Transcript of the Lectures and Speechesat
The Honda Foundation International Symposium 2005, Hanoi
Linking Innovation and Entrepreneurshipfor Developing Countries

February 28, 2005: Melia Hanoi Hotel, Hanoi, Vietnam

Organized and Hosted by:
HONDA FOUNDATION (HOF)with:
National Institute for Science and Technology Policy and Strategy Studies (NISTPASS),
Ministry of Science and Technology, Vietnam

Supported by:
Embassy of Japan in Vietnam
Honda Vietnam Co., Ltd.

On February 28, 2005, the Honda Foundation (HOF), in collaboration with the National
Institute for Science and Technology Policy and Strategy Studies (NISTPASS) of the Ministry of
Science and Technology of Vietnam, held an international symposium titled “Linking

Innovation and Entrepreneurship for Developing Countries”at Melia Hanoi Hotel in Hanoi.
Focusing on the HOF-advocated Eco-Technology concept, the participants discussed how the
fast-growing Vietnamese economy could remain prosperous while moving on to a moreenvironmentally-benign direction. The symposium was supported by Embassy of Japan in Vietnamand Honda Vietnam, a Honda’s local enterprise which produces motorcycles in Vietnam.

More than 20 researchers from Japan, Vietnam, and Thailand delivered speeches and exchanged
views and ideas about how the Vietnamese economy can depart from the past catch-up growthmodel harnessed by the transfer of foreign technologies and investments. The discussantsemphasized the importance of sci-tech based innovations, and such policies that facilitate them,for Vietnam’s sustainable growth in a more creative, environmentally-sound fashion. In addition,
Honda R&D engineers from Japan demonstrated a prototype of the fuel-cell and hybrid motorcycles
to showcase the forefront of Honda’s development in earth-friendly technologies. The symposium
was covered on the national TV stations and commercial newspapers and drew wide attention.

What follows is a transcript of the remarks and talks of the discussants at the Honda
Foundation International Symposium 2005, Hanoi.

The Honda Foundation International Symposium, 2005, Hanoi

Linking Innovation and Entrepreneurshipfor Developing Countries
February 28, 2005: Meliá Hanoi Hotel, Hanoi, Vietnam

Co-organizer:
National Institute for Science and Technology Policy and Strategy Studies (NISTPASS)
HONDA FOUNDATION (HOF)

Supported by:
Embassy of Japan in Vietnam
Honda Vietnam Co., Ltd.

[Program]
8:30 Registration and Welcoming coffee
9:00 Opening: Vice Minister Le Dinh Tien (MOST)
Opening Session A: Keynote Address[1] Ambassador Hiroto Ishida (Ex-Vice Minister STA, President Kanazawa Gakuin Univ.)[2] Dr. Le Dang Doanh (CIEM/MPI)
Opening Session B: Special Presentation
Dr. Patarapong Intarakumnerd (NSTDA, Thailand)
10:05 Session 1: Innovation, Learning and Entrepreneurship
Chair: Prof. Nguyen Quang Thai (DSI/MPI) & Prof. Hiroyuki Odagiri (Hitotsubashi Univ.)[1-1] Japan’s Innovation Systems (Prof. Hiroyuki Odagiri, Hitotsubashi Univ.)[1-2] Technology Transfer: the Role of MNCs in Vietnam (Mr. Nguyen Vo Hung, NISTPASS)[1-3] Role of Firms in Industrial Innovation (Mr. Takashi Sawai, NTT Advance Technology)[1-4] Link-up program between Firms - Research Institutes - State and Experiences from HCMC
(Dr. Dao Van Luong, Department of Science and Technology, HCMC)

Discussions and Q&A
11:45 Lunch (Hosted by HOF)

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13:10 Session 2: Strategy and Policy
Chair: Dr. Nguyen Manh Quan (Ministry of Industry) & Prof. Akira Goto (Tokyo University)[2-1] Dynamics of the National Innovation System - A Case of the Thai Automobile Industry(Dr. Nobuya Haraguchi, UNIDO)[2-2] Institutional Building for Vietnam’s Innovation System(Dr.Tran Ngoc Ca, NISTPASS)[2-3] China’s Innovation Systems Reform and the Development Strategy(Prof. Atsushi Sunami, GRIPS)[2-4] Policy Lessons for Vietnam: Engineering capacity building for sustainable development,poverty alleviation and international integration(Dr. Nguyen Truong Tien, Hanoi Construction Company, Ministry of Construction)
Discussions and Q&A

14:55 Coffee Break
15:10 Session 3: Innovation, Eco-technology and Sustainable Development
Chair: Dr. Nguyen Danh Son (NISTPASS) & Prof. Kunio Nakajima (GRIPS)[3-1] ECO-TECNOLOGY --- Human Environment Conscious Science & Technology(Prof. Hirohisa Uchida, Tokai University)[3-2] Entrepreneurship and Development of Eco-Technology(Prof. Bui Van Ga, Danang University)[3-3] Case: Future of Motorcycle -- Introduction of a future study of Honda R&D research division(Mr. Yoshiyuki Horii, Honda R&D, Japan)[3-4] Case: Clean production in Xuan Hoa company(Mr. Doan Van Bang, Deputy director, Xuan Hoa enterprise), with support from Dr. Tran Van
Nhan, CPC, Hanoi Technology University
Discussions and Q&A

16:50 Closing Speech for The Symposium: Dr. Tran Ngoc Ca (NISTPASS)
17:10 Exhibition; Fuel Cell & Hybrid Motorcycles (Experimental)(Honda Vietnam and Honda R&D Japan)
18:00 Pause: The End of Symposium for the General Audience-6-

Le Dhin Tien

Vice Minister MOST

Opening message“His Excellency Ambassador of Japan,
Mr. Hiroto Ishida, President of Kanazawa Gakuin University, head ofJapanese delegation,
Mr. Hiromori Kawasima-President of Honda Fundation,
Professor Chu Tuan Nhan, President of the National Council ofTechnology & Science Policy,
Ladies and Gentlemen,
On behalf of the Ministry of Science and Technology I sincerely
appreciate the initiatives of the Honda Fundation, as well as the Institute ofStrategy and Technology – Science Policy, the Ministry of Science andTechnology for co-organizing this forum on the connection between
technology innovation, entrepreneurship, lessons for developing nations
and welcome domestic and foreign delegates attending to this conference.
Ladies and Gentlemen,
In the process of “Doi Môi”20 years, Vietnam have gained a number ofsignificant and important achievements in all aspects. Thanks to“Doi Môi”,
Vietnam overcame socio- economic crises, the economy grow rapidly andthe technical equipments improved, the standard of living was continuallyenhanced, politico-society was stable and international relations were
strengthened.
The GDP is doubled for 10 years from 1991- 2000 with an averageannual growth rate of 7.5%; and for the last 3 years from 2001- 2004, theaverage growth rate has remained high at 7.1%. However, Vietnam is still-7-

considered as an undeveloped nation with a per capita income of 500
dollars per year. The speed of economic growth is relatively high but its
quality is not assured such as low effectiveness in investment, in quality
productivity and small added value for products and services, still low
competitiveness in economic aspects as compared to other nations in theregion and the world.
One of the main reasons for this situation is that the technology level in the
production competence of Vietnamese enterprises has remained backward.
In many economies, innovation speed and technology modernization are
not efficient. Most of Vietnamese entreprises are at small and medium size.
As a result, the ability to invest in technology innovation is quite restrained,
experience in business is inadequate. Research and Development
organizations in Vietnam are also in bad situation of investment ability.
They are not able to keep up with and adapt to the changing economic
environment which has transformed from a centralized planning system toan open market mechanism.
The linkages between entreprises and Research & Development
organizations to carry out technology innovation are still limited, so it
creates big challenges for all of them in the globalization, integration andinternational competition in Vietnam. On one hand, the impacts ofglobalization and international integration, through factors of innovative
systems, provide opportunities for Vietnam to develop more quickly, toacquire progress in science and in technology as well as in society at theworld level, to reinforce learning, to transfer and cooperate technology. On
the other hand, this process will create a big challenge for every unit
involved in this process, especially for organizations, individuals andenterprises in underdeveloped- countries like Vietnam.

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The Vietnamese Party and Government place high priority on policies forindustrialization,

modernization

andtechnologicalandscientificdevelopment. Our government views the development of education andtraining in science and technology as our most important objectives innational development policy, especially recently, the Vietnamese
government has officially promulgated a strategy of technological andscientific development up to the year 2010 with “Renovation project oftechnological and scientific management mechanism”. The Ministry of
Science and Technology sets up important measures and policies tostrengthen technological market development, complete laws of intellectual
property and transfer of technology to promote trade initiative andtechnological innovation for improving competitiveness of products andservices in the context of international and regional integration. This next
coming 5 years, from 2006- 2010 is the critical implementation phase forthe strategies of socio- economic development in Vietnam. Particularly,theaim of the 2001-2010 strategy is to keep out Vietnam a developing nationand create the premises for an industrialized nation by 2020. The Ministryof Science and Technology, therefore, appreciates the topics in thisworkshop and acknowledge help from scientists, managers, and foreignand domestic businessmen for ensuring the success of this forum. It isreally an useful forum for us to share experiences, exchange ideas, discussand make recommendations to related offices and organizations. This will
help Vietnam gain valuable experience in the process of economic andtechno-scientific integration.
On behalf of the Ministry of Science and Technology, I would like toexpress our thanks for the efficient support and closed cooperation of the
Honda Fund and the Japanese Ambassador in organizing this forum. I hope-9-that Vietnam and Japan continue to develop close ties and that our forum
will be a success. Thank you.

