Integral Manufacturing &Supporting Industries
The Way Forward for Vietnam

Kenichi Ohno
VDF/GRIPS June 2007

How to Catch Up with & Overtake
Other ASEAN Economies
z Open up trade and FDI boldly
Step-by-step liberalization no longer works; create freest
business environment in E Asia, and use it to market Vietnamz Promote local-FDI linkage vigorously
Analyze why other ASEAN countries are slow to link up with
FDI and foreign buyers
z Learn integral manufacturing andbecome Japan’s reliable partner
This strategy is needed to avoid direct clash with China and toovercome the “glass ceiling”

Business Architectures
Modular manufacturing

Integral manufacturing

Partsinterface

Parts are common and canbe used for any model

Each product has uniqueparts, specifically designed

MeritsQuick results and flexibility

Endless pursuit of quality

Demerits

No differentiation, excess
entry, low profit, lack of R&D

It takes much energy andtime to achieve results

Institutional
requirement

Openness, quick decision
making, flexible outsourcing

Long-term relations, building
internal skills & knowledge

PerformanceTimeTime

Monozukuri (Manufacturing) Spirit
Mono means “thing” and zukuri (tsukuri) means“making” in indigenous Japanese language.
z It is a sincere attitude toward production with pride,skill and dedication. It is a way to achieve highperformance, disregarding short-term profit.
z Many of Japan’s excellent manufacturing firms werefounded by engineers full of monozukuri spirit.
zSakichi Toyota
1867-1930

Konosuke Matsushita
1894-1989

Soichiro Honda
1906-1991

Akio Morita(Sony’s co-founder)
1921-1999

What Must Be Done Is Clearz Promote industrial human resources
Training centers, Meister system, curriculum reform at industrial
univs. & colleges, overseas educ. & training, incentive for brain
return, using AOTS & JODC schemes, etc.
z Promote supporting industries
SME promotion (HRD, technology, finance), inviting FDI parts
makers, industrial standards, quality standards and testing, factory
doctors, local-FDI matching service, promoting SME networking,trade fairs & reverse trade fairs, database, using JETRO services

These measures are well known and have been
available for a long time in ASEAN. The question isnot WHAT to do, but HOW EFFECTIVELY you do it.

Japan: Ageing Problem
z Japan has high technology, high wages, andageing population.
z “The 2007 Problem”—Postwar baby boomers(born 1947-49) with high skills are now retiring.
z Integral manufacturing cannot develop fully
by just using simple labor in developing
countries.
z Japan needs a young and developing country
as a reliable partner in integral manufacturing.

Population Pyramids

MaleJapan
2005

FemaleMale

Source: US Census Bureau, International Database.

Vietnam2005

Unit: million
Female

Motorbike Master Plan
(Final Draft Version, May 2007)

Chapter 2—Industrial Structure andProduction Orientation
Prof. Fujimoto’s business architecture theory.
z Modular manufacturing is easy but will face excesscompetition and technology lock-in.
zEasy entry
Low price

Low profit

Low R&D

Low qualityz

Parallel development of integral and modular
manufacturing is acceptable, but policy should
support only integral manufacturing.

Motorbike Master Plan
(Final Draft Version, May 2007)

Chapter 4—Supporting Industries andIndustrial Human Resources
Vietnam’s motorbike industry is now large enough(2 million units per year) to attract suppliers.
z Motorbike should be the core industry for promoting
supporting industries.
z Three types of human resource should be targeted:(i) new managers, (ii) new multiple-skill workers, (iii)managers and workers solving current problems.
zPolicy Measures for Chapter 4
M1—Incentive measures for pressing, casting,forging, welding, die & mold
M2—New mechanism to receive foreign
experts effectively, incl. Japanese retirees
M3—Strategic FDI marketing for supporting
industries (Hoa Lac HTP, rental factories, etc)
M4—Building supporting industry database inconjunction with business matching service

Measures (continued)
M5—Creating pilot institutions for practicaltechnical & vocational education and training(TVET)
M6—Testing centers for assembly-type
manufacturing industries
However, details of action plans are not yetagreed or drafted into the master plan.

Proposal for Further Actionz MOI should draft a new Supporting Industry

Master Plan within the framework of Joint
Japan-Vietnam Initiative.
z This Master Plan must have concrete actionplans and time tables.
z Government should clearly announce that
supporting industries are top priority.
z Japan should actively assist implementationof this master plan.