize this, the most important pre-condition is to raise the awarenessand understanding of the good use of motorcycles among all people,
including users, law enforcers, and leaders. Without this, no policy measures
will work.
Actions should be taken in the following three directions.
Short-term measures(a) Regulated use of limited road space: this requires establishingclear rules and guidelines, and informing them to users andenforcing them strictly (see chapter 6 for motorcycle riding
rules).
(b) Expansion of time-based parking fee: Long stay parking onroads and sidewalks in urban centers with minimal fee benefits
users at the sacrifice of all others. Road space is not a garage formotorcycles and other vehicles. Time-based parking fee promotes
an efficient use of road space, and collected fees can contributeto further improvement of traffic management facilities. By
combining traffic control with a proper parking system, whichreflects the function of roads and roadside situations at eachlocation, overall efficiency of traffic flow and accessibility toroadside activities can be improved.
Long-term measure
Proper design of rail stations and terminals: as urban areas
grow, travel distance beyond 30 minutes cannot be served by
motorcycles due to increasing discomfort. As Hanoi and HCMC
expand, a high quality mass transit system must provide coreservices as recommended in HOUTRANS and HAIDEP. As

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noted above, motorcycles and bicycles should play important roles
in providing feeder services through the park-and-ride system.
Cars can also do this through the kiss-and-ride system.
Motorcycle traffic should be directed away from main corridors
and toward local services in catchment areas of mass transit lines.
To realize this concept, interchange areas such as stations andterminals must be properly designed for smooth connection offeeder and line haul services.
Traffic Management in Hanoi's Ancient Quarter
Traffic situation in the Ancient Quarter of Hanoi should be
improved by implementing the following measures with close
cooperation of local communities.
(a) Car and truck regulation: ban the use of cars and trucks
within the designated areas of the Ancient Quarter, except those
directly owned and used by residents or those delivering goods.
Permitted cars and trucks can operate during certain hours only.
They should be issued official stickers which must be displayed
clearly.
(b) Other restrictions: the speed limit of all vehicles should be
15 kph or 20 kph within the Ancient Quarter, on-road parking ofcars and trucks are banned except in designated areas and time,and motorcycle parking should also be limited to designatedspace with time-based parking fees.
(c) After the completion of the UMRT Line, which will serve theAncient Quarters with underground stations, the use of cars,
trucks and motorcycles should be restricted more extensively
and the entire Ancient Quarter should become an area forpedestrians and non-motorized vehicles, except for the minimum
use of vehicles by residents and commercial establishments.

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Chapter 6
Reducing Traffic Accidents
6-1. Basic data on traffic accidents
The situation of traffic accidents is serious in Vietnam. It has become amajor social problem, in which traffic safety is now regarded as one of
the most urgent policy issues of the government.
The open door policy of Vietnam has accelerated economic developmentwith the participation of many economic sectors. Demand for passenger
and goods transport also rose sharply since the 1990's. At the same time,
Vietnam's road system, which consists of national highways and local
and rural roads, is being built or renovated significantly with domestic
funding as well as loans from bilateral and multilateral organizations.
Income growth and improvement of transport infrastructure together
contributed to a sudden increase in the number of motorized vehicles,
especially motorcycles, in the last decade. As traffic volume expanded,traffic accidents also increased. Traffic conflicts and bottlenecks in urban
areas became apparent, and traffic accidents in rural areas, which used tobe very few in the past, began to soar. On the other hand, the level ofunderstanding and compliance of traffic safety requirements remains
very low among the public. Authorities have also been largely unaware of
their critical role in restoring traffic safety and order.
In terms of transport mode, most traffic accidents occur on roads(96-97%), and most of the fatalities (94-97%) and most of the injuries(98-99%) are also attributed to road traffic. The share of road traffic in
total traffic accidents, fatalities and injuries has been highly stable in the87

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Reducing Traffic Accidents

period of 1996-200527. Clearly, road traffic is at the center of the problemof traffic accidents in Vietnam.
Table 6-1 shows the reported counts of road traffic accidents, fatalities
and injuries. According to this data, road traffic accidents increased
rapidly from 6,110 in 1990 to 27,993 in 2002, or 4.6 fold with theaverage annual increase of 13.5%. In the peak year of 2002, the number offatalities and injuries reached 13,186 and 30,999, respectively. However,reported numbers of accidents and injuries dramatically fell in the period
beginning 2003, although the number of fatalities remained high andrelatively constant around 12,000 per year. This means that there were 1.5
fatalities per 10,000 persons in recent years.
There may be a systematic bias in the reported data on road traffic
accidents since 0.87 fatalities per accident on average (2006 data) isextremely high in comparison with neighboring countries. The corresponding
ratios are 0.20 in Thailand and 0.02 in Malaysia. Fairly constant fatalities
from 2002 to 2006, in contrast to rapidly declining accidents and injuries
in the same period, also point to statistical inconsistency. Significant
under-reporting of accidents and injuries are suspected, relative to thenumber of fatalities which should be more reliable.
According to the sampled data analysis of the National Traffic Safety
Committee conducted in 2001, almost half (48.9%) of road traffic
accidents occurred on national highways where traffic volume and cruising
speed were both high, followed by provincial roads (26.2%), urban roads(17.1%), and district and commune roads (7.8%). By transport mode,
71.4% of road traffic accidents were caused by motorcycle drivers,
22.5% by automobile drivers and 6.1% by other road users28.

27 In 2005, the total number of reported traffic accidents was 14,711, in which road accidents occupied
14,141 or 96.1%. In the same year, road fatalities were 11,184 or 97.0% of total, and road injuries
were 11,760 or 97.9% of total. The rest of traffic accidents, fatalities and injuries were attributed torailway, inland waterway and maritime.
28 When many traffic modes are involved in an accident, the one responsible for causing it is counted
in this data.

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Tab. 6-1 Road Traffic Accidents (1990-2006)
Year

Accidents

Fatalities

Injuries

1990

6,110

2,268

4,956

1991

7,382

2,602

7,114

1992

9,470

3,077

10,048

1993

11,5824,140

11,854

1994

13,7604,897

14,174

1995

15,9995,728

17,167

1996

19,638

5,932

21,7181997

19,9986,152

22,071

1998

20,753

6,394

22,9891999

21,538

7,095

24,1792000

23,327

7,924

25,693

2001

25,831

10,86629,4492002

27,993

13,18630,9992003

20,774

11,86420,704

2004

17,663

12,23015,417

2005

14,711

11,53412,013

2006

14,727

12,757

11,288Source: National Traffic Safety Committee.

The number of road traffic accidents is related to the number of motorized
vehicles on the road, including motorcycles and cars, both of which haveincreased greatly in recent years (chapter 1). However, the relationshipbetween accidents and motorized vehicles may not be simple or linear. In
Fig. 6-1, the number of fatalities per 10,000 motorized vehicles fell gradually
over the years, but still remained at a critically high level of 6.5 fatalities
per 10,000 motorized vehicles in 2006. The numbers of accidents andinjuries per 10,000 motorized vehicles declined more sharply, but thesetrends should be interpreted with care due to the data problem mentioned
above.

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Reducing Traffic Accidents

Fig. 6-1 Traffic Accidents per 10,000 Motorized Vehicles

Accident

Fatality

Injury50.0

No./10,000 veh.

40.0
30.0
20.0
10.0

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

1992

1991

1990

0.0

Source: National Traffic Safety Committee.

Tab. 6-2 Main Causes of Road Traffic Accidents in Selected Years

Cause

2001

2003

2005

Count

%

Count

%

Count

Number of total accidents

25,040--19,852--

14,711%--

Number of analyzed accidents

14,332

100.0

771

100.0

8,485

100.0

1

Road user's error, of which:

10,896

76.0

647

83.9

5,629

70.7

Speeding

4,686

32.7

212

27.5

2,656

31.3

Dangerous overtaking

3,686

25.7

155

20.1

1,317

15.4

Drunk driving

841

5.9

42

5.4

506

6.0

Poor road observation

1,183

8.3

103

13.4

1,015

12.0

Misuse of lanes

-

-

109

14.1

134

1.6

Pedestrian error

500

3.5

26

3.4

371

4.4

2

Unsafe vehicle condition

191

1.3

3

0.4

56

0.7

3

Roads and bridges

33

0.2

2

0.3

12

0.1

4

Other

3,212

22.4

119

15.4

2,418

28.5

Source: National Traffic Safety Committee.

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Reducing Traffic Accidents

According to the sampled accident analysis presented in Tab.6-2, about
three-fourths of road traffic accidents in Vietnam are identified as causedby road users' errors, among which speeding is the primary cause. Road
infrastructure, especially national highways, has improved significantly in thelast decade, but drivers' mindset has not changed accordingly. As a result,road users tend to speed up on highways with relatively less traffic.
Dangerous overtaking by trucks, buses and passenger cars expose low-speed
vehicles, such as motorcycles and bicycles, to great risk in a mixed traffic
situation.
Under these circumstances, strict enforcement of traffic rules and effective
traffic education of road users are crucial in reducing traffic accidents. In
addition, physical measures such as improvement of surface conditions,paving of shoulders, re-designing of roads, and installation of traffic signs
and signals are also necessary.

6-2. International comparison
Global Road Safety Partnership (GRSP) data shows that nearly 1 million
people are killed and more than 10 million people are injured in roadtraffic accidents in the world every year. More than 75% of these occur
in developing and transition countries.
According to regional data, shown in Tab.6-3, the level of traffic safety in
Vietnam is very low. Regarding the total number of fatalities, Vietnam
ranked third after Thailand and Indonesia in 2000 but overtaken them tobecome No.1 by 2006. In terms of fatalities per population, Vietnam's
figure is 1.5 per 10,000 persons (2006 data), which ranks third after
Malaysia (2.6) and Thailand (2.0). In terms of fatalities per motorized
vehicles, which include motorcycles, Vietnam's figure is 6.5 per 10,000
vehicles (2006 data), again ranking third after Myanmar (24.3) and Laos
(19.1). In comparison, fatalities in Japan are 0.7 per 10,000 persons and
1.0 per 10,000 motorized vehicles.

