Drafting the Motorbike Master Plan
New Method and Key Issues
Kenichi Ohno - Vietnam Development Forum - March 2007

Topics(1) Introducing VDF(2) Drafting the Motorbike Master Plan
Purposes and new methodz Proposed contentsz Key policy issues – with special attention on
motorbikes’ role in Vietnamese societyz

(1) Introducing VietnamDevelopment Forum (VDF)
Established in 2004 by Japan’s research grantz Joint research project between National Graduate
Institute for Policy Studies (GRIPS) in Tokyo, andNational Economics University (NEU) in Hanoiz Objectives: (1) Research innovation(2) Policy impact & networking(3) Mobilizing young talented Vietnamese
zWorkshopOfficeIndustrial Policy Supportby VDF
Research and surveys on electronics, motorbike,automobile, steel, power, supporting industries,infrastructure, business architecture, database, etc.
z Joint missions with Ministry of Industry (MOI) toThailand, Malaysia, Japan comparing policy drafting
method, master plans, business involvementz Supporting Industry Master Plan—working with MOI
to conduct surveys and related researchz Motorbike Master Plan—VDF is a coordinator among
MOI, businesses and experts; new drafting methodz Study on Hanoi’s developmentz(2) Drafting Motorbike Master
Plan: Methods & Issues
z Official drafting body – Industrial Policy

Strategy Institute (IPSI) of MOI
z VDF supports IPSI as facilitatorz Main purposes
Introduce new method and content under:(1) Active involvement of stakeholders, especiallymotorbike producers(2) Active coordination with related ministries andorganizations

Two Problems in Vietnam’s
Industrial Policy Formulationz Lack of business involvement--Unrealistic analysis & targets not supported by firmsz Lack of coordination within government--Listing policies without concrete action plans
These problems are unique to Vietnam; they do not exist
in Japan, Thailand or Malaysia

Thailand (Thaksin period, 2001-2006)
Tripartite coordination under industry-specific institutes and committees

Prime Minister

Policy direction
to be concretized

Order

Relevant
Ministry

Industry-specificCommittees

DirectinputsPrivateSector--Master plan--Implementation--Monitoring--Adjustment

Industry-specific
Institute
Experts

Malaysia:
Industrial Master Plan 3 (IMP3), 2006-2020
338 members + support staff; actual drafting time—about two years

Malaysia:
Drafting Process of IMP3IPC: Industrial Planning Committee (headed by MITI Minister)
SC: Steering Committee (headed by MITI high official)
TRGs: Technical Resource Groups (headed by various experts)

Business opinions reflected through TRGs and brainstormingVietnam: Traditional M/P Drafting Process
PrimeMinister
Review for
approval

Order

SubmitInterministerial
review

Drafting
Team

Minister

MPI & other
Ministries

Submit

Data

Internal
review

MPI & other
Ministries

GovernmentAppeal letter toPrime Minister whenproblems arise

Contact
Ministry whennecessary

Interviews,
symposiums(sometimes)

Technicalassistance(sometimes)

Internationalexperts

Business Community
No permanent channel for continuous policy dialogue(case-by-case, temporary, ad hoc)

New Motorbike Master Plan
In Spring 2006, Joint Working Group (JWG) wasorganized to draft the Motorbike Master Planz 17 members—including IPSI/MOI, motorbike
assemblers, experts, and VDF
z Official recognition by MOI and Vietnam-Japan
Joint Initiative Phase 2z Final draft by end May 2007 (drafting time about
one year)zDrafting
Organization

Ministry of Industry
Master Plan for approval

Motorbike Joint Working GroupIPSI/MOIRelevant
ministries
andagencies

VDF

CoordinatorExperts

Assemblers

Opinions
Assemblers

Partsuppliers

Information& analysis
Experts

Drafting Activitiesz

Supporting Industry Survey (Feb-Apr 2006)ÎSee VDF Reportz

9 brainstorming sessions (May-Aug 2006)
Î See VDF websitez

Discussion with assemblers & suppliers in North and South(Nov.2006)z

Japanese experts dispatched to support M/P (Jan-Feb 2007)
Mr. Minato (air polllution), Mr. Hiroe (supporting industries), Mr.
Kawashima & Mr. Nakagawa (Industrial property rights)zDiscussion with related ministries and agencies (ongoing)
MOTransp, MOTrade, MOLISA, Police, 127 Committee, VNRegister, NTSC, researchers, etcz

Consumer survey on motorbike use (Mar.2007)