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Hiroto Ishida’s Speech
Hello, everyone. I’
m Hiroto Ishida. It is my pleasure being here in Hanoi, a beautiful city
surrounded by rivers and woods. And it is my great honor to deliver a keynote address tothis gathering, the International Symposium in Hanoi 2005, in front of Mr. Le Dhin Tien,
Vice Minister of the Ministry of Science, Technology and Environment (MOSTE).
With its focus on “innovation, entrepreneurship and economic development,” this
symposium is co-hosted by NISTPASS and the Honda Foundation. I believe it would
serve as a catalyst for a tighter relationship and the bright future of Vietnam, Japan, andthe rest of the Asian countries. Before starting my address, I sincerely thank all theparticipants, especially Dr. Patarapong from Thailand’s NSTDA.
The Honda Foundation was established by Mr. Soichiro Honda, one of the most famous
business entrepreneurs of Japan. In accordance with the spirit of the late, it has advocateda technological concept called “eco-technology,”encouraging technologies that help createa more “humane” civilization. The foundation has hosted a number of symposiums invarious countries as an opportunity for researchers and experts in the world to freely
exchange their insights and experiences. Each of these occasions has drawn publicattention and produced greater responses as the actual importance of eco-technology
increases.
At the beginning of the 21st century, creating sci-tech based innovations is the key policy
concern around the world. Some arguments even predict no nation can survive without
improving national life with the full use of the sci-tech based innovations. We once argued
modern technology may rob us of job, but that was a lie. Quite contrarily, technologicaladvance creates new jobs while reducing toil from us. Today we know stable employment
is an outcome of diligence to provide better products and services that customers want.
Look at today’s robust economy in Vietnam. Her economy picks up because Vietnamese
people works so hard, although her prosperity is only half done. We strongly hope Vietnam
will keep up the good work and move further into greater economic growth.

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I served as a Japanese ambassador to Czech Republic in Europe from 1999 to 2003. Inthat age, the European Union accelerated its expansion: A union of 15 became that of 25
as a result of the liberalization momentum after the fall of Berlin Wall in 1989. Former
Eastern European countries, now called Central Europe, started adopting technologies
from the free world in pursuit of economic expansion. Czech was no exception. In such aturbulent age, I was often, however, inclined to think about my country and Asia. European
countries have long history, but Asia has even longer history with a larger population. How
can we Asians lead the rest of the world with our technological innovations and improve
people’s life? — This was a common concern among Asian ambassadors and business
managers who then worked in Europe.
Asia is diverse, but we have a lot of things in common. For instance, we East Asians havea tradition of living close to each other intimately in rich natural environment. Yesterday, I
visited the preservation site in historically important Don Ram village. I was very moved as
I saw how people thank nature and respect ancestors because such a tradition is very
intimate to me.
In Hanoi, I saw an aquatic puppet play in which all characters — men, dragons, frogs, fish,
and buffalos — were active on the water. I felt it must be an expression of the Vietnamese
people who live on the water like Mother Mekong and Mother Huong. I didn’t understandwhat was going on behind the dynamic movements of the puppets. When the puppeteers
appeared in front of the audience after the play ended, I could only guess how the puppets
were manipulated. I still don’t think everything is clear.
The Japanese culture also has the puppet theater. In bunraku, one of the registered world’scultural heritages, each puppet is manipulated by three puppeteers and they are present
on the stage, beside the doll in black robes and head coverings. The audience can always
see how they manipulate the doll. Especially, omo-zukai, or head puppeteer, wears nohead covering. Sometimes all three puppeteers wear colorful robes. So bunraku theater
requires puppeteers to perform not only their puppet but also themselves. The audiencecan enjoy the performance of “supposedly nonexistent” players as well as that of the- 12 -

puppets — I personally think this is the spice of the bunraku art.
As just described in the two examples, Asian cultures have likes and differences, and thefuture of this region depends on how we can take full advantage of this diversity andsimilarity.
In terms of national innovation, the top priority is to cultivate able human resources, afundamental basis of all activities in modern nations. But when you use the term humanresource, it should be always reminded it somehow implies our perception of human asmeans for some other end. Our end always lies in human himself — all national endeavors
must pursue the society where every human can manifest his/her full humanity to lead a“humane”life.
I have a profound respect for endeavors of the Vietnamese to keep improving youreducational and training systems as an engine of social and economic development in yourlong history, especially since 1993. As a result, you have made considerable achievements
in many respects: Improved school enrollment, diversified vocational training, strong
foreign language education, promoted special-talent fostering, and an increasing numberof private schools. All these achievements make Vietnamese livelihood more stable, andstable livelihood is a basis for better material and spiritual life. This is where HOF’s conceptof eco-technology aspires for.
Recently Vietnam and Japan have strengthened cooperation in various areas associatedwith people’s security, comfort, and health with the strong leadership of Embassy of Japanin Hanoi. One good example is a fuel-cell scooter which Honda Vietnam will demonstrate
later. The fuel-cell motorcycle is a product of one of today’s most advanced technologies,
and I believe it is very important for both nations to make full use of suchenvironmentally-benign technologies for more secure, comfortable livelihood of the people.
In many other areas, Japanese embassies strive to improve collaborative relationships
among Japan, Vietnam and the East Asian countries in general. For instance, we help
researchers build a unified form of technologies to conserve and improve the earth's- 13 -

environment, and a cooperative prevention system to address disasters like the Sumatra
Earthquake and the bird flu.
Intellectual activity is the most important activities of human being. To acquire newknowledge, we need not only intellectual cooperation among nations, but also physicalinvestments for large-scale advanced equipment and technology. But new knowledge isjust a starting block. More importantly, we need to closely watch sci-tech trends andcooperate to create innovation, to put knowledge into use, especially when the world
shortens the span between the frontier of knowledge and the industry.
I expect Vietnamese people to step toward a new innovation based on your diligence andthe cooperation with the international community, especially Japan. We will maximize ourassistance. This is my passion for Vietnam and the end mark of my keynote address.
Thank you.

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The Honda Foundation International Symposium, 2005, Hanoi

Linking Innovation and Entrepreneurshipfor Developing Countries

February 28, 2005: Melia Hotel, Hanoi, Vietnam

Keynote Address

Technology innovation, Entrepreneurship and Link-up Implementations in Vietnam

Le Dang Doanh- 15 -

Vice Minister of Sciences and Technologies, Mr. Le Dinh Tien,
Ambassador Hiroto Ishida, President of Kanazawa Gakuin University
Distinguished guests,
Ladies and GentlemenFirst of all, I would like to thank NISTPASS and Honda Foundation for their initiative toorganize this important international symposium and for my opportunity to give a speechat this gathering. The main theme of the symposium, “Linking Innovation and
Entrepreneurship for Developing Countries”, is a very useful topic for Vietnam and is
an area Japan can set a good example of innovation and entrepreneurship for developing
countries to learn useful experiences and lessons.
This symposium being organized in the Spring of 2005 is a meaningful coincidence in thehistory of the bilateral relationship between Vietnam and Japan. A hundred years ago, in
1905 Vietnamese patriots including our famous Phan Boi Chau who started the Eastward
Going Movement, sending Vietnamese youths to Japan to learn a development model andseek helps and assistance in our fight for independence. Thus, we, Vietnamese, recognized
the leadership of Japan in Asia 100 years ago and looked toward Japan. I believed thatboth Vietnamese and Japanese nations will celebrate the 100th Anniversary of theEastward Going Movement in the spirit of cooperation, friendship and good prospective
Vietnamese-Japanese relationship. I hope that this symposium being organized 100 years
after the Eastward Going Movement will contribute to the promotion of Japanese
investment into Vietnam, encourage Vietnamese entrepreneurs to innovate theirtechnologies, which are the realistic measures to have close economic, science andtechnology linkages in the spirit of mutual benefits.
Vietnam has a long history of culture and heroic national defense for independence andsovereignty to develop with its own characteristics and with its own choices. This is also adynamic and continuous innovation process, absorbing positive achievements of thehuman civilization and adopting creatively for Vietnam’s particular conditions. The world
has known Vietnam for its creative contributions in military, culture, traditional medicine,and agriculture during its thousand-long years of history. In the past, the State and villages,
pagoda and the State, together with Confucianism, Buddhism were important institution.
Vietnamese entrepreneurs during the national history made important contribution to the
expansion of international trade with other countries including Japan, due to limited- 16 -

understanding, their contribution were not duly acknowledged by the society and written
about.
At the present, when the whole human being is moving toward a new stage ofdevelopment, which is called new economy or knowledge economy, when development
and growth which are urgent and imperative needs for deeper integration into the world
economy depend on science, technology and innovation, the symposium “Linking
Innovation and Entrepreneurship”is highly topical.
In the past centuries, churches, pagodas, Confucianism, Taoism, the State, King, and thevillage communities formed the important national institutions. In the context of the 21st
century, firms, research institutes, and universities are more and more important
institutions. They have even become the major institution for economic development,competitiveness enhancement not only at the present but also in the future. That firms,
universities and research institutes are the driving forces for economic and sci-techinnovation, the major institutions for innovation in business, production in a close
relationship with the state and society. It is obvious that firms are the important linkage for
introducing technologies in our life, affecting consumers and the whole society.
Hereafter, I would like to address the transition in Vietnam, development ofentrepreneurship and technological innovation and to make several recommendations for
future development.
I. Roles of firms in the innovation and development process in Vietnam
Started from 20 years ago, Vietnam has been continuing its active transformation process:- Transition from a centrally planning economy in which state owned enterprises
were encouraged and private business were prohibited economic model to asocialist-oriented market economy which is step by step integrating into theregional and global economy.
- Transition from a small, agriculture and noncompetitive economy to anindustrialized, modern, specialized economy, and step by step moving toward alarge scale, high productivity and competitive economy.
- Move forward to a high knowledge, technological and scientific economy, in which
well trained, qualified, able and creative persons play a key role.