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Tab. 6-3 Comparison of Road Traffic Accidents in Asian Countries in 2000

Fatalities

Country

Population(000)

Motorized
Vehicles(000)

Accidents

Vietnam (2006)

84,50019,58914,727

12,757

1.5

6.5

Vietnam (2000)

77,635

6,695

23,327

7,924

1.0

11.8

Brunei

338

213

2,861

41

1.2

2.0

Cambodia

12,000

331

556

196

0.2

5.9

Indonesia

210,400

18,22413,000

9,500

0.5

5.2

Laos

5,300

187

3,159

362

0.7

19.1

Malaysia

23,30010,590250,417

6,035

2.6

5.7

Myanmar47,700

424

3,459

1,021

0.2

24.3

Philippines

75,6003,506

10,595

969

0.1

2.8

NumberPer 10,000 Per 10,000
persons
vehiclesSingapore

4,000

689

77,475

189

0.5

2.7

Thailand

60,70019,72867,80012,040

2.0

6.1

Japan

129,260

89,250917,609

9,066

0.7

1.0

Sources: National Traffic Safety Committee (Vietnam) and Global Road Safety
Partnership Conference Report, Hanoi, 2002 (other countries).

6-3. Causes of traffic lawlessness
The basic mechanism of chaotic traffic situation is illustrated in Fig.6-2.
In Vietnam, the majority of traffic conflicts and accidents are caused byaggressive and lawless driving such as speeding, reckless overtaking,running red lights, sudden entry into road section, going wrong way,frequent lane changes, and excessive honking. While careless drivers
should be blamed and bear direct responsibility for such conducts,
shortcomings in public policies also indirectly permit and encourage suchdangerous behaviors. These shortcomings include (i) inadequate traffic
safety education, (ii) inefficient traffic enforcement, and (iii) insufficienttraffic safety facilities. To reduce road traffic accidents, policy effort must
be directed to these three areas.

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Fig. 6-2 Causes of Traffic Conflicts and Accidents

Traffic conflicts

Traffic accidents

Aggressive and disorderly behaviors
Speeding, reckless overtaking, running red lights,
sudden entry, going wrong way, frequent lane changes,
excessive honking
Cause
Inadequate traffic safety education
In efficient traffic enforcement
Insufficient traffic safety facilities

6-4. Traffic laws and regulations
On June 29, 2001, the National Assembly approved the Road Traffic Law,
which came into effect on January 1, 2002. This law laid out the basic
traffic policy and became the basis of addressing the problem of traffic
accidents in Vietnam. The Road Traffic Law consists of 77 articles andincludes 28 road traffic regulations such as (i) road signal system, (ii)speed and distance between vehicles, (iii) use of lanes, (iv) overtaking, (v)changing course, (vi) stopping and parking, (vii) giving way at intersection,(viii) traveling on expressway, (ix) drivers and riders of motorcycles andengine-equipped bicycles, and (x) drivers and riders of bicycle, pedestrian,and others. The Law covers most of the current traffic situations in
Vietnam, although some articles need to be elaborated further.
Subsequently, two decrees have been issued to supplement this law.
Decree No.14, which includes one amendment and 30 additional articles,prescribes detailed definitions to supplement the Law. Decree No.15
describes penalties for administrative violations.
Even though the present traffic law is relatively complete by international
standards, the largest problem in Vietnam is the lack of awareness and93

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therefore non-compliance of the Road Traffic Law and related regulations
among drivers and other road users. Moreover, standard traffic laws andregulations are not specific enough to cope with Vietnam's uniquely
mixed traffic with an overwhelming number of motorcycles. Thus, theexistence of laws and regulations is not enough to promote traffic safety
in Vietnam. Tab.6-4 gives an assessment of the effectiveness of the current
Road Traffic Law based on the observation of actual traffic flows.

Tab. 6-4 Evaluation of the Current Road Traffic Law
Traffic Accident
Causes andDangerous Behavior

Prescriptions in the
Current Road Traffic Law

Current Situations/Issues

1. Speeding/

The Minister of Transport shall Article Insufficient usage of theprovide specific regulations.
12
Speed Limit Sign.

2. Reckless Driving/

Before changing lanes, drivers Article Not many drivers use
must give a signal and ensure
12
signals when they change
safety before changing lane.
their lane.

/

When turning, driver must Article No priority for vulnerable
give priority to pedestrians
15
road users. Turning-traffic
and bicycles and must giveandthrough-traffic
way to vehicles running in thecompetes on road space.
opposite direction/

Motorcycles are prohibited Article Motorcycles
runonfrom running side by side, to28sidewalk and drivers using
run on pedestrian lane and tomobile while driving,use mobile phones.
particularly the young
drivers.

/

The vehicle intending to over- Article Practiced by most of thetake another vehicle must give14
motor vehicle drivers, but
a signal either by light or horn.
not motorcycle drivers.

/

The vehicle must pass on the Article Many motorcycle drivers
left hand side of the other14
ignore the regulations.
vehicle.

4. Misuse of Lane/

On one-way roads with lane- Article Not strictly enforced thus
separated lanes, light vehicles
13
resulting in mixed andmust run in the right-mostcongested traffic flows.
lane and other vehicles must
run on the left-most lanes.

5. Misuse of Lane
(Bicycle)/

Bicycles are prohibited to Article Most regulations are sameproceed in pedestrian path or29
as the ones for motorcycles.
lanes.
At least provide safety
rules for the left-turners at
intersection.

3. Careless Overtaking

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6. Jaywalking
Pedestrian/

Pedestrian must only use the Article There are many obstructions
sidewalk and roadsides.
30
on the sidewalk; thus,
many people walk on the
carriageway.

/

At designated pedestrian Article Many pedestrians ignore
crossings which have traffic
30
the signal and crossing.
lights, pedestrians must follow
the signal and cross the roadaccordingly.

/

Upon reaching intersections, Article Drivers sometimes justdrivers must slow down their
22
cross intersections without
vehicles and give way.
slowing down. Stop sign
should be applied effectively.
No mention about 'Stop
Sign'.

/At intersections without Article Common among most ofroundabouts, drivers must give22
the users.
way to vehicles coming fromits right-hand side.

/

At intersections with round- Article The traffic from the left
abouts, drivers must give way
22side seems to be the priority.
to vehicles coming from its
left hand side.

8. Drunk Driving/

Prohibited Acts, the alcohol Article Many drunk driving cases
content exceeding 80mg per
8
are observed but penalties
100ml of blood or 40mg per 1
are not being enforce.
liter of exhaled breath.

9. Helmet Use/

Drivers and passengers of Decree Helmet use should be
motorcycle, three wheeled
14
enforced at all times
vehicles and motorized vehi- Article and not only limited tocles must wear helmet when
8
designated sections.
traveling on the roads where
helmet use is required.

10. Motorcycle Drivers
and Riders/

Aside from the driver, Article Overloading isvery
motorcycle may carry only
28
common for both goods
one adult and one child as
and people.
maximum load.

7. Failing to give way atintersection

Source: JBIC SAPROF Final Report for Traffic Safety Improvement Project in Vietnam,
October 2006.

For example, the top cause of traffic accidents is speeding. The Road
Traffic Law states that the speed limit will be decided by the Ministry ofTransport according to the technical standard. However, the existing
technical standard sets speed limits mechanically by official roadclassification, without regards to actual traffic and roadside conditions.

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Thus, in addition to the technical design standard, operational speed limits
based on the existing situation must be introduced.
Other important issues include how to control a large volume of
motorcycle traffic and how to curb reckless driving. For these, one option
is to introduce lane segregation by vehicle type, which is not mentioned
clearly in the existing road traffic law or regulations.
In order to implement the road traffic law and regulations
effectively, it is necessary to introduce traffic control and management
suitable for individual roads, location by location. Traffic safety facilities
including signal systems, road signs, pavement markings, and so on,
should be installed properly. However, guidelines or standards for
installing them are not established yet.

6-5. Law enforcement
Since 1995, the government has issued one road traffic law, twoordinances on punishment of administrative violations, eight decrees, one
governmental resolution, and ten instructions on road traffic safety andorder by the Prime Minister. In addition, ministries and branches haveissued various resolutions, circulars, decisions, and so on, to guide theimplementation of these documents.
However, some stipulations require reconsideration. For example,
administrative ordinances allow the head of traffic police to penalize
violators only up to 200,000VND. If violation requires a higher penalty,
he has to submit the case to his superior, which is time-consuming andimpractical for officers at the site of traffic violation. Decree 15/CP also
contains various problems regarding marking of driver's license, temporaryconfiscation of violator's vehicle, penalizing the violator, competence oftraffic police, etc. Moreover, some violations such as dangerous overtaking
and non-helmet use carry very soft penalties.
In addition to the problems in the contents of laws and regulations, thefollowing areas must be cited as currently lacking or insufficient toenforce the traffic law effectively.

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Reducing Traffic Accidents· A mechanism to ensure systematic implementation of traffic law· The amount and content of traffic safety education· Traffic safety devices, such as traffic signs and markings· Road facilities such as the necessary number of paved lanes, lane
widths, paved shoulders, and bus-bays· Effective traffic operational strategies such as procedure to turnright or left at intersections· Fundamental traffic operational methods such as the way to set
traffic lanes and which position should be reserved for pedestrians
and bicycles· Criteria for selecting the type, site and time of traffic enforcement
appropriate for each traffic situation· Enforcement equipment for the traffic police such as patrol vehicles,
speed gun, and alcohol detector

6-6. Existing traffic safety programs
Traffic safety education is being carried out at various levels of society,for example at schools and work places. Moreover, the government haslaunched a number of traffic safety programs, often with the assistance ofinternational donors and FDI companies.
· The National Traffic Safety Program for the period 2001-2005 by
the Ministry of Transport, together with Ministries of Police,
Education and Training, Health, and National Defense, the Civil
Aviation Administration of Vietnam, and a number of otheragencies. However, most components were not implemented dueto the lack of available funds.
· Traffic Safety Enforcement Program implemented by Traffic
Police.
· The World Bank's Vietnam Road Safety Project (VRSP), Phase 1.

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Reducing Traffic Accidents· The National Road Safety Action Plan by the Vietnam Road
Administration with ADB's support (March 2004).
· The Japan International Cooperation Agency (JICA)'s Hanoi
Traffic Safety Improvement Project, 2001 to 2003.
· The Japan Bank for International Cooperation (JBIC)'s Pilot Studyon Stakeholder Traffic Safety Program on Interurban National Road.
· JICA's Traffic Safety Human Resource Development Project inHanoi, from 2006.
· Honda Vietnam's "Toi Yeu Viet Nam" media campaign for traffic
safety awareness.