Skeleton Draft (Sep 2006)
Currently, drafting chapters based on this structure

0. Introduction
1. Role of motorbikes in
VN society **2. Industrial structure &production
3. Forecasting demand
4. SI & Industrial HR
5. Urban Transport **6. Traffic accidents **7. Environment *8. Industrial property *9. Policy measures** Non-supply issue* Non-key issue in traditionalformat

Highlights of Proposed Contents
1. User-side concerns (safety, environment, congestion)
are featured in addition to traditional supply-side
issues (output, skills, technology).
2. Government role is to support healthy growth of
motorbike industry(1) Indicative projection and guidance(2) Realistic and meaningful standards for
quality, safety, environment, industrial
property (applied to all producers equally)(3) Enhancing Vietnam’s local industrial
capability

Î Not to intervene in the business decisions of individual
producers, such as output, investment, export

3. Policy objectives in Motorbike M/P(1) People’s mobility and convenience(2) Quality of life (congestion, traffic safety, clean air)(3) Ensuring reasonable cost and timing of building
transport infrastructure(4) Leveling-up of Vietnam’s industrial capability

4. Conditional promotion of motorbike use“Motorcycles should continue to be used to ensure people’s mobility
and reducing infrastructure cost per year, provided that sound andsustainable solutions are found and implemented to cope with traffic
congestion, traffic accidents, environment, and industrial property
rights.”“At the same time, the motorcycle industry should become theprincipal industry by which supporting industry base is built andindigenous industrial capability is promoted.”5. Leveling-up of industrial capability--Any producer, who satisfies quality, environment andintellectual property standards, is welcome to enter themarket.
--Government will not target or promote national brandmotorbikes.
--Government will strongly promote supporting industries andindustrial human resources (with international cooperation,if necessary)--Government will encourage exports, but will not set any
numerical target--Government will help Vietnamese assemblers to restructure.

6. Learning integral manufacturing--Japanese motorbikes are integral and Chinese motorbikes
are modular.
--Vietnam should learn integral motorbike manufacturing inorder to (i) upgrade technology; and (ii) compete effectively
with “Chinese” (modular) products.
--Parallel development of integral and modular motorbikes isacceptable, if Intellectual property is protected. But modular
production does not require strong policy support

7. WTO consistency--High tariffs, import bans & quotas, localization requirement
are WTO inconsistent. They are not needed for Vietnam’s
motorbike industry.
--Promotion of supporting industries and industrial humanresources are WTO-consistent.
--Industrial property protection is highly consistent with WTO.

Key Policy Issues
Related to Motorbike Usez Forecasting motorbike demand – both stockand annual salesz Should motorbikes be restricted in urban
areas to solve traffic-related problems? If
so, what policy measures should be used?

Existing Stock of Motorbikes
Currently, nearly 20 million motorbikes in use (annual sales about 2 million)
Hanoi and HCMC - 2 persons per motorbike (close to saturation)
Other areas - 6 persons per motorbike (room for growth)Million201816Motorcycles
Automobiles

141210864201990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

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 0.68 0.77 0.89

Motorbike Density in Asia, 2000
Registered motorcycles per 1000 persons

600
500
4003002005

200

Pakistan

Philippines

China

Vietnam

Mauritius

Thailand

Malaysia

Taiwan0Cambodia

100

Indonesia

2000Vietnam’s Uniqueness
Motorbike/Automobile Ratio

Motorbike/automobile
ratio is extremely highÎ

2018162005

14122000

10864

4

RuralUrban

Urban

Thailand 2003

Vietnam 200520Í
Urban-rural gap is large

Malaysia

Mauritius

Philippines

Bangladesh

TaiwanPakistan

China

Cambodia

Indonesia

6Thailand

RuralIndia

8Vietnam

Persons per Motorbike

20

Motorbike and Automobile Density in Vietnam, 2005
Automobiles per 1000 persons
60

Saturation

50

Hanoi

HCMC

4030?
B. Duong?