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These processes integrate, interacted and enable each other in the transition to a market
economy in which socialist orientation is the key.
Vietnam has attained considerable economic, education, scientific and technologicalachievements. The most important change is to realize the right to pursue one’s own
business according to laws and regulations in the context of market mechanism,
integration, cooperation and competition, in which each individual has the right to decideon the field of business, investment and education, instead of business prohibition andrestriction as before.
At the moment, Vietnam has 160,000 registered firms, 2.2 million household businesses, 6
million rural farms, in which about 250,000 firms are licensed to import and export.
Entrepreneurship has been lightened up and contributed into high growth rate, poverty
reduction to a half, job and income creation and export improvement. From a foodimporter, Vietnam has become an important exporter of rice and many other agricultural
produces like coffee, cashew nut and tea with much biological innovation in botanical andanimal variety, irrigation. The fishery industry has made great achievement in aquaculture
farming. Together with technological innovation, electronics, garment, wooden furnitureexports have rapidly increased.
Newly born industries have appeared such as ship building and motorbike assembling.
Vietnam has quickly absorbed and owned new technology in tunnel construction, bridge
construction, and high-rise building etc.
The government has constructed and developed the infrastructure, improved investment
and business environment for doing business. The government also has assistant programin information technology, e-government, administrative innovation, technologicalinnovation for small and medium enterprises, and in agriculture extension. Vietnamese
government plays a key role in boosting technological innovation, creating economic
leverage to promote entrepreneurship. Enterprises Law in 1999, effective 1 January 2000
has significantly improved the development in the private sector and thus, boosted
technological innovation.
The National Assembly has approved Competition Law dated 9 November 2004, effective
1 July 2005 with a hope to create a fair business environment, control state monopoly andreduce costs for firms.

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The market driven economy’s institutions like banks and creditors, technological markets
and fairs have assisted firms in modernizing their technology.
Information technology plays an ever-increasing important role in business operation andscience research. Information technology is a foundation for achieving biotechnological
technology improvement, modern management and governance. Most firms have taken
the use of emails in communicating domestically and internationally, world wide webs inintroducing firms. Customers world wide are now able to order a traditional long dress ora suit online from Vietnamese talent tailors at proper price, for instance.
Vietnamese firms have taken greater attention to register their trade mark, their intellectual
properties and obey the Law on this issue.
During the whole process, Japanese firms have played an active role in technology transfer,human resource training, developing cooperation relationship, and step by step forming
clusters of satellite firms to supply parts and components. The 60% localization of the
Honda motorbike is an encouraging example. Many Japanese importers have consulted
and helped Vietnamese firms in meeting the quality requirement, style, sanitary standard,
and food safety by transferring technology, advising the required standard. Thus, more andmore Vietnamese products could be exported to Japanese market and to third countries
like handicraft, agriculture, forestry and marine products.
Vietnamese firms can be categorized into three main types:---

Firms that have strong financial resources and are of suitable size, professionallymanaged and well ordered, operate in competitive import –export businessenvironment. There is only a small number of such firms.
Firms that are state monopoly, large sized, operate in non-competitive businessenvironment thus their business behavior are very different from other firms.
Technological transformation is mainly for maximizing abnormal monopolistic profit
but not for improving competitiveness and satisfying customers’need.
The third type includes state owned and private enterprises of small sizes, of whose
management is ethnocentric oriented, concentrate on domestic market. These firms
need support and co-operation from large firms, credit institutions and government
institutions in modernizing technology. Household business is also belonging to thiscategory.

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Vietnamese agriculture is small sized, fragmented, economically inefficient totechnologically self-innovate. Thus, support from government, banks, scientists and firms
are urgently needed. Recently, there has been positive experience in joining governmental
investment and universities and institutes’technological innovation in applying scientificimprovement, new animal and botanical varieties into agriculture, forestry, and fishery.
Evidence shows that farmers have great potential in learning new technology to improve
competitiveness.
There have been models in industry, in which there are direct connections between scienceand production, production orders science research, and scientific results applied directlyin production. In both agriculture and industry, scientists’income goes together withbusiness effectiveness and their research is tested in reality.
It can be asserted that technological innovation and entrepreneurship are ever connected
and promoted. It is easily noticed that firms operate in competitive business environmentor engage in export have recognized the importance of technological innovation and beable to do so in this regard in comparison with state monopoly or small firms who only
operate in domestic market. It can be seen easily the difference between exporting firms
like Viet Tien, Thai Tuan and domestic firms operate in monopolistic areas. Managers
who are highly educated, have knowledge of foreign languages, and are still very young
are the ones who push up the technological innovation process. Software technology is anarea that requires the involved firms to compete severely, to update their knowledge andhave a well trained and able managerial force.
II. Opportunities, challenges and recommendations
While acknowledging achievements in technological innovation, promoting
entrepreneurship and university-institute linkages obtained during the past it must be
admitted honestly that Vietnam is just at the very first stage of the process and facing
many opportunities as well as challenges.
Vietnamese indicators on technological competitiveness, technological innovation ratio,
technological level of product and services are very poor and slowly improved. Legalframework on technology transfer which includes regulations on technology importation,
tax, and technology evaluation procedures need to be further developed to create favorable
environment for businesses.

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The key factor in bolstering technology innovation is to create a stable and secured
business environment for firms to safely invest. Vietnamese firms are still incompetent inmarket research, marketing, customer management needed to apply suitable businesstechnology. Due to the weakness in market research, quite a few firms are vague inmodernizing technology, in choosing an appropriate technology suitable for market andcustomers’requirement.
Vietnam should also further develop financial and credit institutions which include
venture capital for scientific research, new technological application investment. There
must also be a linkage between universities, research institutes, firms, and farmers basedon governmental preference, support and investment. The management reform inuniversities and research institutes must be encouraged, realistically organized to bring out
persuasive effectiveness to firms and farmers.
The linkages between science and production, between universities, research institutes andfirms must be carried out more closely, publicly and effectively. This must be done in the
on-going business reform as well as scientific and technological reform. Firms must be put
in domestically as well as internationally competitive environment and monopolistic firms
must be supervised closely by impartial criterion. Only via this method has active
entrepreneurship been encouraged. The technological system must be operated via a close
linkage between business, technology and reality.
Throughout this process, learning experience and absorbing modern technology has adeterminant role. Evidence has shown that, investment and technology transfer from Japan
has significantly contributed in technological innovation in NICs (Newly Industrialized
Countries) in South East Asian. More recently, Japanese investment and cooperation has
greatly changed Chinese coastal provinces’agriculture, helped these provinces to produce
agricultural products of high quality which meet the Japanese’s standard. These are usefulexperience and lessons for Vietnam.
I hope this symposium will promote Vietnam’s cooperation with Japan as well as othercountries in the region, help Vietnam improve its competitiveness in its international
economic integration. I believe that, together with the support and goodwill from the two
governments, and the two nations’friendship, this symposium will contribute to thepromotion of investment and technology transfer from Japanese firms into Vietnam.

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May I wish you good health and our symposium great successes! I hope you all have anice time in Viet Nam.
Thank you.

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The Honda Foundation International Symposium, 2005, Hanoi
Innovation, Entrepreneurship and Link-up Implementations for Developing
Countries
February 28, 2005: Melia Hanoi Hotel, Hanoi, Vietnam

Special Presentation: Innovation, Entrepreneurship and Link-up
Implementations for Developing Countries: Thailand’s Experiences
By

Dr. Patarapong Intarakumnerd
Project Leader of Thailand’s National Innovation System Study
Science, Technology and Innovation Policy Research Department
National Science and Technology Development Agency (NSTDA)

Vice Minister Le Dhin Tien,
Ambassador Hiroto Ishida,
Dr. Le Dang Doanh,
Dr. Tran Ngoc Ca of NISTASS,
Prof. Odagiri, Prof. Goto, Prof. Nakajima, Prof. Sunami,
Mr. Toshio Ban, Managing Director of Honda Foundation
Distinguished speakers and participants, Ladies and Gentleman

It is my great delight and honour to be invited by the prestigious Honda Foundation
and NISTPASS to share my view at the conference. It is very trendy to talk about
innovation and entrepreneurship, which have become buzzwords. However, what ismuch more significant in the context of developing countries is how innovation andentrepreneurship can be really implemented to eradicate poverty, increase quality oflife of people, and enhance international competitiveness of a country. Thisconference is therefore very timely organised to address these critical developmentrelated issues.

The outline of my presentation will be as follows. First, I will place entrepreneurshipin the context of national innovation system. Then I will discuss about- 23 -

entrepreneurship in Thailand, which is very much relying on overseas Chinese
business practices. I will move on by introducing all of you with major changes inThai government policy for promoting innovation and entrepreneurship. Finally, twocases implementing cases will be used as examples. One is about how to leverage
entrepreneurship and knowledge from outside and use them to strengthen the
country’s indigenous capability. Another is about how to nurture entrepreneurship andinnovative capability, based on local wisdom and knowledge, at the grass-root level.