6-7. Drivers' licensing
Before 1995, training and testing for issuance of drivers' licenses was
conducted by the Ministry of Public Security (formerly the Ministry ofInternal Affairs). This responsibility was transferred to the Ministry ofTransport in May 1995 based on the Decree No.36/CP. From September
2000, Vietnam Road Administration (VRA) under the Ministry ofTransport has set requirements for drivers' licensing and managed licensing
activities nationwide. Each province has a testing and licensing committee,
which is audited by the VRA.
Driving a motorcycle with an engine capacity less than 50cc does not
require a license. Licenses for two- and three-wheeled motorcycles do not
require renewal. For all other licenses, renewal is required every five
years for non-professional licenses and every three years for professional
licenses. For renewal, license holders are required only to go to theprovincial licensing committee and pay the renewal fee. Only those whohave committed serious traffic violations are required to attend a seminaror a training course to enhance their consciousness on traffic safety.
Applicants for drivers' licenses must be at least 18 years old. First-time
applicants for any type of drivers' license must attend a seminar or a

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training course in any of the 150 drivers' training schools nationwide.
These training schools are operated and managed by various government
agencies as well as the private sector. The driver training period varies
according to vehicle type. The training for motorcycle drivers requires
about 10 hours and includes both theory and practice. The training forcar drivers consists of 10 hours of theory and 20 hours of practicalexperience, which includes on-road training.
To enhance road traffic safety, the following adjustments should be madeto the licensing system.
· Licensing should also be required for driving a motorcycle withan engine capacity of less than 50cc.
· Enforcement of elimination of unlicensed driving, particularly
drivers of two- and three-wheeled motorcycles.
· A compulsory license renewal system for two- and three-wheeled
motorcycles with appropriate re-training programs.
· A compulsory re-training program for renewal of licenses forfour- or more-wheeled vehicles.

6-8. Setting clear rules for motorcycle users
Apart from improving the licensing system, Vietnam should organize ataskforce to study its unique traffic safety problems in which motorcycles
dominate, unlike any other countries. The taskforce should pay special
attention to formulating effective regulation of motorcycle use.
Authorities with major responsibility in traffic safety as well as leading
motorcycle assemblers in Vietnam should participate in the study. The
taskforce should produce a report with concrete policy recommendations
with timetables, which will be announced and deliberated publicly. Basedon sufficient discussion among users, experts and policy makers, a set of
new traffic rules governing motorcycle use should be drafted to supplement
the Road Traffic Law.
The new regulation on motorcycle use should cover the following, among
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Reducing Traffic Accidents· Use of helmet· Drunk driving· Maximum number of people on a motorcycle· How to carry baby or child on a motorcycle· How to carry cargo· How to use road lanes among other vehicles such as cars andbicycles· How to enter main road
· How to make left turns and right turns· Overtaking· Use of mobile phone or other devices while driving or riding· Parking· Use of headlight· Honking· Drivers' licensing and associated training and re-training
programs (see section above)· Owner's duty to maintain motorcycles in good condition· Motorcycle inspection system (see chapter 7)· Illegally copied motorcycles (see chapter 8)
Initially, care should be taken not to set rules that are too ideal oradvanced for Vietnam as they tend to be ignored by people.
Unfortunately, driving manners in Vietnam are extremely hazardous andprimitive at present, and realistic steps must be taken to educate people
and prepare authorities to implement new regulation fully. In the longrun, Vietnam should aim to become a country in which motorcycle use ismost sophisticated and safest in the world.

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Appendix to Chapter 6
Organizations Responsible for Traffic Safety

Organization

Responsibility

National
Transport
Safety Monitoring and managing traffic safety in general.
Committee/ Traffic Safety ProjectManagement Unit (TS-PMU)
MinistryofTransport

Planning and
Making investment plans on upgrading, rehabilitation and
Investment Department maintenance of transport infrastructures to reduce black spots.
Financial andAccounts Department

Monitoring and financing investment in upgrading,rehabilitation and maintenance of transport infrastructures.

Transport Legislation
Department

Setting up and monitoring transport legal documents.

Science and Technology Setting up all technical standards on transport infrastructures
Department
and transport means.
Vietnam Road
Administration

Managing, monitoring and investing in transport infrastructuresin the assigned sub-sector.

Ministry of Planning andInvestment

Making investment plans for construction of infrastructures,
including transport infrastructures and transport means.

General Statistics Office

Collecting, managing and monitoring all statistical data.

Ministryof Public
SecurityRoad and Railway
Traffic Police Bureau

Managing and monitoring road and railway traffic accidents,and enforcing road and railway traffic rules and regulations.

Social Order andAdministrative
Management Police
BureauPreventing pavement and roadway encroachment, illegal
construction, and illegal motorcycle races.

Ministry of Finance

Financing, managing all taxes, charges, fees and penalties(including those in the transport sector).

Ministry of Education and Training Educating and disseminating traffic laws and regulations inschools and universities.
Ministry of Health

Giving emergency treatment, supporting and curing injuriescaused by traffic accidents.

Vietnam Fatherland Front

Coordinating with other organizations in promoting anddisseminating traffic safety laws, regulations, and institutions
to all population levels, so that people can understand andabide by them.

Youth Union

Mobilizing youths to participate in the movement of traffic
safety and order.

Ministry of JusticeLaws in Vietnam.

Ministry of National Defense

Ensuring safety for transport means managed by militaryforce.

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People's Committees in large cities State administration on transport, traffic safety in the city.
(Hanoi, HCMC, Hai Phong, Da
Nang)
Provincial and Municipal Traffic Giving advice on local traffic safety to the chairmen of
Safety Units
provinces and cities.
Provincial Transport Authorities

Matters related to transport infrastructures, transport means,drivers, traffic accidents and transport inspectors.

Local Traffic Police

Enforcing traffic rules and regulations, dealing with traffic
accidents, collecting traffic accidents data at local level, andmaking reports.

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Chapter 7
Environmental Protection
7-1. Urban air pollution
In the last ten years, Vietnam has been transformed from a country withrelatively few motorized vehicles to a country with a large number ofmotorized vehicles, especially in urban areas. Unlike other countries
where automobiles dominate, motorcycles occupy by far the largest shareof transport in Vietnam (chapters 1 and 5). With one motorcycle for every
two persons, virtually all households in Hanoi and HCMC have accessto private transport. Although motorcycles in Hanoi and HCMC are
individually no more polluting than those in other large cities in Asia, thesheer density of motorcycles gives rise to air pollution and high exposure
to exhaust in these cities.
The monitoring data of the Center for Environmental Engineering ofTowns and Industrial Areas (CEETIA) shows that, in the period from2000 to 2004, air pollutants such as carbon monoxide (CO), nitrogendioxide (NO2), dust and particles at a number of locations exceedednationally stipulated standards for ambient air quality (TCVN 5937--seebelow) as shown in Fig.7-1. The noise level is also persistently high.
The study of the National Institute of Occupational and Environmental
Health (NIOEH) in 2003 indicated that, in rush hours, dust content in air
environment was 4 times, CO was 2.5-4.4 times, and hydrocarbon was
12.1-2,000 times higher than the national standard mentioned above. The
concentration of other pollutants, such as nitrogen dioxide (NO2), sulfur
dioxide (SO2), carbon monoxide (CO) and volatile organic compounds(VOC) also exceeded limits by 5 to 35 times.

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Fig. 7-1 Air Pollution in Urban Areas, 2000-2004(a) Dust (mg/m 3)

1.40
1.20

2000

1.00

TCVN Dust= 0.2 mg/m 3

0.80

2001
2002

0.60

2003

0.40

2004

0.20

TCVN

Tra Noc IP (CT)28/14 B2 Mau
Than (CT)

Trung Vuong
School (DN)

UoT (DN)

Nguyen Van
Linh Str. (HP)

Ngoi Sao Hotel(HP)

K10 To Hien
Thanh str.
(HCMC)

Cross roadDTH-DBP(HCMC)

Cross road
KL-GP (HN)

Ly Quoc Su str.
(HN)

0.00

(b) Carbon Monoxide (mg/m3)

18
16

2000

14

TCVN CO=5mg/m 3

12

2001

10

2002

8

2003

6

2004

4
2

TCVN

Tra Noc IP (CT)28/14 B2 Mau
Than (CT)

Trung Vuong
School (DN)

UoT (DN)

Nguyen Van
Linh Str. (HP)

Ngoi Sao Hotel(HP)

K10 To Hien
Thanh str.
(HCMC)

Cross roadDTH-DBP(HCMC)

Cross road
KL-GP (HN)

Ly Quoc Su str.
(HN)

0

Source: Center for Environmental Engineering of Towns and Industrial Areas (CEETIA),
various years.

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Tab. 7-1 Pollutant Concentration at Intersectionsin Hanoi during Rush Hours, 2003

Monitoring station

Pollutant concentration (mg/m3)
NO2

SO2

CO

VOC

Vong

3.9

3.6

360

170

Kim Lien

3.7

3.5

350

160

So

3.8

3.7

355

165

National standard(TCVN 5937-1995)

0.4

0.5

40

5.0

Source: NIOEH survey (2003).

Concentrations of CO and PM10 (particulate matter less than 10 microns
in diameter) in the air of Hanoi and HCMC have remained
relatively stable in recent years. According to the Vietnam Register data,
motorcycles are the major source of air pollutant emissions, accountingfor 54.4% of total CO emitted, 54.1% of HC, 54.5% of Pb and 43.0% of dust.