20Danang

BR-VT
D. NaiK. Hoa10Q. Tri00100200300

400500600

Motorcycles per 1000 persons

Stock Demand Forecast(Circulation)<Three approaches yield similar results>
Person-to-motorbike ratio, motorbike per household, urban vs ruralperson-to-motorbike ratio
By 2020, 33 million motorbikes in Vietnam, or 3 persons/motorbike
Urban: 2.8 persons/motorbike
Rural: 3.1 persons/motorbike
Million motorcycles
40Persons per motorcycle
1435

1230

1025

Approach 2
Approach 3

820

615

Approach 1

10Approach 245

Approach 322015

02000

02000

Approach 1

200520102020

200520102015

2020Thailand as a Benchmark
Persons per motorcycle
1614

Rural

12

Average

10Bangkok

864

2.922005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

1992

1991

1990

1989

0

Flow Demand Forecast(Annual Sales)
Stock in 2020: 33 million - What will be annual demand?
Million<Stock/sale ratio>

4.0

Minato (JARI)

Minato 9.5
Ohno 10-13-18
Ohno (Now at 9.7)

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

25

More Data on
Stock/Flow Ratio

Vietnam
20

Thailand

15
10Vietnam and Thailand
Î52005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

0

Motorcycle Stock/Sales Ratio
25

Motorcycle intensive country

20

Automobile intensive country
15105USA

Philippines

Canada

China

India

FranceIndonesia

Hungary

Thailand

Vietnam

GreeceMalaysia

Italy

JapanTaiwan

0Germany

International
comparison ÎMotorbike Ban in Large Cities?
China bans motorbike use in major cities.
z Hanoi restricted new motorbike registration in 20032005, but abandoned the policy subsequently.
Î Motorbike ban usually has limited effectiveness andimposes serious burden on general public.
Î In Hanoi and HCMC, where motorbike density isextremely high (2 persons/motorbike), banningmotorbikes without providing alternative transportmodes can be considered a policy failure.
Î Traffic demand is predictable, and long-term policy
should cope with its increase.
zWhat Policy Measures?
We do not prefer direct, administrative controls likeban on registration or circulation.
z Indirect measures should be used under aconsistent roadmap.
z--Taxes on motorbike/car registration or fuel use--Strict enforcement on driver’s license, helmet use, riding
style, other traffic rules (for users)--Strict enforcement on quality, intellectual property,environment (for producers)--Traffic management measures such as intersection
improvement, lane separation, staggered commuting
hours, park-and-ride system, satellite cities, etc.
--Construction of new transport infrastructure

Two Alternative Scenarios
for Hanoi and HCMC
Automobile, motorbike and public transport are three pillars of urban transport.

Scenario AScenario B- Rapid motorization- Strong restriction on motorbikes- Slow construction of transport
infrastructure- Controlled motorization- Gradual phase-out of motorbikes- On-time construction of transport
infrastructure
Travel dem andTravel dem andAutom obile
Autom obile

Motorcycle
Motorcycle

Public transport
Tim e

Public transport
Tim e

Hanoi and Ho Chi Minh City
In terms of volume, the two cities are already atsaturation point. But sales will continue to be robust.
z Motorcycle should be phased out only gradually,
and automobile should be introduced only gradually.
z Traffic management and road improvement should
be strengthened.
z Urban mass rapid transit (UMRT) should be built assoon as possible, but under budget constraint.
z Ensuring traffic order and safety and clean air is thepre-condition for the healthy development of themotorcycle industry.
zBangkok Now Has Cleaner Air
Bangkok now has bluer sky and cleaner air
compared with early 1990sz Thai policy makers worked very hardz--Required oil companies to produce cleaner fuel--Abolished 2-stoke engine motorbikes--Converted all taxis to use natural gas--Introduced and strictly applied EURO air standard--Converted from coal to electrical cookingzDuring the last decade, traffic volume increased
40%, but air-borne toxic particles fell 47%, children
with high lead in blood fell from 28% to 3%.

Tentative Conclusion
By 2020, there will be about 33 million motorbikes, or
one for every 3 persons, in Vietnam.
z Urban-rural ownership gap will narrow.
z Domestic sale depends on stock-to-flow ratio, whichreflects market characteristics.
z Vietnam should continue to use motorbikes, but on
the condition that traffic congestion, accidents,environment are solved.
z No direct control of motorbike use in urban areas.
z

VDF Reference Materials
Website:www.vdf.org.vn/jwg.htm
Publications:z Industrial Policy Formulation in Thailand, Malaysiaand Japan (Eng & Vn, Sep.2006).
z Industrialization of Developing Countries: Analyses ofJapanese Economists (Eng & Jpn, Nov.2006; Vn 2007).
z Supporting Industries in Vietnam from the
Perspective of Japanese Manufacturing Firms (Eng,Vn & Jpn, June 2006).
zImproving Industrial Policy Formulation (Eng & Vn,March 2005).

z

Building Supporting Industries in Vietnam (Eng & Vn,forthcoming in early 2007).