Entrepreneurship in National Innovation System
In a nutshell, innovations are novelties of (potential) economic value. Innovations
may be introduced to a market as products either in the form of goods or services.
Alternatively, they may be used within the firm/organization as processes andorganizational changes to increase productivity and product quality. It is widely
accepted that in the era of globalisation and technological sophistication, no one caninnovate alone. Innovations are very much influenced by many actors and embedded
in national context which those actors operate or the so-called National Innovation
System (NIS). NIS is the interactive system of existing actors, private and public
firms (either large or small), universities and government agencies, financial
intermediaries, private industrial associations and so on, aiming at the production,diffusion and use of knowledge within national borders. Interaction among theseunits may be technical, commercial, legal, social and financial as much as the goal of
the interaction may be development, protection, financing or regulation of knowledge.
Institutional context like law and legal frameworks, trust (among actors), attitude to
failure affect behaviours all actors in the NIS. Entrepreneurship is also very importantpart of institutional context.

The word ‘entrepreneur’came from the term ‘entrepredre’in French since the Middle
Age. Literally translation is a ‘between-taker’or a ‘go between’. One of the mostimportant pioneer of innovation studies, Joseph Schumpeter, saw the entrepreneur as
the ‘bearer of the mechanism of change’, i.e., a key factor in introducing innovations
by performing one or combinations of these tasks: a) introducing of a new good,b)introducing of a new method of production, c)opening of a new market, d)- 24 -

acquiring a new source of raw materials or half-manufactured goods and e) carryingout a new organisation of any industry.

Entrepreneurship in Thailand
With the exception of Indonesia, the Thai economy is rather unique in South-East
Asia because no class of indigenous big business entrepreneurs exits. Even smaller
businesses in Bangkok, especially in retailing, are mostly owned and operated by
Sino-Thais. The dominance of family-owned enterprises established by immigrant
Chinese entrepreneurs in Thailand has long been rooted into the Thai business norms
and cultures. Therefore, historically and culturally, entrepreneurship in Thailand is
not much different from Chinese-dominated countries like Taiwan.

In terms of trust, Chinese-owned businesses tend to be built as family-affiliatedcorporations that allow ownership- and kinship-led rather than skill-based
management. This “family-ownership-control-type business”, characterised by low
stock ownership diffusion and more family-related CEOs has led to business and joint
investment co-operation among different companies within the same family affiliates
but only few co-operations among various enterprises of different families. Althoughmany Chinese-run firms have grown into big conglomerates covering many businessareas, the founding family still keeps the ultimate rein. After, firms under the samefamily umbrella overlap and compete, leading to intra-family conflicts. In sum, cooperation is less likely in inter-family businesses, and in the intra-family enterprises,
co-operation often draws family complexity and contention.

An effect of the Chinese-Thai entrepreneurship on the failure acceptance attitude canbe translated into two contrasting views. While the first view sees Sino-Thaiinfluence as a threat towards innovation, owing to their low acceptance of failure anda lack of merit-based management, the second view the Chinese-Thai business culture
as a positive condition, that tolerates risky ventures, needed for long-term planningand investment.

- 25 -

First of all, due to the fact that Chinese-run enterprises expand their businesses for themain purpose of their “total fortune of the family”, they advance into areas such as
finance and real estates. This evidence shows their risk-averse characteristics in doing
businesses. The up-front profit from trading and property business is far more
attractive than the expensive technology-intensive manufacturing that will only earn
longer-term gains. As a result, technological deepening or long-term sustainability is
not much of a concern. Political capability in terms of gaining access to lucrative
oligopolistic sectors seems more important than technological capability in this case.

The structural and political context also affects behaviour of Sino-Thai firms. Most of
the domestic expansion and diversification rationale comes from the fact that SinoThai firms take advantages of government’s industrial promotion and other tax
incentives while diversifying into foreign venture for scale and scope purposes, given
the limited domestic market and intensive local competition. Therefore, liberalisationand high industrial growth of the 1980s, together with many outside favourable
conditions unrelated to the fundamental capability of the Thai industries, allured theThai conglomerates into new diversification technologically unrelated to their original
businesses. In order to do that, the underlying capability these firms accumulated iscapability to establish and maintain political connections with government authorities,
rather than technological and innovation capabilities.

The second view, however, sees the Chinese-Thai entrepreneurship positively. The
fact that “Sino-Thai families traditionally were reluctant to relinquish ownership andmanagement of their companies… ”allow them to create long-term vision for theirvery own family businesses. While some list their assets in the stock market, many
still prefer to raise capital conservatively through loans and offshore bond issued at achance to benefit from different international interest rates. The continuous visionfrom fathers to children protects them from the short-term concerns of the stock prices
or threat of acquisition. Deep-rooted corporate culture and tacit learning of the family
members create a qualified decision base for risky projects. Therefore, they arecapable of creating risky ventures on the expectation of future success without being
distracted by their stockholders.

- 26 -

Entrepreneurship in Thailand experiences interesting changes. The attitude andbehavioral changes towards entrepreneurship in Thailand come from exposure tomodernism, innovative culture and new technologies of the West, which have
infiltrated through the overseas education among their predecessors of the newer
generation. This factor is where the two contrasting views towards the Sino-Thaibusiness culture finally merge. The combination of the fast decision traits and thelong-term plan assets will create a condition that allows the Thai business to growboth horizontally and vertically. It will likely create a business structure, thoughremaining of the family-run type, that becomes increasingly innovative and adaptive
to the changing environment. The attitude that favours kinship rather than managerial
skills has also started to change. Professionalism of management grows despite thetight family control allowing a better prospect for competency building andtechnology development.

The innovation surveys show higher acceptance to failure attitude from 10.5 percent
in the year 2000 to 19.5 percent in 2002. As high as 63.5% of surveyed firms in 2002
considered establishing long term strategic partnership with other firms rather
important or important. There was also a positive change in other attitude indicatorssuch as openness of customers to innovation. This indicates a better innovativeenvironment in Thailand.

Changesingovernment

policyinpromotingInnovation&Entrepreneurship
Up to the present government of Prime Minister Thaksin Shinawatra (starting January2001), scope of S&T policy in Thailand was rather narrow. It covered only fourconventional functions, namely, research and development, human resource
development, technology transfer, and S&T infrastructure development. This narrow
scope of S&T was very much based on the perception that private firms were “users”
of S&T knowledge mainly produced by government agencies and universities. There
was no articulate national innovation policy. Though the word “innovation”was
mentioned in several national plans, it was not whole-heartedly incorporated into thescope of S&T policies. In addition, unlike Japan, Korea, and Taiwan, S&T elements- 27 -

were not part of broader economic policies namely, industrial policy, investment
policy and trade policy and, to the lesser extent, education policies..
Industrial policy of Thailand has not paid enough attention to the development ofindigenous technological capability as an integral factor in the process ofindustrialisation. Investment policy, especially the promotion of foreign direct
investment (FDI), aims primarily at generating inward capital flow and employment.
Unlike Singapore where FDI is specifically used to upgrade local technologicalcapability, there is no explicit and pro-active link between promoting FDI andupgrading of local technological capability in Thailand. Trade policy, the mostimportant instrument in Thailand being tariff, has not been used strategically topromote technological learning like in NIEs. Instead, trade policy was very muchinfluenced by macro economic policy, for instance, to reduce domestic demand forimports at the time of balance of payment deficit. The Ministry of Finance, thedominant agency which controlled the policy, had little knowledge or experience ofindustry and industrial restructuring.

Moreover, industrial policy in Thailand has been limited to the so-called ‘functional’
intervention such as promoting infrastructure building, general education, and export
push in general. There have been virtually no selective policy measures, such as
special credit allocation and special tariff protection, targeting particular industries orclusters. The exception was the local content requirement in automobile industry,
which was rather successful in raising local contents of passenger vehicles to 54% in
1986. Interestingly, with the exception of automotive industry, there has been noreciprocal performance-based criteria (such as export and local value added andtechnological upgrading targets) set for providing state incentives like in Korea orJapan. Investment promotion privileges, for example, are given away once approved.
The intention to attract foreign direct investment and promote export overshadowed
the need to develop local initiatives and indigenous technological capabilities. As aresult, linkages between multinational corporations and local firms were also weak.
Unlike Taiwan, the governmental protection and promotion, without strengthening
absorptive capabilities of Thai suppliers, left a profound impact on the weaktechnology and suppliers’network of industries.

- 28 -

The major change in policy came recently under the present Thaksin government.
Media and academics in Thailand and the Southeast Asia labeled this government
distinctive policy as “Thaksinomics”(Thaksin’s Economics). Dual track policy is themain thrust of Thaksinomics. The government is trying to enhance international
competitiveness of the nation by strengthening ‘external’side of the Thai economy,
namely, export, foreign direct investment and tourism. At the same time, it is
attempting to increase capabilities of domestic and grass-root economies byimplementing projects like Village Fund (one million Baht to increase local
capabilities of each village), a three-year debt moratorium on farmers’debt, One
Tambon1 One Product Project (supporting each Tambon to have product champion),and People Bank (giving loans to underprivileged people with no requirement ofcollateral).