7-2. Health impact of air pollution
It is well known that people's health is adversely affected byprimary pollutants from vehicles such as PM10 and PM2.5 (particulatematter less than 10 or 2.5 microns in diameter, respectively), nitrogenoxides (NOx), SO2 and CO, as well as secondary pollutants such as ozone.
These cause respiratory problems, sinusitis, bronchitis, asthma, lung cancer,
cardiovascular diseases and premature death. Particles have also beenshown to increase the mortality rate. People with asthma and respiratory
diseases in turn are highly susceptible to particles, NOx, SO2 and ozone.
In addition, lead particles have serious effects on children's growth anddevelopment. Children with high lead levels in their blood are often deficientin weight and tend to have a low count of red blood cells. Their IQ levels
on average are also lower than those with lower lead levels.
In Vietnam and other countries in the region, air pollution is now
acknowledged as a serious public health threat. WHO estimates that
globally about 800,000 people die prematurely every year because of
exposure to urban outdoor air pollution. Among them, about 500,000

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are believed to be in Asia. The Disability Adjusted Life Years (DALY)
indicator29 shows that out of the 6.4 million affected by air pollution, 3.8
million are in Asia. According to the Vietnam Statistical Year Book 2005,
the majority of respiratory diseases in Vietnam are related to air pollution30.
The health effect of air pollution was first studied in Vietnam as early as
in 1995 with a focus on traffic police officers31. Due to extended exposure
to high levels of air and noise pollution, 2.9% of traffic policemen were
infected with tuberculosis, compared with an average infection rate of
0.075%. Moreover, 76% of traffic policemen suffered from ear, nose, andthroat infection, and 32% of them had reduced hearing ability.
Separately, NIOEH conducted a study on the health impacts of air pollution
in 2005. It showed that 83.1% of the respondents suspected that dust
pollution came from transportation. Examination of persons who worked
more than 8 hours per day on roadside found a significant difference inthe health conditions between targeted and reference groups (Tab.7-2).
Tab. 7-2 Disease Frequency of Persons Working in Roadside
Targeted group
Symptom

Persons working more than
8 hours per day on roadside

Reference group

Chronic bronchitis level III

3.8%

0.0%

Chest pain

51.2%

42.1%

Difficulty in breathing

21.5%

4.5%

Nose, throat, sinusitis and dermal
diseases

15.1%

4.7%

Abnormal X-ray

44.4%

11.7%

29 According to WHO's definition, the DALY for a disease is computed as the sum of years of life lost
(YLL) due to premature mortality and the years lost due to disability (YLD) for incident cases of
the health condition. It is a broad health gap measure which includes, in addition to premature
deaths, equivalent years of "healthy" life lost in states of less than full health, which may be termed
disability. One DALY represents the loss of one year of equivalent full health.
30 According to the Statistical Yearbook 2005, the most common diseases related to air pollution in
Vietnam are lung diseases (415.09 per 100,000 persons), throat and tonsil diseases (309.40 per
100,000 persons), and bronchial tube diseases (305.51 per 100,000 persons).
31 The study of Labor Protection Unit of HCMC, 1995. Also see Dang Dinh Nguyen, "Air Pollution
in Urban Areas: Reality and Solutions," Saigon Giai Phong Thu Bay, no.276, 1995.

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The costs related to health problems caused by air pollution in Hanoi
were estimated at US$23 million in 2006, or about VND1 billion per day.
Meanwhile, the World Bank Environment Monitor Reports 2002 estimatedthe health-related air pollution costs to be US$392 million for Metro
Manila in 2001 and US$424 million for Bangkok in 2000. Compared withthese cities in the region, the health costs of air pollution in Vietnam,
which is at an early stage of motorization, is much lower. However, it islikely to grow rapidly unless preventive measures are taken.

7-3. Current regulation for controlling vehicularpollution
The Vietnamese government recognizes that air pollution causes rapid
deterioration of environment and negative health effects. After theEnvironment Law was adopted in 1994, the government issued
Instructions on Strengthening Environmental Protection in the Period ofIndustrialization and Modernization (No.36-CT/TW, 1998, Vietnam
Communist Party).
Air pollution from vehicles is regulated by the following legislations:· Air Quality, Ambient Standards (TCVN 5937, 1995)· Air Quality, Hazardous Substance Standards (TCVN 5938, 1995)· Standards for Noise in Public and Residential Areas (TCVN5945,
1995)· Standards for Noise on Road Motor Vehicle (TCVN5948, 1995)· Instruction No. 24/2000/CT-TTg on Using Non-lead Petrol(2000)· The National Action Plan on Emission Reduction from Transport
Vehicles (2003)· Decision 249/2005/QD-TTg on Setting the Roadmap for
Application of Emission Standards to Road Motor Vehicle (2005)
Despite these regulations, the country remains in violation of the airambient quality standards. To comply with the standards, controlling
pollution from motorized vehicles, especially motorcycles, is crucial.

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7-4. Policy direction
The overall policy goal should be to place the total amount of motorcycle
emission on a declining trend and attain meaningful (not small) improvementin the atmospheric environment of Vietnam's urban areas by 2020, withappropriate steps between now and 2020, under the projected increase in
the number of motorcycles (chapter 3).
Total pollutant load and air pollutant concentration are related but not thesame. International experiences show that environmental and health costs
from air pollution may rise greatly as total pollutant sources increase andaffected areas expand, even with the same or lower level of pollutant
concentration at any location. In Vietnam, it is also possible that air
pollution level at any location may remain stable or decrease slightly inthe next 15 to 20 years, even under the predicted increase in the number ofmotorized vehicles and fuel consumption, provided that the currently
proposed policies are fully and effectively implemented. Even in thatcase, the total cost of urban air pollution may increase.
However, Vietnam lacks scientific studies on the situation and causes ofurban air pollution. For some pollutants, motorized vehicles in generaland motorcycles in particular are the predominant source, and for others
they are a contributor but not the dominant source. Vietnam first needs
reliable data and analyses on the mechanism of urban air pollution in
Hanoi and HCMC before setting concrete policy goals and designing
action plans32.
32 The study by Hoang Xuan Co and Nghiem Trung Dung (2006) offers scientific projections regarding
one source, namely total suspended particulate matter (TSP). Taking the environmental situation in2002 as the base, they projected three scenarios for TSP concentration in ambient environment in
Hanoi in 2010 as follows: (i) without any additional countermeasure; (ii) countermeasures suggestedby the JICA project; and (iii) with 75% reduction on total emission sources relative to 2002. The
dispersion model ISC3-AIRMOD was first used to analyze the air quality of Hanoi in the base year,
which revealed that some areas near industrial zones and some areas of high population density had
high counts of TSP. Under scenario (i), air quality of Hanoi in 2010 will be much worse. Under
scenario (ii), with current planning plus measures suggested by the JICA project, some sources will
be reduced but the total amount of sources will increase, with the result that air quality of Hanoi in2010 will be more or less the same as in 2002. Scenario (iii) suggests that at least 75% reduction ofsources is necessary to make visible improvements. Efficient ways to reduce TSP concentration
include removal of old enterprises from inner city as well as introduction of new technology andhigh efficiency treatment systems for emission control.

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When such data and analyses are available, Vietnam should establish a
concrete and realistic roadmap for air pollution control based on thecurrent EURO standard. Vietnam is already on the EURO roadmap but
details are yet to be decided. To implement the EURO roadmap, the fuelquality monitoring and control system and the vehicle inspection andmaintenance system are the two key pre-conditions. The former is absent
at present and the latter needs to be greatly improved.

7-5. The roadmap
As a member of APEC, Vietnam is required to adopt the EURO standard
in air pollution control. Decision 249/2005/QD-TTg on Setting theRoadmap for Application of Emission Standards to Road Motor Vehicle
stipulates that EURO-II equivalent (Tab.7-3) will be applied for second-handautomobiles imported into Vietnam from July 2006, and for all domestically
produced or imported automobiles from July 2007. By the year 2025 allvehicles in Vietnam are required to satisfy EURO-V, a very strict standard
that only advanced countries are now beginning to adopt. However,details of how EURO-II as well as higher levels of EURO standards will
be introduced remain to be decided. The problem that Vietnam faces inemission regulation is not what must be attained in the long run, but how
and at what speed the proposed roadmap should be realized.

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Tab. 7-3 Maximum Emission Limits of Road Motor Vehicles
Vehicles fitted with spark ignition engines
Pollutants

Mopedsmotorcycles

Automobiles

in exhaust gas

Vehicles fitted withcompression ignitionengines

Limit 1 Limit 2 Limit 3 Limit 1 Limit 2 Limit 1 Limit 2 Limit 3
CO (% volume)

4.5

3.5

3.0

4.5

-

-

-

-

HCC (ppm volume)
Four-stroke engines

1,200

800

600

1,500

1,200

-

-

-

Two-stroke engines

7,800

7,800

7,800

10,000

7,800

-

-

-

Special engines

3,300

3,300

3,300

-

-

-

-

-

-

-

-

72

60

50

Smoke opacity (% HSU)

Source: Appendix to the Prime Minister's Decision No. 249/2005/QD-TTg dated Oct. 10,
2005.
Notes: This table shows Vietnamese emission standards in steps to adopt EURO-II.
Timing of implementation has not been specified so far. Special engines include Wankel
engines and a number of other engines with structures different from those of piston
engines which are widely used.

The EURO emission standards are primarily for automobiles. The upper-level
EURO standards (EURO-IV and V) for motorcycles are not yet determinedeven in the EU. However, in Vietnam where motorcycles are the dominantsource of urban air pollution, regulating emissions for automobiles while
ignoring motorcycles greatly reduces the environmental policy impact.
Vietnam should have a long-term emission control strategy for bothautomobiles and motorcycles. For automobiles, the EURO roadmap
should be followed. For designing motorcycle emission control, theexperiences and standards of neighboring countries such as Thailand andTaiwan should be studied, and expert opinions should be heard.
One important question is how to fully implement EURO-II, especiallyfor motorcycles. At present, details or timing of implementation ofEURO-II for motorcycles are not determined in Vietnam, although theissue is currently under consideration by the Vietnam Register. It is clearthat urban air quality will not improve much if motorcycles are excluded
from Vietnam's EURO roadmap. While new motorcycles must also comply
with the standard, it is of utmost importance to regulate (and ban if
necessary) ill-maintained old vehicles which are the worst polluters on

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the road33. To be effective, the EURO roadmap must encompass all
motorcycles, both old and new, and have an inspection and maintenancesystem that is practical and comprehensive.
Another issue is whether EURO-III should be skipped. EURO-II and III
can be satisfied mainly by mechanical improvements while EURO-IV
and V must be achieved by the use of electronic technology. There is asignificant jump from EURO-III to EURO-IV in both technology andanticipated environmental results. Under these circumstances, one option
is to adopt EURO-II, III, IV and V sequentially, while another option isto skip EURO-III and move directly from EURO-II to EURO-IV and V34.
The gradual approach may look less burdensome for a developing country
like Vietnam, but it is expected to generate a number of problems that
increase transition and adjustment costs, such as frequent changes inanti-pollution equipment and the need to re-invest in refinery technology
to upgrade fuel quality. In addition, needless to say, an earlier adoption ofEURO-IV will provide cleaner air for urban citizens sooner.
Other Asian countries are also adopting stricter air pollution standards.
Most of them are currently at the stage of EURO-I or II equivalent,
except China, India and Thailand which are moving faster. However,targets are not always implemented as scheduled because of the lack ofpre-conditions such as required fuel quality or an effective vehicle
inspection system.
Based on the current commitment on EURO standards, Vietnam should
draft a concrete and transparent roadmap with sufficient details andreasonable timing. To do so, consideration should be given to (i)environmental achievement which is as frontloaded as possible for the

33 Currently, 40% of motorcycles in Vietnam are more than 8 years old, and 70% of cars are more than
10 years old. Meanwhile, leading motorcycle assemblers have begun to produce models that are
already in compliance with EURO-II although this standard has not been adopted for motorcycles
yet.
34 One view, called the normal track, is to adopt EURO-II in 2007, EURO-III in 2012, EURO-IV in
2017, and EURO-V in 2022. The other view, called the fast track, calls for adopting EURO-II in
2007, EURO-IV in 2014, and EURO-V in 2020.

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benefit of urban residents; (ii) coverage of all motorized vehicles including
automobiles and motorcycles, whether used or new, domestic or imported;(iii) installation of required pre-conditions for effective implementation,
namely fuel quality and inspection and maintenance (see sections below);and (iv) pre-announcement of a clear long-term roadmap to motorcycle
producers and oil refinery operators in order to minimize transition andadjustment costs.

Fig. 7-2 Automobile Emission Standards for New Vehicles (Light Duty)

CountryEU

95 96 97 98 99 2000 01 02 03 04 05 06 07 08 09 10
Euro 1 Euro 2

Euro 3Euro 4

BangladeshaEuro 2

Bangladeshb

Euro 1

Hong Kong

Euro 1 Euro 2gEuro 3

IndiacEuro 4

Euro 1

IndiadEuro 2E1 Euro 2

Euro 3 Euro 4

Euro 3Euro 2Indonesia
Euro 1

Malaysia

Euro 2Euro 4

Euro 1

Nepal

Euro 1

Philippines
ChinaaEuro 1ChinacEuro 1 Euro 2

Singaporea

Euro 1Euro 2Singaporeb

Euro 1Euro 2Euro 2Euro 3Euro 2E4Euro 3E4Euro 4 Beijing onlyEuro 4
Euro 1

Sri Lanka
US Tier 1

TaiwanThailandEuro 5Euro 1

US Tier 2 for dieself
Euro 2Euro 3

Vietnam

E4Euro 2

E4

Source: CAi-Asia. May 2006.
Notes: Italics - under discussion; a - gasoline; b - diesel; c - entire country; d - Delhi andother cities: Euro 2 introduced in Mumbai, Kolkata and Chennai in 2001; Euro 2 in
Bangalore, Hyderabad, Khampur, Pune and Ahmedabad in 2003, Euro 3 introduced in 10
mega cities since 2005; e - Beijing has adopted Euro 3; Shanghai and Guangzhou has
requested approval of the State Council for implementation of Euro 3; f - Euro 4 forgasoline vehicles and California ULEV standards for diesel vehicles; g - gasoline vehicles
under consideration.

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7-6. Fuel quality
Fuel has direct influence on vehicle emission. Changing some components
of gasoline or diesel changes vehicle emission. When a stricter emission
standard is adopted, fuel becomes the key factor in making motorcycles
cleaner, assuming that vehicle emission control technology remains
unchanged. Since the same fuel is used for automobiles and motorcycles,
it must satisfy the environmental needs of both vehicles.
The American Automobile Manufacturers Association (AAMA),
Association des Constructeurs EuropÐens d'Automobiles (ACEA), andthe Japan Automobile Manufacturers Association (JAMA) jointly
proposed the Worldwide Fuel Charter in January 1999, which classified
gasoline and diesel into four categories:
The first category comprises fuels for markets with minimal
requirements for emission control, in which fuels are considered
only in terms of vehicle and engine performance.
The second category comprises fuels for markets with stringent
requirements for emission control and other market demands(EURO-I and II).
The third category comprises fuels for markets with advanced
requirements for emission control and other market demands(EURO-III and IV).
The fourth category comprises fuels for markets with further
advanced requirements for emission control that enablesophisticated NOx technology.
Since Vietnam adopted EURO-I in 1998 for gasoline vehicles and in2005 for diesel vehicles, its fuel falls into the second category. In
addition, Vietnam switched from leaded to unleaded gasoline in 2001.
The current fuel quality in Vietnam cannot meet EURO-II or higher
standards because: (i) the sulfur content of gasoline and diesel is high; (ii)113

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the benzene content of gasoline is high; (iii) unleaded gasoline is not reallylead-free; and (iv) engine oil contains phosphorus and sulfur.
In general, conforming to a higher emission regulation requires both
vehicle emission control technology and corresponding fuel. To implement
EURO-II or higher standards, Vietnam must have new standards andmechanisms to ensure suitable fuel quality for both domestic and imported
oil products. New emission regulations must be synchronized with the
improvement of fuel quality.
Tab. 7-4 Fuel Quality in Asian Countries

Lead
China

Lead freeHong Kong
Nationwide
Major cities(ppm)

BenzeneAromatics Olefins(% v/v,
(%)
(%)
max)

Oxygen(% m/m,
max)

RVP
(kPa,
max)
74

500

2.5

40

35

-

Lead free

50

1

42

18

2.7

60

Lead free

500

5

-

-

2.7

35-60

Lead free150

1 and 3

Bangladesh

Lead free

1000

-

-

-

-

68

Cambodia

Lead free

-

3.5

-

-

-

-

Indonesia

0.30g/l

2000

-

-

-

2.0 (premix)

62

Malaysia

Lead free

1500

5

40

18

-

70

Pakistan

Lead free

10000

5

40

-

-

62-69

Philippines

Lead free

1000

2

35

-

2.7

35-60

ThailandLead free

500

3

35

-

1-2

-

VietnamLead free

5000

5

-

-

-

-

India

Nationwide

Sulfur-10000Source: CAi-Asia, 2005.
Note: In India, benzene content is 3% in metro areas and 1% in national capital region.

7-7. The vehicle inspection and maintenance system
Apart from fuel quality, the vehicle inspection and maintenance system isanother key instrument for controlling vehicle emission. How this system
actually operates greatly affects the vehicle's performance, including
environmental impact.

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Vehicle inspection can be classified into annual inspection, roadsideinspection, random tests in parking lots, and inspection for road vehicles
entering the city. Among these, annual inspection and roadside inspection
are the most important. In Vietnam at present, vehicle inspection covers
only automobiles. Inspection of motorcycle is considered by some to be
infeasible due to limited equipment and human resources relative to thelarge number of motorcycles. However, since motorcycles are the largest
source of vehicle emission in Vietnam, they must definitely be included
if cleaner urban air is to be achieved and the EURO roadmap is to berealized in the future. Inclusion of old motorcycles is particularly
important for this purpose.
Relevant authorities should begin to study appropriate method of
motorcycle inspection. Ways should be devised to maximize environmental
impact while minimizing administrative costs. A reasonable timetableshould be set up for achieving this goal.
As with automobiles, motorcycles that fail to meet standards must be
upgraded before they may be driven on the road. Such vehicles may berepaired in maintenance stations organized by motorcycle manufacturers
or maintenance enterprises registered at the Department of MaintenanceManagement of the Vietnam Register. This means that manufacturersthat sell motorcycles in the domestic market are required to build asystem of maintenance stations capable of providing required maintenanceservices. Furthermore, all maintenance enterprises responsible for vehicularemission treatment must be equipped with a tailpipe exhaust analyzer andother necessary equipment.

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Chapter 8Intellectual Property Rights
8-1. Importance of protecting IPRs in the motorcycle
industry
Infringement on intellectual property rights (IPRs) seriously harms theVietnamese society in its development process in the age of integration.
Protection of IPRs is the international requirement in global business.
Moreover, IPRs concerning motorcycles and motorcycle parts are central
to the IPR question in Vietnam because motorcycles are highly popular andvisible in every corner of the country35. In this sense, IPRs cannot beestablished in Vietnam unless IPRs in the motorcycle industry areproperly protected.
The protection of IPRs in the motorcycle industry benefits consumers,
producers and society in general.
Consumers are protected from being cheated into purchasing products
which are unsafe, defective or low quality. Because the proper functioningof the motorcycle has a direct bearing on road safety, unaware consumers
face the risk of death or injury in addition to having to put up with low
performance and the trouble of frequent repairs and replacements.
Producers benefit from the healthy growth and competitive businessenvironment of the motorcycle industry in general, and from the eliminationof illegal copies of their models and the increased value and prestige of
genuine products in particular.
Vietnamese society as a whole will also benefit. Successful protection of
IPRs in the motorcycle industry will prepare a favorable background forand have spillover effects on the development of other industries.
35 Intellectual property rights consists of industrial property rights and copyrights. In the case of
motorcycles, only the former is relevant.

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Protection of IPRs in an industry as important as the motorcycle industry
will encourage creativity instead of unauthorized copying as the main
engine of industrial growth, establish an early track record of
WTO consistency in IPRs (especially in comparison with China), andbuild a good image of Vietnam as a latecomer country which plays byinternational rules.
Some argue that cheap copies should be allowed in developing countries
to make industrial products available to the poor at affordable prices. Thisview is wrong because the existence of fake products not only harms
consumers, but also prevents the dynamic growth of honest andcompetitive producers. The country which adopts such a strategy cannot
have long-term growth based on skills and knowledge, or improve theliving standard of the general population. It is also highly questionable
whether the poor is really better off and can save money by purchasing
fake products, if low performance, short product life, and high repair cost
are taken into account. The poor are forced to buy cheap copies mainly
because they do not have cash at hand and cannot borrow from anyone.
This is a cash constraint problem which should be solved through theprovision of consumer loans instead of permitting illegal copies.

8-2. IPR infringements in the motorcycle industry
IPR infringements in motorcycles is rampant in Vietnam. It occurs inmanufacturing of parts, assembly, transporting and sales. However,accurate data is difficult to obtain because of the nature of the problem.
Reported arrests are just the tip of the iceberg, as violators are far more
numerous than official raids. The entire scope of IPR violation can only
be estimated.
Honda and Yamaha motorcycles are the most popular targets of fakes andcounterfeits. According to NOIP data, there were about 300 infringementcases related to motorcycles in Vietnam in the first six months of 200636.
36 This is the latest data available from NOIP. On July 1, 2006, NOIP was discharged of the responsibility
to make decisions on infringement cases.