This government, unlike its predecessors which pay most attention to macroeconomic stability, focus more on enhancing meso- and micro-level foundations forinternational competitiveness. The high priority of ‘competitiveness’issue on thegovernment’s agenda is illustrated by the establishment of National CompetitivenessCommittee chaired by the Prime Minister. It was the first time that Thai government
has serious “selective”policies addressing specific sectors and clusters. The
government declares five strategic clusters which Thailand should pursue: automotive,
food, tourism, fashion, and software. Clear visions have been given to these fiveclusters. Kitchen of the World (food cluster), Detroit of Asia (automotive cluster),
Asia Tropical Fashion, World Graphic Design and Animation Centre (software
cluster), and Asia Tourism Capital. Building innovative capabilities of the nation ishighly regard as very important factor increasing and sustaining Thailand’sinternational competitiveness. “Innovative nation with wisdom and learning base”is
one of seven Thailand’s Dreams projected by this government. To make this dreamcome true, several strategies have been devised. These include continuous investment
in R&D and technology, well environment for attracting and stimulating innovation,high accessibility to knowledge and information across the nation, fluent English as asecond language, possessing strong learning basis such as passion for reading, better
accessibility to cheap but good books, thinking school with innovation movement.

1

Tambon is a unit of local government administration. One Tambon comprises several villages.

- 29 -

The new ten-year Science and Technology Strategic Plan (2004-2013) places theconcept of national innovation system and industrial cluster at its heart. The scope of
the plan is much broader than the aforementioned four functional areas. Measures tostimulate innovations and to strengthen national innovation system and industrial
clusters are explicitly highlighted. Equally important, the Board of Investment (BOI)
has substantially changed its policy by paying more attention to issues underlying
long-term competitiveness of the country, namely, development of indigenous
technological capability and human resources. Special investment package promoting“Skill, Technology and Innovation or STI”has been initiated. Firms can enjoy one or
two years extra tax incentives if they perform the following activities in the first three
years: spending on R&D or designing at least 1-2 percent of their sales, employing
scientists or engineers with at least bachelors degree at least 5% of their workforce,spending on training of their employees at least one percent of their total payroll, andspending at least one percent of total payroll on training personnel of their local
suppliers.

To carry out these changes, the government has introduced the private sector’s
management style to improve efficiency and effectiveness of bureaucratic system.
Chief Executive Officer (CEO) style is now being implemented both at central andlocal government levels in order to integrate related government policies under clear
leadership. Together, the Performance-Based Management (PBM) which clearly
illustrates contractual relationship and delegation of authority in the bureaucratic linesof governance has been put in place.

Cluster concept is also used as a main industrial policy of Thaksin Government fornational, regional and local levels. At the national level, it is used to strengthen
advanced industries both in service and manufacturing sectors like automotive, textile
and garment, software and tourism in order to make them to be coherent andinnovative ‘industrial clusters’. At the regional level, Thailand is now divided to 19
geographical areas. Each area has to plan and implement its own cluster strategy
focusing on a few strategic products or services. It will be supervised by CEO
governors located in the area. For the local level, the cluster concept is applied toincrease the capacity of grass-root economy in the name of ‘community-based
clusters’, especially to help the ‘One-Tambon-One Product’succeed.

- 30 -

Link-up Implementations
Here I will elaborate on how changes in the aforementioned policies have been
implemented in practice by using two case studies. One is about how a research andtechnology organisation (RTO) played a bridging role to leverage entrepreneurshipand innovative capability of transnational corporations to stimulate them to perform
more technologically advance activities within the country and diffuse its knowledge
to local companies. Another is about the development of entrepreneurship andinnovative capability at the grass-root level based on local knowledge and wisdom.

Hard Disk Drive to Chili Paste: TNCs led-Innovation and
Entrepreneurship?
The hard disk drive is an electronic product playing a significant role in Thailand’s
electronics exports. Thailand is ranked as the most important global base for hard disk
drive manufacturing. Thailand stands 2nd in the world rank of hard disk exporters next
to Singapore with manufacturing segment of 17 percent of world production in 2003.
The HDD sector in Thailand employs more than 50,000 people having an asset of atleast 52,000 million Baht which is generating an export worth of 210,000 million
Baht. This has become possible due to the Thai manufacturing bases of the hard disk
giants like Fujitsu, IBM/Hitachi, Western Digital and Seagate.

Thailand-based operations generally import high technology components from abroad
into the country as raw materials and exports the products to markets worldwide. The
level of local content is estimated to be quite low, approximately 30-40 percent of
total production cost, due to the lack of suppliers, low quality domestic components
and the complicated processes of buying between domestic factories. Since themajority of HDD suppliers receive tax incentives from the Board of Investment (BOI)
similar to the HDD assemblers, they are also eligible for raw material import tariff
exemption for export products. If the manufactured components are not exported as
declared to the BOI, the suppliers must submit papers declaring the value of indirectexports which may be considered as domestic sales for payment of the raw material
import duties. Therefore, it is frequently easier for suppliers to directly export to- 31 -

neighboring countries like Malaysia and Singapore, leaving the assemblers to reimport it as raw materials for use in Thailand.

The industry heavily relies on technology transfer from their foreign affiliates. The
foreign affiliates usually provide raw materials, machinery technology and markets.
In addition, the TNCs’headquarters play a major role in formulating marketing andproduction strategies.

National Science and Technology Development Agency (NSTDA) is the biggest
research and technology organization in Thailand with 1,800 employees. It undertakes
a broad-based, systematic approach towards enchanting the entire science andtechnology system of Thailand in support of national economic and social
development. Four specialised centers-Genetic Engineering and Biotechnology(BIOTEC), Metal and Materials Technology (MTEC), Electronics and Computer
Technology (NECTEC), and Nanotechnology Center- come under the NSTDA
umbrella. These three centres have been established in the 1980s in line with theglobal trend at the time and perceived local needs for strong research capability inthese areas. Though it is not an official policy, NSTDA, therefore, has strong pathdependency of focusing on R&D with a smaller interest in supporting advancement oftechnological capability development of private firms through several financial andtechnical supporting schemes such as technical consultancy services, IP services,training services, quality control services.

It tries to play a role of knowledge broker or a bridging institute in the hard disk drive
cluster. First, in collaboration with Asian Institute of Technology (AIT) and Asia
Policy Research (a consulting company), they conducted studied on the hard disk
drive cluster by mapping all key players, and evaluate roles, technological capabilities
and linkages of key players of the industry.

From the study, there are five major private-sector players of the cluster:
1. HGA/HAS/HDD Assembly
2. Motors
3. Suspensions- 32 -

4. Base plates
5. Flex assembly.

In addition, there are a few other value-added activities carried out by various players
such as Gem City Engineering (automation engineering services) and Thai
International (calibration). Apart from private-sector players, there are key
government agencies important to the industry, namely, BOI, government research
institutes like NSTDA, universities conducting research related to and in cooperation
with the industry like Asian Institute of Technology (AIT), Chulalongkorn University,
Suranaree University and Khon Kaen University, and training institutes providing
courses in automation like Thai German Institute.

The firm-level interview survey of the HDD industry generated some mixed
indications with regard to the technology activities of foreign invested firms in
Thailand. Building on detailed interviews with 10 major companies in the HDD sector–all clearly foreign owned with the exception of one firm listed on the Thai stock
market, the research exercise measured the technological capabilities in five broad
areas and at three different levels: basic, intermediate and advanced.

The basic findings were that:•

The firms exhibited strong capabilities in investment, process development andindustrial engineering areas, all areas that are required to support their
manufacturing operations in Thailand;•

The firms showed much weaker capabilities in product engineering andinnovation, with some indications that American firms had gone much further inbuilding these capabilities in their Thai operations than non-American firms; and•The firms show very weak capabilities in linkage development but showed astrong interest in developing stronger linkages if the support infrastructure is inplace, and indicated that it would call for concerted efforts from both industry andthe government to build an environment that is conducive to linkage development.

- 33 -

Most companies are linked to a certain degree into the vertical supply chain of theThai HDD cluster and share related information with regard to specific productrelated issues, especially for new products. But it was found that a few firms
cooperate closely with either Thai based suppliers or customers in broader productprocess or human resource development related activities that is marked by weak
innovation related links amongst them. Moreover, fewer companies maintain links
with universities, R&D institutions and service providers or with the competitors intheir field.

From the study, seven projects aiming to technologically upgrade the hard disk drive
cluster have been specified:
1. Training Program for Automation Engineers and Technicians
2. Revitalize the Certificate of Competence in Storage Technology (at AIT)
3. Establish a precision engineering part of the proposed Thailand Tool & Die
Institute
4. Collaborative R&D Project in Automation
5. Establish a Disk Storage Institute
6. Develop a New Investment Package for the HDD Industry
7. HDD Technology Roadmapping

To implement these seven project effectively, NSTDA helped to set up a cluster
management organisation headed by a HDD cluster manager, an adjunct professor at
AIT who is also a technopreneur owning IC design company. He used to work for theindustry, understand the industry’s needs. He is highly accepted by the industry. This
organization will act as a coordinator between all main actors, and push forward theseprojects. The work of HDD Cluster Manager is under the supervision of a steeringcommittee chaired by a director of NSTDA’s centre and composed of industry people,
university professors in the field and representatives from concern government
agencies.

At present, NSTDA is playing a role of an organizer and facilitator in the HDD
technology roadmapping project (the 7th project) aiming at producing shared visionand technology roadmap of the cluster for the next ten years. Next step, NSTDA will
partially finance and work with TNCs in the collaborative R&D project on automation- 34 -

(the 4th project) It will assist in establishing TNCS-Thai firms linkages such as
helping to identify key Thai suppliers' engineers and technicians to be trained in the
1st project.

Grilled-Fish Chilli Paste Cluster: Innovation and Entrepreneurship at the Grass
Root?