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According to another source, it is estimated that about 560,000 fake
Honda motorcycles were sold in the first ten months of 2006 but only
5,986 were seized by the authorities.
Industrial IPRs have three principal categories: (i) invention (patent); (ii)trademark; and (iii) industrial design37.
Invention—anyone other than the invention patent holder or the
licensee is prohibited from using a technical solution similar tothe patent, even if details of concrete structure may be different
from the product of the patent holder.
Trademark—anyone other than the trademark holder or the
licensee is prohibited from using any mark that is sufficiently
similar and therefore may be mistaken as the registered trademark.
Industrial design—anyone other than the design patent holder
or the licensee is prohibited from using outer shape that is not
significantly different from the patented design.
By far, the most common infringements in Vietnam's motorcycle industry
are industrial design, especially regarding external plastic cover, in which
manufacturers or traders of low quality motorcycles use fake decors
similar to originals. It is very difficult for law enforcement authorities to findproduction lines of fake products since manufacturers and traders usuallyassemble copies in secret places instead of registered factories. Only
naked motorcycles, without exterior plastics, are in their factories toavoid persecution. Another common way of violating companies is to
produce visibly different models from the ones they register. Illegal
copies can be sold with impunity since photo verification is not requiredat the point of sales. In addition, dishonest producers even blame enforcement
authorities and complain to the public that their arrest was unlawful andcaused only by inconsistent policies among concerned authorities such as
Vietnam Register, MMDs, and police.
37 The right to fight against unfair competition, in which the creator takes an action to stop other people fromabusing the creator's achievement to compete unfairly, such as unauthorized use of unpatented design, is
an IPR component which is also recognized internationally. However, this right is not stipulated in thecurrent intellectual property law in Vietnam, and therefore it is not included in this master plan.

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Intellectual Property Rights

Patent infringements in Vietnam mainly occur in the unauthorized use of
clutch release mechanism and frame structure.
Trademark infringements are common in sales rather than in
manufacturing. Violating shops display signboards or decoration indicatingthat they are authorized dealers of Honda, for example, when they are not.
IPR infringements are spread all over the country although degrees mayvary across provinces. Informal survey conducted by motorcycle
companies in 2006 classified the frequency of spotting IPR infringements
at retail outlets into three levels--widespread, average and few. A large
number of motorcycle dealers that sell fake Honda products were found
all over Vietnam except some Northwest Mountain provinces, such as Lai
Chau, Lao Cai, Tuyen Quang and Cao Bang, where motorcycle sales are
relatively low.
In 2005, the Prime Minister assigned the Ministry of Industry (MOI) to
conduct a national survey on the situation of IPR infringements in the
motorcycle industry. Since this was conducted throughpre-announced visits to factories, discovered infringements greatly
understated what really went on. Nonetheless, the survey's general
conclusion was that violation was related to Chinese technology and it
was mainly in the form of design infringement. One FDI company
appeared to be the principal source of illegal parts manufactured in
Vietnam. However, since the survey was conducted by MOI alone, which
did not have the authority to inspect joint venture companies (only MPI
has such authority), the survey team could not visit this company forinvestigation.

8-3. Actions by government and producers
The government is taking actions to prevent and punish IPR infringements.
Producers are also implementing measures to prevent others fromviolating their IPRs. However, the protection level of IPRs in Vietnam
still remains low. This is partly because Vietnam is a latecomer in global
business interaction with little experience in dealing with IPRs and120

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Intellectual Property Rights

partly because there is no agency which has sufficient power to cope with
the issue in a comprehensive manner.
Legal framework
The law and decree stipulating IPR related issues in Vietnam are the Law
on Intellectual Property dated November 29, 2005 and Decree No.
105/2006/N§-CP and 103/2006/N§-CP on State Management ofIntellectual Property. The new law on intellectual property came into
effect on July 1, 2006, partly to address the problems under the old law
and partly to fulfill requirements of WTO accession. Previously,
violations were rampant and punishment was light. Although theimplementation decision for the new law has not been issued as of May
2007 and its application is thus pending, the new law, when it is fully
implemented, is expected to strengthen law enforcement.
Overall, Vietnam's legal framework for protecting IPRs is
sufficiently developed and at international levels. However, there aresome shortcomings in actual implementation: authority is decentralized,
some clauses are considered too advanced for Vietnam, and there areother issues that merit discussion.
Decentralized authority
One salient feature of Vietnam's IPR organizations is decentralization.
The power to oversee IPR related issues is diversified across many
official bodies as follows (see Tab.8-1 for details):· National Office for Intellectual Property (NOIP) and Inspection
Department under the Ministry of Science and Technology· Market Management Department (MMD) under the Ministry ofTrade· Economic Police (EP) under the Ministry of Police· Ministry of Industry· Vietnam Register under the Ministry of Transport· Provincial People's Committees· Steering Committee 127

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No single organization takes the leading responsibility in coordinating
IPR protection in the motorcycle industry, which causes problems andinconsistencies in coping with infringement. Moreover, under the newlaw, decentralization has accelerated further. The authority to examine
violation was moved from NOIP to a number of enforcement bodies such
as Market Management Department (MMD), Economic Police (EP),
Customs, etc. This may be justified from the viewpoint of division oflabor among related bodies and building capacity at each enforcement
organization. On the other hand, however, this increases the risk ofinaction or inconsistent action against IPR infringements, because
individual enforcement bodies at present lack skills and experience totake over the role of examining violation, and therefore they may decidepunishments which are mutually inconsistent.
For example, under MOST which handles industrial design issues, NOIP
is supposed to function as a central organization to make final judgmentson difficult cases only, while individual violations are regularly to be
dealt with by 64 Departments of Science and Technology (DOST) offices
at the provincial level. In practice, however, DOSTs are mostly preoccupied
with establishing IPRs rather than protecting them. Therefore, all violation
cases are referred to and handled by NOIP in Hanoi, which overburdens it.
MMD in each province is under the direction of its People's Committee.
MMD's budget is also allocated by the People's Committee. In somecases, local leaders who are interested in promoting local industries are notvery keen on solving IPR infringements in the motorcycle industry. This
leads to weak implementation of the intellectual property law at theprovincial level.

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No

No

No

Vietnam
Register(under M of Trans)

Provincial PCs

Steering Committee
127 (inter-ministerial
under M of Tradechairmanship)

Minister of MOST

Yes but
executed only
infrequently
Market Management
Yes but
Department (under executed only
MOT)
infrequently
Economic
PoliceYes but(under MOP)
executed only
infrequently
Ministry of Industry
No

National Office forIntellectual Property(under MOST)
Inspectors(underYes but
MOST)
executed only
infrequently

Judgeviolation
No moreYes

No

Complicatedprocedure (by law)

Authority to prevent Inspection only inviolation at every response to order orstage of project
requestInvestigation

Authority to inspect Investigation
anytime, anywhere

Penalty up to VND 10 Coordination
millionToo many industries

Authority to prevent Inspection only inviolation at initial response to order or
stage
requestPenalty up to VND 10 Local power and Inspection only inmillionguidance to local response to order or
MMDsrequestOrder to stop
production

Yes

Suspend model
approval

Financial penalty

Yes

Yes

Financial penalty

Yes

Yes

Penalty up to VND 5 Authority to inspect Small personnel inmillion; Chief Inspector anytime, anywhere ministerial level;
can give penalty up to
weak power in local
VND 20 million
level
Penalty up to VND Authority to penalize Too busy with other20-100 million
issuesserious cases

No more enforcement
functions

Weakness

Yes

ExpertiseStrength

No

Decide punishment

No

Inspect

Tab. 8-1 Authority of IPR-related Organizations

Weak coordination with local authorities;
Issuance of document that limits MMD's
power to examine infringements in transit.

Tendency to avoid heavy penalty to violators

Checking prior to granting production
permit only; inability to examine FDI
suppliers which are under MPI's authority

Budget and human resource constraints;
response only to requests by IPR holders

Budget and human resource constraints;
response only to requests by IPR holders

Few inspections conducted

IssuesIntellectual Property Rights

123Intellectual Property Rights

Steering Committee 127, an inter-ministerial body, is responsible forcoordinating activities of all related authorities. However, its coordinating
function has not fully developed. On the other hand, the Committee
issued Document 4880 dated October 2005, stipulating that MMD canstop and inspect a vehicle transporting illegal motorcycles only if there isclear evidence in advance that it is doing so. This severely limits theauthority of MMD to stop suspicious vehicles.
Another requirement that reduces MMD's capability under the new law is
the stipulation that all receipts of penalties be transferred to the statebudget. Previously, MMD could retain 7% of penalties for conducting
investigation of IPR infringements.
Light penalties
Police and other authorities destroy plastic parts, front covers, mud shieldand other exteriors of fake motorcycles when they are seized. However,
the average fine is small (about 160,000VND per vehicle) compared withthe sales price of the vehicle and thus does not significantly deter violatorsfrom repeating the offense. Moreover, seized motorcycles can later berefitted with new plastic and other exterior parts for sale. This is quite
different from and much lighter than international practice. In Malaysia,
for example, the authorities destroy fake motorcycles completely.
On the other hand, in 2005, NOIP switched to the "double protection" ofboth overall design and part design in conformity with international
practice. Previously, NOIP only allowed overall design to be protected,
which prevented the punishment of producers of illegally copied parts38.
The role of civil court
The current law stipulates that the civil court should settle IPR relatedcases. Only those violations that are "significantly harmful to society,"
namely those in food and medicine, are to be dealt with by administrative
raids and penalties (Article 23.1.d). All other violations are to be solved

38 At present, thanks to reverse engineering, almost all fake motorcycle parts for assembly in Vietnam are
made in Vietnam, unlike previously when Chinese parts were imported. Because of this, illegal parts mustbe eliminated through domestic raids and penalties rather than seizure at customs inspection points.

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through the civil court because administrative raids and penalties require
too many evidences to be collected (Article 23.1.b, c, e; also see Decree105-2006/ND-CP dated Sept 22, 2006). As a result, illegal motorcycles
are no longer a priority target of NOIP.
The role of the civil court in settling IPR-related disputes is wellestablished in advanced countries where IPR infringements are relatively
rare, the civil court has long experience in judging such cases, andenforcement is very effective. Under such circumstances, IPR infringements
can be regarded as a civil matter between related parties with no substantial
damage in social order or the nation's competitiveness. Even in suchcases, the law does not specify which particular fields or industries damage
society more than others.
In Vietnam, by contrast, IPR infringements are widespread, the civil
court has not yet started hearing IPR cases, and enforcement needs to beguaranteed in the future. It is also fairly clear that IPR infringements area central problem in Vietnam harming consumers' rights and the healthy
development of industries. While activation of the civil court is a reasonable
goal in the long run, Vietnam also needs a more practical strategy to
reduce IPR infringements in the transition period. The traditional methodof administrative raids and penalties should not be ruled out as animportant component of such strategy.
The official statement that IPR infringements in only food and medicine
are significantly harmful to the society, but not those in cosmetics, gas
cookers, motorcycles, etc. is not rational. This may even give the wrong
signal that infringements in other industries are less serious and can be
tolerated.
Another problem in Vietnam is the absence of cumulative concrete caseson which new cases can be judged. In IPR-related disputes, there are no
globally common quantifiable criteria to decide which products are
original and which are imitations. Criteria for similarity must be built up ineach country by the accumulation of experts' evaluation on similar cases
over the years. In Vietnam, it will take time to develop such judgment
capability.

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In the future, when the judiciary system is strengthened to judge
IPR-related cases, different courts should be available depending on thetype of violation, including a special court for IPR-related cases, civil
courts, criminal courts, and administrative courts. Trademark infringements
can be brought to the criminal court since the offense combines both IPR
infringement and infringement of consumers' rights. By contrast,
unauthorized copying of industrial design constitutes IPR infringement
only. Whether the case should be dealt with administratively or brought tothe criminal court depends on the degree of "seriousness," whose criteria
must also be established in each country by responding to actual
situations39.
Producers' actions
To protect themselves from IPR infringements, leading FDI assemblers in
Vietnam are taking the following measures: (i) market investigation andtaking photos of illegal copies; (ii) training courses for law enforcement
officers to improve their ability to spot violating vehicles; (iii) producing
evidence and bringing violators to law authorities; and (iv) PR campaigns
through TV and magazines as well as exhibitions comparing originals andcopies to raise popular awareness.
These self-protection measures incur costs for producers. They are forced
to act on their own since the current IPR enforcement isineffective. Ideally, public agencies should take the lead in effectively
enforcing IPRs, while producers should cooperate with the government as
partners.

8-4. Establishment of an industry association
It is common international practice to establish an industry association
with the participation of manufacturers of a certain industry in thatcountry. Such an association performs various functions which are
39 In China, previously a company was brought to the criminal court after violating IPR laws three times.
Recently, the rule was changed to bring a company to the criminal court if it made an illegal profit greaterthan 50,000 RMB.

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Intellectual Property Rights

beneficial to member companies, such as data collection, symposiums
and trade fairs, programs to improve productivity and competitiveness,interface with policy makers, public relation activities, international
cooperation, and so on.
At present, Vietnam does not have an industry association that exclusively
and comprehensively represents the interest of all motorcycle producers.
As a result, above-mentioned functions are largely absent for the motorcycle
industry. To receive technical assistance or strengthen international
cooperation, such an association is a must. For instance, Vietnam currently
cannot join the Federation of Asian Motorcycle Industry (FAMI), a
regional organization consisting of seven countries and areas, because aneligible association does not exist in Vietnam. Cooperation with theJapanese government or the Japan Automobile Manufacturers
Association (JAMA) will also be made easier if there is such an associationon the Vietnamese side.
The existing two associations, namely the Vietnam Bicycle andMotorcycle Association (VBMA) and the Vietnam Automobile
Manufacturers Association (VAMA), only partly cover the interest of the
motorcycle industry. VBMA has no participation by FDI companies and
VAMA mainly promotes the interest of the automobile industry.
With an increasing size of Vietnam's motorcycle industry, such anindustry association should be set up in Vietnam as a matter ofpriority. This can be done either by creating an entirely new association
or restructuring one of the existing associations. In either case, FDI
assemblers should take a lead in light of their dominance in Vietnam's
motorcycle market.

8-5. Targets and policy directions
Two policy targets are advanced as follows.
First, domestic suppliers which produce illegal motorcycle parts shouldbe eliminated completely, regardless of nationality or ownership type ofthe supplier, by 2010.

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Second, there shall be no IPR infringements of any kind in the motorcycle
industry in Vietnam's territory by 2015.
In order to attain these targets, the following policy directions areproposed.
· Coordination among public authorities must be strengthened
encompassing NOIP, MMD, Economic Police, Vietnam Register,courts, MOI, MPI, Provincial People's Committees, and Steering
Committee 127.
· Strong public-private partnership should be established, in which
producers cooperate closely with public authorities and support
policy targets set forth above. Top leaders of concerned businesses
should be involved deeply.
· Punishment for IPR infringements should be made more severe toa level which effectively deters IPR-related crimes.
· Protection of IPRs in the motorcycle industry should be one of the
top priorities of MMD and Economic Police. Protection mustcover not only sales and distribution but also manufacturing,which includes assembly and part production.
· The intellectual property law should continue to be reviewed andrevised as necessary and as experience is accumulated40. The law
should be implemented effectively and without exceptions.
· The Vietnam Motorcycle Manufacturers Association (tentativename) should be established with the participation of both FDI
and Vietnamese producers in both assembly and part supply. This
association should become the main channel through whichinternational cooperation for the motorcycle industry is received.
More specifically, the following concrete measures should be considered.

40 Based on the Chinese experience after the accession to WTO, a JAMA expert stated in February 2007
that the intellectual property law needed to be revised every five or ten years to catch up with changing
situations and improve implementation.

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Inter-ministerial actions· Steering Committee 127 should request Provincial 127
Committees to eliminate illegal motorcycles in all cities andprovinces.
· Steering Committee 127 should abolish Document 4048, which
requires MMD to secure sufficient evidence of IPR infringement
before stopping motorcycle-transport vehicles for inspection.
· The government should set up an inter-ministerial taskforce toregularly examine the situation of IPR protection in all motorcycle
companies in Vietnam, including domestic and FDI companies,
as well as assemblers and part suppliers. All related government
ministries and agencies should participate in the delegation.
IPR-related bodies· MMD and Economic Police should be given the leading role indealing with IPR infringement cases. To support them, the following
programs should be conducted for MMD and Economic Police:(i) training courses with instructors from NOIP, producers andinternational experts; and (ii) follow-up activities to assist them tomake actual IPR punishment decisions.
· Budget should be allocated directly to MMDs. In addition, 7-10%
of fines collected for IPR infringements should be retained by
MMDs for their activities.
· The Vietnam Register Office should stop registering fakemotorcycles.
· Traffic Police should have the authority to stop and confiscate any
fake motorcycles on the road or in the market.
Law and its implementation· The policy of separate treatment of IPR infringements of food andmedicines on the one hand and all other products on the other inthe current intellectual property law (Article 211 Point 1 Item a)should be revised . Each relevant ministry or agency should

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decide which IPR infringements are serious based on actual
situation.
· Fines for IPR infringements in the motorcycle industry should be
revised and implemented effectively. In principle, the fine shouldbe 1-5 times the value of the original motorcycle with genuine
parts, not 1-5 times the value of the motorcycle which uses fakeparts.
Industry association· FDI companies should take the lead in establishing an industry
association which includes both FDI companies and Vietnamesecompanies.
· The industry association, in cooperation with FAMI, should
launch an IPR Communication Program for motorcycles inVietnam to raise the public awareness on the matter and improvethe effectiveness of law enforcement.
· The industry association should organize the following activities
for its member companies: (i) encouragement of licensing
between Japanese and Vietnamese producers; (ii) dispatch of
Vietnamese members to Japan to deepen the understanding of
IPR-related issues; (iii) assistance for its members to establish an
intellectual property department and implementation of theintellectual property law; and (iv) organize regular meetings
between its members and government authorities.
IPR court· Steering Committee 127 should propose to the Parliament theestablishment of a court specializing in IPRs to take over this
responsibility from local civil courts which are not familiar with
the issue.

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Chapter 9
Policy Measures
9-1. Introduction
Some of the policy directions proposed in chapters 4-8 arepresented with concrete targets and action plans below. While all
proposed policy directions in previous chapters are desirable, only 12 ofthem are included here. This selectivity comes from the need to executeand follow up each proposed policy measure adequately under thecurrently limited human resources, budget and institutional preparation
for policy implementation.
A number of action plans may require external assistance including
foreign expertise and financial support. Vietnam should explore thepossibility of such assistance whenever necessary. Active cooperation of
motorcycle manufacturers in Vietnam is particularly important. Official
assistance from bilateral and multilateral donors should also be sought.
Some action plans may be outsourced from the private or non-government
sector for efficiency and effectiveness.

9-2. Measures, targets and action plans
Measure 1. Incentives for investment and training in supporting
industries (chapter 4)<Overall objective>
Introduce incentive measures for promoting supporting industries inassembly-type manufacturing industries, in which the motorcycle industry
is expected to take a leading role.
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Policy Measures

Target 1-1. Introduce incentive measures which are sufficiently competitivevis-à-vis other East Asian countries from the viewpoint of potential
foreign investors in supporting industries. Incentive measures are initiallytargeted at pressing, casting, forging, welding and production of dies andmolds.
By

ActionActor(s)2008

For targeted activities, introduce corporate tax exemption for 6 years MOF
after the first year of profit

2008

For targeted activities, introduce 100% import tariff exemption for MOF
machinery import2008

For targeted activities, introduce 50% subsidies for training of MOF
Vietnamese managers, engineers and workers

Measure 2. Create a new mechanism to receive and utilize foreign
experts more effectively (chapter 4)<Overall objective>
At present, knowledge of visiting foreign experts in the manufacturingsector are sometimes not fully utilized due to the lack of sufficient
preparation, needs-matching, timely dispatch, and review and followup.
Effectiveness of foreign expert dispatches in the manufacturing sector
should be enhanced by creating a receiving mechanism which
minimize these problems and maximize learning from foreign experts. At
the same time, there should be an effort to link retired or retiring Japaneseexperts with Vietnamese companies that want to receive them.
<Targets and action plans>
Target 2-1. A new mechanism should be set up in Vietnam to coordinate
demand and supply of foreign expert dispatch services.
By

ActionActor(s)2008

A report on the assessment of the current situation and proposal for MOI, MPI
improvement

2009

Establish a new foreign expert receiving mechanism, preferably in MOI, MPI,
the form of public-private cooperation
donors132

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Policy Measures

Target 2-2. Establish a mechanism to receive retired Japanese managers
and engineers with high skills in manufacturing to level up Vietnamese
factories (this may coincide with the mechanism mentioned in Target
2-1 above).
By