As mentioned above, at the local or community level, the government initiated “One
Tambon, One Product”by encouraging each Tambon to select its product champion
based on their comparative advantage. A ‘product’can be anything such as handicraft,
herbal medicine, foodstuff, manufacturing items, and tourism. ‘Cluster concept’isapplied at the community level to support these products and the government called
them community-based clusters. Here we will examine a community-based cluster inthe making. This cluster grew rather successfully before the government cluster policy
initiative. The study was done jointly between the Office of Rajabhat Institutes andNational Science and Technology Development Agency in 2002.

History of the Community

Wat Tuptimdang Community is located at Tambon Klong Song, Klong Luang District,Pathumtani province. This community is an old community dated back to the reign ofKing Rama V or more than 100 years ago. The community was named after a Temple,
Wat Tuptimdang Dharmadaram, which was highly respected and used for religious
ceremony by local people. At present, there are 1,031 inhabitants living in 171
households. Most inhabitants are farmers with their own land. Their economic status
is fair and quite sufficient. Most of them are Buddhists and had only primary and/or
secondary level of education. Relatives live together closely and rely on each other.
These rural people live simply and close to nature.

Local Wisdom

The Taptimdang Community has been rather stable. Ways of life have been
maintained. The community has wisdom in the areas of agriculture (e.g. farming,
breeding, mixed animal and plant farming), handicraft, food and food processing.

- 35 -

These areas of knowledge are mostly tacit as it is embodied in certain individuals of
the community. The most striking local wisdom of this community is, of course,
knowledge in making grilled fish chili paste. Fish has been very abundant and can be
consumed all year round. Fish is cooked, processed and preserved in many forms.
Chilly paste is an every-day food of people in the central region. Grilled fish has beenused as important ingredient in a certain types of chilly paste and is considered as
local wisdom passed on from one generation to another.

Mapping of grilled fish chilli paste

The cluster of the grilled fish chilli paste is mapped here. The driving force of thecluster is of course the House Wife Association. They are others important actors,
namely, customers, general raw material suppliers, suppliers of specific ingredients,
knowledge institutes at the local and provincial levels, specialised services andinfrastructure providers, government supporting and regulatory agencies (both at local
and provincial levels), community networks and associations institutes (see thefollowing figure).

- 36 -

- 37 Other Chilly
Paste

Financing- Provincial Commerce Authority- Exhibitions- Trade Fairs- Future Park Rangsit Deportment Store

Markets- Ordinary Thai customers- Can/packaging factories

Customers- Rangsit Market (Talad Thai)
providing specific ingredientsfor making
grilled fish chilly paste- Local customers

Specialised Service and Infrastructure Providers

Grilled Fish Chilly
Paste

House Wife’s Association

Specialised Suppliers- Vegetable-growing farmers- farmers producing raw materials

Suppliers

General Raw Materials-District Development Authority-District Agriculture
Authority-Rajabhat Phetburi
Wittiyalongkorn

Knowledge Institutes-Saving Group for Agriculture-Klong Luang Cooperative Group- Food and Drug Authority- Community Shop
- Klong Luang Cooperative Agriculture Group- Klong Luang Women Cooperative Agriculture
Group

Community Networks

Authority-Klong Luang Women Cooperative Group-Live Stock District Aughority-Cooperative District Authority- Development Provincial Authority- Commerce Provincial Authority- Cooperative Provincial Authority- Health District Authority

Government Agencies

Government promoting & regulating agencies/ community Networks/Associations

Cluster Map of the Production of Chili Paste with Grilled Fish

Policy lessons from the case of chilli paste cluster

The chilli paste cluster is a community-based cluster that relies heavily on the local
knowledge in making chilli paste. As mentioned before, the local knowledge is highly
tacit i.e., mostly embedded in people and relationship between people. They are fourchallenges for this type of knowledge.

1. Codification. Local community knowledge, to a large extent, is passed onfrom one generation to another orally. Attempts to codify and store them inmedia (e.g. written document) are quite limited. As a result, there is high riskthat knowledge would be disappear as time go by.
2. Verification. The results of the local knowledge sometimes are not consistenti.e. they do not always yield the same and assured quality. They are problems
of being able to repeat the same process provided by the local wisdom. In thiscase, the paste’s taste could vary in terms of sweetness, hotness, dryness andthe like.
3. Diffusion. As the knowledge is very much tacit and localised. In several cases,
it is quite difficult to transfer the knowledge to wider public.
4. Upgrading. It is challenging to upgrade products of local wisdom such as tomake it have longer shelf life, to make it more attractive for upper markets,and to be able to export to other countries.

While studying NSTDA and ORIC were addressing these four challenges. They
attempts to codify ingredients and the detailed process of making the chilli paste.
They verified this process by using laboratory testing to make sure that the quality andtaste of chilli paste would be consistent and high standard. They publish manuals of
making chilli paste which were distributed widely. As for upgrading, they provided
technical assistance to the association by introducing can technology. The rationale isthat if the chilli paste is in the canned packaging, it would last longer and more
attractive for upper market. However, this is not so successful since consumers arestill like to buy chilli paste in a small plastic pack, since they can see the colour andtexture of the paste.

- 38 -

Conclusion
Entrepreneurship is an indispensable institutional context of national innovation
system. Rather than perceiving entrepreneurs as born and pre-given only, thegovernment should encourage entrepreneurship and innovation by facilitating
entrepreneurship development process and creating conducive environment. For
developing countries relying on FDI, government should leverage knowledge andentrepreneurship of TNCs and link them to local firms while grooming local
knowledge & entrepreneurship especially at the grass-root level where majority of
population live.

ResearchandTechnology

Organisations,havingorganisational

flexibility,

accumulated knowledge and human resources, should be able to act as bridging
intermediaries between transnational corporations and local firms. On the other hand,community-networking organisations, having local knowledge and trust of local
people, can play important roles in diffusing knowledge and encouraging innovationand entrepreneurship at the grass-root level. Government should support andstrengthen capabilities of these organizations to perform such roles.

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Impacts of FDI on Technological Innovation and Learning:
the Case of Motorbike Industry in Vietnam
Nguyen Vo Hung
National Institute for Science and Technology Policy and Strategy Studies
38 Ngo Quyen, Hanoi, Vietnam
Email: hung@ism.ac.vn
With the Law on Foreign Direct Investment (FDI) issused in 1987, FDI has become atremendous phenomenon in Vietnam. By the year 2003, the total number of licensed FDI
projects reached 5441 with US$45,7 billions of resistered investment capital and US$22,3
billions of legal capital. In real term, by the end of 2002, there were 2308 FDI enterprises inwhich 1561 were whole owned by foreign investors. By the same time, these enterprises
directly employed about 691,088 jobs, accounted for 14.83% of total workforce of enterprises.
The value of their fixed assets and long term investment reached 170,579 billions VND,
about 30.9% of value of all enterprises (Statistical Yearbook 2003).
FDI in Vietnam is expected not only as a source of capital but also and even more
importantly as a source of technology and management knowledge, a means for improving
the competence of the local workforce and a catalyst for the development of local industries
and the whole economy. Various policy measures have been designed to provide incentives
for FDI1 with the hope to realize the above expectation. However, to which extend FDI has
fulfiled the expectation is a controvesal issue among policy makers and research community.
Based on a random sampling survey of 169 FDI enterprises in Vietnam, Nguyen et. al.
(2004) found that foreign investors in Vietnam, especially recent entrants, are often small
focused firms with little international business experience. Foreign investors in Vietnam
report managerial capabilities and machinery as their most important resources, ahead of bothtechnology and networking assets. This pattern suggests a traditional pattern of competition,
as few references are made to intangible assets such as technology and marketing assets. The
survey also reveals that the training expenditures appear weakly related to the R&D intensityof the parent. The highest training expenditures (over 15%) are incurred by parent firms with
R&D expenditures of more than 4% of sales. On the other hand, of firms with less than 4%
R&D expenditures, more than half spend less than 0.5% on training. Hence there appears tobe some support for the notion that attracting R&D intensive firms generates more
knowledge transfers.

1

Law on Foreign Investment in Vietnam instruments and stipulates explicitly several incentives for technology
transfer in FDI establishments. According to previous regulations, the maximum royalty level was stipulated at
5% of net sale price or 8% of total investment capital in the event the valued technologies form contributed
capitals. Currently, this rate is allowed up to 8% of the net sale price or up to 30% of the after-tax profit. Where
the contributed capitals are made of the technologies value, payment price for the technology transfer canaccount up to 10% of total investment capital.