ActionActor(s)2008

A report proposing concrete targets and actions

MOI, MPI2009

Establish a new mechanism for this purpose, preferably in the form MOI, MPI,of public-private cooperation
donorsMeasure 3. Strategic FDI marketing for strengthening supporting
industries (chapter 4)<Overall objective>
Vietnam should become a favored destination for foreign SMEs withhigh-tech capability in supporting industries.
<Target and action plans>
Target 3-1. Draw up and effectively implement a strategy to absorb
narrowly targeted foreign enterprises to strengthen Vietnam's
supporting industry base. The strategy should include improvements
in procedure, focused vision and targets, better FDI marketing andproduction-related infrastructure and services.
By

ActionActor(s)2008

Draw up a strategy for receiving FDI part suppliers in specific sectors MPI, MOI
or from specific foreign regions

2009

Prepare industrial parks or rental factories specifically designed to Designatedreceive targeted FDI part suppliers (Hoa Lac High-tech Park may be locality
considered as one candidate)2009

Activate FDI marketing based on prepared strategy and receiving Designatedlocations
locality

Measure 4. Building a supporting industry database in conjunction
with business matching service between FDI assemblers and local
suppliers (chapter 4)

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Policy Measures<Overall objective>
To narrow the information and perception gap between FDI assemblers
and Vietnamese suppliers, a supporting industry database should becreated, and FDI-local business matching service should beinitiated. Moreover, these two activities should be synchronized andintegrated as one.
<Targets and action plans>
Target 4-1. Create and maintain a supporting industry database. It
should be designed and operated to attract both buyers and sellers in asustainable way.
By

ActionActor(s)2008

A report on the effective design and implementation of a supporting MPI, MOI,
industry database combined with business matching service
VCCI

2008

Establish a supporting industry database on a pilot basis

2009

Review initial operation, make revisions as necessary, and expand MPI, MOI,
the database to include more companies
VCCI

Designatedorganization

Target 4-2. Establish business matching service between FDI firms andlocal suppliers in close coordination with the supporting industry database.
By

ActionActor(s)2008

Establish business matching service on a pilot basis

Designatedorganization

2009

Review initial operation, make revisions as necessary, and expand MPI, MOI,
the service to include more companies
VCCI

Measure 5. Creating pilot institutions for practical technical andvocational education and training (chapter 4)<Overall objective>
Upgrade a small number (2 or 3) of technical colleges andvocational schools to become pilot institutions which can deliveradequate education and training in response to the actual requirements of
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Policy Measuresindustries. Targeted fields include, but are not limited to, pressing,casting, forging, welding, and production of dies and molds. For thispurpose, a close and continuous cooperative mechanism between training
institutions and manufacturers that may hire students upon graduation
should be established.
<Targets and action plans>
Target 5-1. Formulate and implement the National Policy Framework forDevelopment of a Profession-Oriented Education System at technicalcolleges and vocational schools.
By

ActionActor(s)2008

A National Policy Framework for Development of a
Profession-Oriented Education System is drawn up and approved

MOET

2009

Establish a coordinating unit for overseeing and assisting a
consortium of pilot institutions to achieve the project aim

MOET

2009

Review the requirements of targeted manufacturing labor market MOET
and reflect the results in policy

Target 5-2. Implement profession-oriented education and training at selectedcolleges and schools, including collaborative training programs between
training and businesses, learning "best practices," mobilizing foreign
experts and targeted firms' managers and engineers, and improving facilities
and equipment. Disseminate their methodology and materials to othereducation and training institutions.
By

ActionActor(s)2008

Select a small number of pilot institutions

MOET, MOI2008

Set up a committee consisting of educational experts and targeted Pilot
businesses to advise on improvements
institutions

2009

A report on current assessment on teaching staff, curriculum and Pilot
materials based on graduates' competency in targeted businesses, institutions
with proposals for improvements and revisions

2009

Begin to introduce proposed programs in steps

2011

Review initial results and begin to disseminate project results to MOET & pilot
other technical institutions
institutions

Pilot
institutions

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Policy Measures

Measure 6. Testing centers for assembly-type manufacturing industries(chapter 4)<Overall objective>
Vietnam should have testing centers that serve the needs of the motorcycle
industry.
<Target and action plans>
Target 6-1.
Existing testing centers should be strengthened and, if necessary, new testing
centers should be established to conduct testing of products, parts andmaterials related to the motorcycle industry through provision of necessary
equipment and technical assistance.
By
2009

ActionActor(s)Establish a sufficient number of testing centers that conduct testing MOI, MOST,
services for the motorcycle industry
STAMEQ?

Measure 7. Introduction of time-based parking fees on roads andsidewalks in urban centers (chapter 5)<Overall objective>
Traffic order should be restored and traffic congestion should be ameliorated
in urban centers while at the same time revenue is collected for further
traffic management.
<Target and action plans>
Target 7-1.
Time-based fee collection on street parking of motorcycles and automobiles
should be introduced in Hanoi and HCMC.
By

ActionActor(s)2008

Draft a plan for a time-based parking system and pre-announce to MOP, Hanoi
people and businesses
HCMC

2008

Introduce this system on a pilot basis in Hanoi and HCMC

2009

Review initial results, make revisions as necessary, and expand the MOP, Hanoi,
system to larger areas
HCMC

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MOP, Hanoi,
HCMC

Policy Measures

Measure 8. Vehicle entry regulation in Hanoi's Ancient Quarter(chapter 5)<Overall objective>
Reduce traffic hazard and congestion and restore safe and tranquil
atmosphere in the Ancient Quarter of Hanoi for the purposes of culturalpreservation, tourist attraction and better living condition.
<Target and action plans>
Target 8-1.
In steps, the Ancient Quarter of Hanoi should become an area mainly ofpedestrians and non-motorized vehicles, except minimum residential andcommercial traffic. The policy should cover vehicle entry, speed limit,
parking, and resident and business exemptions.
By

ActionActor(s)2008

Draft a study on traffic management in Hanoi's Ancient Quarter

Hanoi PC2009

Begin to enforce new traffic management in Hanoi's Ancient Quarter Hanoi PC
in steps

Measure 9. Revising regulation on motorcycle drivers' licensing andmotorcycle riding (chapter 6)<Overall objective>
Improve motorcycle riding to restore order and reduce traffic conflicts
and accidents, with an aim to become a model country of orderly use of
motorcycles.
<Target and action plans>
Target 9-1.
New traffic management should be introduced and strictly enforced for
motorcycle riding in Vietnam.
By

ActionActor(s)2008

Draft a study on regulating motorcycle riding covering licensing, MOTransp, MOP
helmet use, riding manner, road use, and so on (see chapter 6)

2009

Enforce new regulation in steps

2009

Initiate stepped-up public education on safety driving through joint MOTransp, MOP,
effort of relevant authorities and businesses
businesses

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Policy Measures

Measure 10. Prepare necessary conditions for implementing theEURO roadmap (chapter 7)<Overall objective>
Improve fuel quality, the vehicle inspection and maintenance system, andthe ambient air quality monitoring system as pre-conditions for effectively
implementing the EURO roadmap on air pollution regulation for bothautomobiles and motorcycles, starting with EUROII and moving up tohigher levels.
<Targets and action plans>
Target 10-1.
Establish and enforce fuel quality control in a way consistent with theproposed EURO roadmap.
By

ActionActor(s)2008

A survey on the fuel quality of imported oil products and retail MOTransp,
market
STAMEQ, GdoCs

2009

Design and begin to implement higher standards of fuel quality in MOTransp, MOST,
line with future EURO roadmap
STAMEQ

Target 10-2.
Strengthen the vehicle inspection and maintenance system in a synchronized
way with the EURO roadmap.
By

ActionActor(s)2008

Initiate on-road site emission testing

2008

Draft a plan for periodic inspection of motorcycle emissions and VR, MOP,
compulsory maintenance (initially for Hanoi and HCMC)
MOTransp

2009

Implement periodic emission inspection and maintenance of VR, MOP,
motorcycle, with effective administrative measures for noncompliance MOTransp

VR, MOP

Target 10-3.
Strengthen the urban air quality monitoring system.
By
2008

ActionActor(s)Establish an air quality monitoring system in Hanoi and HCMC for MONRE
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Policy Measures

Measure 11. Establishment of an industry association comprising all
motorcycle manufacturers in Vietnam (chapter 8)<Overall objective>
Establish an industry association that serves the interests of motorcycle
assemblers and suppliers in Vietnam.
<Target and action plans>
Target 11-1.
Create an industry association that provides information service, surveys,
technology transfer, coping with social issues, dialogue with policy makers,
international cooperation, and so on, for motorcycle assemblers andsuppliers in Vietnam. MOI should support its creation.
By

ActionActor(s)2008

Draft a plan to establish an industry association through close MOI, related
consultation among producers in the motorcycle industry in businesses
Vietnam, with MOI assistance2009

An industry association should be established

2009

Proposed activities, including monitoring of this master plan (see Industry association
section 9-3 below) and international cooperation, should be started

Related businesses

Measure 12. Eradication of illegal motorcycles and illegal parts in
Vietnam (chapter 8)<Overall objective>
Vietnam should fully protect industrial property rights related to
motorcycles.
<Target and action plans>
Target 12-1.
Vietnam should become a country free of illegal motorcycles by 2015.
This shall be achieved by joint effort of authorities and producers in strategy
formulation, institutional improvement, public education, and strict policing
and persecution.

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Policy Measures

By

ActionActor(s)2008

Draft a strategy to eradicate illegal motorcycles and parts

VR, MOP, MOI,
businesses

2009

Initiate joint effort of authorities and producers in public education, VR, MOP, MOI,
policing, and persecution
businesses

2010

Domestic production of illegal motorcycle parts should be VR, MOP, MOI,
eliminated
MPI

2015

Any production, import, sale or use of illegal motorcycles, both old VR, MOP, MOI
and new, should be eliminated

9-3. Monitoring
Overall progress in implementing these measures should be monitored
and reviewed jointly by the government and the industry. On the governmentside, the Ministry of Industry (Department of Mechanics, Chemicals andMetallurgy) shall take the responsibility for this task. On the industryside, the proposed industry association of motorcycle manufacturers willtake the responsibility. Until the time such an association is established,
MOI shall take the responsibility of monitoring and review, in cooperation
with manufacturers, industrial experts and academic institutions as necessary.
The first progress review shall be conducted one year after the approvalof this master plan. The second progress review shall be conducted three
years after the approval of this master plan. Each review should produce
a report which contains the current status of implementation of each action
plan, overall progress assessment, and proposals for policy revision if any.

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