- 75 -

Regarding the impacts of FDI on local industries, Nguyen et al (2004) shows that
there are positive spillovers of FDI which is reflected in positive changes in the assessment of
the local industry at the time of entry and at the time of the survey. Although the
improvement in the local industry is fairly consistent across sectors, and for different aspectsof the local industry, large margins of change emerge only for the trade and tourism industry,followed by machinery and equipment. In the primary sector, the local industry is by somecriteria even declining.
The above review reveals some aspects of spill-over impacts of FDI. In this paper,motorbike industry will be examined since the industry has became a flagship of consumer
branches in Vietnam considering both, the market dimension and the rapid expansion withinrecent years. The industry is also significant case for studying the variety of entities involved.
By the end of 2002, there were 7 FDI establisments, 51 local assemblers and about 107 partmakers operating in motorbike industry with total capacity of about 1.5 million motorbike per
year. Findings in motorbike industry will not only benefit the policy making works related tothe industry, but also provide insights into policy arrangement on FDI, local enterprises and
S&T institutions.
Motorbike Industry with bold impacts of foreign players
Motorcycle has become an important transportation means in the whole of Vietnam
since the country’s unification in 1975. Right after the unification, used motorbikes (most ofthem were Japanese) were traded from the South to the North, making it a new way of
personal transportation in the North of Vietnam. In the years followed (1975 - 1987), asignificant amount of East European motorbikes had entried Vietnam via Vietnamese who
worked overseas under a labour export deal between Vietnam and former socialist countries.
Under another labour export arrangement at that time, Vietnamese academic staff was sent
off to serve in education sector of some African countries. Earning foreign currencies, many
sent home their saving in kind of new Japanese and/or French bikes. These new bikes were
the symbol of prosperity in Vietnam over that period and that attitude to new motorbikes isstill strong today.
Period from 1988 to 1992 is characterised by dominance of Japanese bikes. This wascaused partly by change in policy and partly by availability of new sources of supply. For thisperiod, every person travelling overseas was granted duty free for 2 imported bikes. Given
the huge gap between world price and domestic price, the product became profitable bringback for overseas travellers. However, what different from previous years is that new sourcesof supplies had emerged. Firstly, significant quantities of second-hand bikes wereaccumulated in Japan and their trading prices were very attractive. Secondly, many
international flights that link Vietnam to the world were re-routed via Bangkok. Given
Honda’s affiliates that become important motorbike producers there, the place was ideal for
motorbike trading. The legendary Honda’Dream II were used to be carried from Thailand as
traveller’s luggage, even as the "handbags" in extreme cases. Due to trade barriers and short- 76 -

of supply, motorbike’s prices were set relatively high and only middle-income families could
afford to have a bike. Very few could have more than one bike for the whole family at thattime.
By 1992, motorbike had already become an important transportation means asaccumulated number of registered bikes reached 2,846,000 (see Table 1). However,regardless of a large mechanics sector, which included many large SOEs, making
motorbike’s spare parts had remained the business of small production units (mainly in kindof mechanics collectives). Motorbike industry did not exist at that time, the production of
spare parts based on out-of-date machinary, and quality of products were low in general.
Period from 1992 up to now observes the development of motorbike industry in
Vietnam with some incredible jumps (Table 1). The first FDI Law in 1987 and its subsequent
amendments have made way for entries of foreign motorbike makers into Vietnam (Table 2).
First products of these FDI enterprises were introduced in 1994 and developed quickly interms of models and quantities in the years later. Considered as an import-substitute industry,high tariffs have been applied to imported bikes, creating favourable conditions for these FDI
enterprises to explore local market (at the cost of consumers).
Table 1: Growth of registered motorbikes in Vietnam
Cumulative units
Units registered
Industry growthYearregisteredin the year(%)
1990
2,770,000
36,4001991
2,806,000
36,000-1.1%
1992
2,846,000
40,00011.1%
1993
2,901,000
55,00037.5%
1994(1)3,275,000
374,000
580.0%
1995
3,678,000
403,000
7.8%
1996
4,209,000
531,000
31.8%
1997
4,827,000
618,000
16.4%
1998
5,219,000
392,000-36.6%
1999
5,585,000
366,000-6.6%
2000
7,452,524
1,867,524
410.3%
2001(2)
9,422,524
1,970,000
5.5%
Souce: MoI
Notes: (1) The first FDI in motorcycle is the 100% foreign owned project of Ching Fong Group, aTaiwanese conglomerate. It received the investment license in 1992, and started production inlate 1993.
(2) Motorbikes originated from China accounts for approximately 86.5%.

By 1999, market share of FDI assemblers was about 51.5%, while domestic
assemblers accounted for only 24.5%. The picture was turned up side down after that, withthe share of FDI firms fall to 15.3% and 12.5% for 2000 and 2001 while domestic assemblers
which mainly based on Chinese models and parts gained market share of 73.4% and 78% in2000 and 2001 (see Table 2). Since 2000, the domination of FDI motorbike enterprises has- 77 -

been challenged by cheap Chinese bikes entering Vietnam via operation of dozen of local
assemblers. The introduction of cheap Chinese bikes has created a boom in motorbike
consumption in 2000 and 2001. This illustrates high demand elasticity to price of the product.
The number of motorbikes registered in 2000 is almost equal the accumulated number ofregistered units in the four consecutive previous years (or a growth of 400% in a single
turning year). Development in 2000 and 2001 out-performed all industrial growth predictions,which predicted a growth of 500,000 units per year. People started to talk about it as fruit of‘local content’policy. As a result of it local producers had competed well with foreign
affiliates and motorbike is now affordable for low-income households. However, inconsistentpolicy and its problematic implementation has encouraged rent-seeking practices. Objectivesof building a competitive motorbike industry driven by ‘local content’policy are notachieved as expected.
Table 2: Foreign bike assemblers in Vietnam
Firms

Licensed Date

Registered Cap.
(USD)

Legal capital

Foreignshares(%)

Investors

VMEP

25/3/1992

120.000.000

42.000.000

100

Taiwanese

Suzuki21/4/1995

34.175.000

11.700.000

70Japanese

GMN

31/10/1995

39.000.000

15.000.000

70

Thai&Lao

Honda

22/3/1996

104.003.000

31.200.000

70Japanese

Yamaha24/1/1998

80.268.000

24.250.000

70Japanese

Lifan

02/6/2000

4.670.000

1.570.000

70

ChineseVina - Siam

20/11/2001

12.000.000

3.600.000

40

Thai

394.413.000

129.320.000

Total

Souce: MPI & MoI

Table 3a: Quantity of bike sold by different producers (unit: unit of motorbike)
1999

%

2000

%

2001

%

20021

%

Honda

96,00026.2

162,049

8.7

169,9318.6

398,551

26.6

Suzuki30,0008.2

23,9991.3

28,0381.4

42,991

2.9

SYM

30,202

8.3

43,948

2.4

83,592

4.2

233,289

15.6

GMN

30000

8.2

45963

2.5

25,436

1.3

25,015

1.7

Yamaha

2346

0.6

9,216

0.5

23,3791.2

68,068

4.5

2,000

0.1

Lifan
Local firms

2
3

Un-accounted
Total
Note:

4

-

-

-

89,77824.5 1,370,000

73.4 1,536,600

78.0

650,000

43.3

87,674

24.0

11.4

5.2

80,086

5.3

212,349

186,532

366,000 100.0 1,867,524 100.0 1,970,000 100.0 1,500,000 100.0(1) in 2002, motorbike production is governed by quota. The number for total 2002 are quota
allocated.
(2) local firms assembles bikes mainly based on Chinese components.
(3) Included importation of complete bikes.

- 78 -

(4) Number for 1999-2001 are number of new motorbike registered with police; a proxi for
number of bike sold.

Table 3b: Market share of FDI bike assemblers
1999

%

2000

%

2001

%

20021

%

FDI assemblers

188,54851.5

285,175

15.3

246,868

16.8

769,914

51.3

Local
assemblers

89,77824.5 1,370,000

73.4 1,536,600

78.0

650,000

43.3

Un-accounted

87,674

24.0

11.4

5.2

80,086

5.3

Total

366,000 100.0 1,867,524 100.0 1,970,000 100.0 1,500,000 100.0

212,349

186,532

Souce: MPI & MoI
Concern of rent-seeking activities as well as quality of so called Chinese bikes createda lot of debate about the policy and its efficience. After months of investigation, thegovernment decided to restrict the industry by applying import quota on parts for each
assemblers depending on variuos criteria, such as their performance in previous years,
investment level for making complicated components, local contents etc. After two years ofbooming, the domestic assemblers with their Chinese bikes are now lost their market position,
falling to account for only 43.5% of market in 2002 and even lower share in 2003 and 2004.
Local content policy: Rent-seeking vs. Technology learning
Evolution of the policy
Lacking effiecient public transportation system in main cities, motorbikes havebecome the dominant means for private transportation in urban Vietnam. Given the potentialcommercial benefit of motorbike business, the government has paid great attentions on policy
measures to regulate the trading and making of motorbikes. There has been many shifts ofpolicy over the last decade.
Before 1997, bike trading via importation were mainly controlled by quota which at
the time was managed by Ministry of Trade (MoT). The MoT allocated quota to some trading
companies which we assume to have a close relationship with MoT, to import bikes. At thattime, many bikes were traded under the umbrellar of the exchange program between Lao andVietnam in which Vietnam provides Lao "garlic" in exchanges for motorbikes (mainly
imported to Lao via Thailand). The program won a nick name of "garlic for bikes" and in thisperiod there were about 100 CKD assemblers in all over the country.
In 1997, the "garlic for bikes" program ended, and so the control of MoT by quota inbike trading. Instead, high import duty was applied for the bikes and their parts, which on the
one hand, help to increase tax income, on the other hand, was believed to attract foreign anddomestic investments needed for the development of the industry. Various import tax rates
were applied due to the fragmentary level of assembling activities. Some types of CKD and
IKD assembling were defined and certified by Ministry of Science, Technology and- 79 -

Environment (MOSTE and now MOST). Given this classification and certification, MoT
managed the bike trading activities. In this period, there were about 20 IKD assemblers andthe market were dominanted by Japanese bikes.
With the ambition to develop a full-scale auto-motor industry in Vietnam, by 2000,
the authorities, mainly the Ministry of Industry (MoI), has proposed a "local contents policy"
which tax imported bike parts in arcordance with proportion of local contents in assembled
bikes. The threshold of local contents for applying privileged import duty was proposed at
40%, then the more the local contents, the less the duty. By that time, most of the FDI
assemblers claimed to meet the 40% threshold and be ready for new policy, while most of thedomestic assemblers with their Chinese bikes were strungling with 10 to 20% local contents.
The policy was then delayed for a year, become effective only from 2001.
Right after coming into effect in 2001, the local contents policy has shown many
complications and become a hot topic for debate, not only between the authorities and bikeassemblers, but also among government bodies. It was criticised that the methods used to
calculate local contents are not appropriate and given the lack of effective monitoring system
the policy created room for rent-seeking activities. Several calculation methods and proving
requirements were tried within 2001, lot of investigation were done, all of these created achaos in bike industry. Failure of the transportation infrastructure to cope with motorbikeboom made things go from bad to worse. Enterprises blamed the government forinconsistance, the government bodies blamed each other, government office was busy to fightfor solution. At the end, the debate was ended by the abandance of "local contents policy"
and the government introduced a new mechanisms to regulate the industry by production
quota and other demand side measures such as restriction of bike registration.
Attracting FDI and spill-over impacts: positive side of the policy
It is obvious that, the protection of domestic motorbike industry by means of tariffand non-tariff measures has attracted international bike makers to invest in Vietnam. Their
activities in Vietnam and the local content requirements also attracted affiliated internationalparts makers who supply them various kinds of parts globally. By 2001, there were only 7
FDI bike assemblers, however the number of FDI projects in motorbike indutry reached thenumber of 84 (Table 4). Patterns in Table 4 also indicates that assemblers from one country
usually bring with them parts suppliers from the same country. Figure 1 also indicates theimpacts of local content policies with the boom of foreign investment in parts making. Figure
2 shows that Japanese and Taiwanese are the major investors in term of the registered capital.

- 80 -

Table 4: FDI in Motorbike Industry
China
Japan
Korea
TaiwanThailand
Other
Total

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 Total
1
7
8
2
5
5
2
1
15
1
1
1
1
1
5
2
1
12
2
1
4
5
8
10
45
1
1
1
2
5
1
1
2
2
6
3
2
12
6
8
7
7
7
10
22
84

Souce: MPI database of FDI projects.
Figure 1: Number of FDI projects in Motorbike Industry
25

20
ThailandTaiwan

15

Other
Korea
10

Japan
China

5

0
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001

Figure 2: Registered Capital of FDI projects in Motorbike Industry
200
180
160
Thailand140

Tai wan

120

Other

100

Korea

80

Japan

60

China

40
20
0
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001

- 81 -

With regard to the development of networks of suppliers, the case of Honda Vietnam
and VMEP are typical examples. In order to meet local contents requirement, Honda Vietnam(HVN) has developed a network of about 20 suppliers in Vietnam in which 13 are Japanese
invested firms, a Thailand invested firm, and 6 domestic firms. Honda itself has entered into
two joint-ventures with other local partners to produce motorbike’s parts. The entry of VMEP,a Taiwanese bike maker in Vietnam in early 1990s also creates similar impacts. Since its
entry, there have been dozen of Taiwanese parts makers who set up their operations in
Vietnam.
The process of seeking local domestic suppliers of MNCs has an important impact onawareness of local firms. By negotiating with MNCs, they learned more about quality
requirements and management. Those who fail to be included in the production chain could
learned a lesson of why they had fail and so what they have to improve. Those who areincluded have greate oppertunty to upgrade in the process of santisfying MNC's requirements.
In many cases these local firms also got technical supports from MNCs especially with regard
to quality management.
Training within MNCs have important impacts on human resource development for
the industry. In the case of HVN, before starting production, the company has built up a core
staff which comprises of engineers and technicians who then sent to Japan and Thailand fortraining. Six months course was also provided for production-line managers and three months
course was for managers at lower level. In total, 100 people have got this type of training.
Once the production commenced, HVN keeps sending its supervisors on a regular basis tooverseas and provide guidance to production activities. Besides oversee training, on-the-job
training has been applied since the start of operation in form of short training courses
provided by Japanese lecturers. This type of training aims at specific or problematic issues
realised in the operation of the new venture.
Training activities in other MNCs such as VMEP, Yamaha etc. have many similar
characteristics of HVN although there are some different in scale and time depending on
strategy of each MNCs. However, since manufacturing is the main concern of MNC'soperation in Vietnam, training efforts are mainly in production skills, operation management,
and quality management. There is little training to develop design and R&D capability,
although there have been some progress in recent years.
The entry of MNCs in motorbike industry also changes the competition in local
market. High price set by MNCs has created opportunities for low price motorbikes to enter
the market. As reported earlier, the emerge of so called ‘Chinese motorbikes’with prices
range from half to a third of that of Honda’s standard ones is an example. In respond to thechallenge of ‘Chinese bikes’, HVN launched its new model ‘Wave Alpha’, which is priced atabout 20% higher than that of ‘Chinese ones’. Soon after its launch, the new model has
gained a significant share in the low-end market, creating a kind of dynamics in this industry.

- 82 -

Rent - seeking activities: a negative side of the policy
Besides positive effects discussed in the above section, local contents policy also has
negative impacts on the development of the industry. The lack of an effective and efficient
tax system, plus smuglling and weak monitoring system have created much room for rentseeking activities. As described earlier, the threshold of local contents for applying privileged
import duty was 40%, while in 2000 almost all wholly Vietnamese assemblers were reported
to have only 20% local contents, at most, in their Chinese bikes. In 2001, when the policy
come into effect, all of these assemblers claimed that they were successful to raise the local
contents in their Chinese bikes to meet the threshold level of 40%, an "amazing efforts" if thiswas real. However, later investigation shows that firms have used many tricks to increase thelocal contents artifficially.
It should be noted that, majority of domestic bike assemblers have background of
trading firms. They were bike trading first, then when the trade barrier was raised, theyswitch to assembling activities using simplest technology without any major investment for
production of parts and components. The 40% local contents requirement is a strong force
which would lead the assemblers to cooperate with local parts suppliers or to invest in
making them. However, given the weak position of parts making sector at that time and huge
capital required for investment in parts making activities, the firms had found a quicker way
to santisfy the requirement.
Figures 3 illustrates how some domestic assemblers have managed to increase their"local contents". Given wide spread of smuglling activities at Vietnam - China boarder, bikeparts had been smuggled to Vietnam. Once in Vietnam, these smuggled parts were registeredas locally made. Investigation shows that there are about 400 firms which were registered as
local parts makers, but in fact, were trading firms without any significant investment for
production. Many of them were especially set up for this "local contents" purpose. As a result,the "local contents policy" which supposed to develop the motorbike industry had turned out
to be a land for rent-seeking activities.
As discussed in previous section, production network based on country of origin has
helped to develop the industry quickly, however it also raise barriers for domestic partmakers to enter the market. Figures 3 indicates a situation in which majority of local firms are
not linked with operations of MNCs in the industry. Rent-seeking practices have prevented
local firms to take opportunity of local content requirements to upgrade their technologicalcapability.

- 83 -DomesticPart
Producers

FDI part
Producers
Market

FDI
Assemblers

Domestic
Assemblers

Trading
Firms

Contracted
Foreign
Suppliers

Foreign
Suppliers

ImportEquipments & Tech

Figure 3: Production Network
Learning behaviour of local firms
Although strategies of MNCs and rent-seeking activities have limited learning efforts
of local firms, it is also the technological capability of local firms and the lack of an effective
supporting system that did not allow them to play a more active role in the industry.
Understand learning behaviour of local firms and their interactions with other players will
help policy makers to come up with more effective supporting measures.
Interactions for problem solving
Generally, science and technology organizations are expected to be important sources
which firms can rely on to tackle their technical problems. However, this is hardly true in- 84 -

reality. Evidence from NISTPASS' innovation survey conducted in 2002 shows that among
domestic firms in mechanics sector, in which majority of them are motorbike parts makers,
interactions with academic sources are not seen as the main sources for problem solving. In
fact, interactions with business partners, especially foreign partners, are much more importantfor firms as channels for problem solving (Table 5).
Table 5: Channels for problem solving, SMEs vs. non-SMEs
Technical
Channels

Product Market

Input Market

SMEs

nonSMEs

SMEs

nonSMEs

SMEs

nonSMEs

Formal cooperation with R&D
institutes/universities

2,21

2,23

1,48

1,58

1,58

1,45

Cooperating withindividual scientists

2,00

2,08

1,62

1,50

1,55

1,75

Cooperating withinfor-tech centres

2,00

1,77

1,97

1,42

1,63

1,36

Cooperating withforeign partners

2,33

2,67

2,20

3,08

2,34

3,00

Cooperating with
FDI partners

2,75

3,31

2,80

3,42

2,79

2,75

Cooperating withdomestic partners

2,94

2,57

3,15

2,85

3,06

2,33

Self-reliance with reference topractices of other domestic firms

3,47

2,83

3,30

3,08

3,03

3,00

Self-reliance with reference topractices of oversees companies

1,97

2,00

1,70

1,86

1,87

1,83

Self-reliance with reference to
2,23
1,97
2,58
1,90
2,75
2,83
technical documents
Souce: Calculated from dataset of 2002 NISTPASS' innovation survey
Note: Scores are average value of a likert scale from 1 to 5 to evaluate the importance of eachchannel in solving problems faced by firms in their innovation activities. The higher the score,
the more important the channel.

The ineffectiveness of S&T organizations in supporting local firms in motorbike
industry should not be a suprise. Given the weak position of S&T sector, inefficient financial
market and underdeveloped technical services in Vietnam, interactions with business partners
would becomes dominant. It is quite common for local firms in developing countries to rely
on foreign sources for capital goods and sometimes even key materials. This is partly due tothe lack of reliable local suppliers, but in many cases, it is also the requirements of customers
or financial dependence of local firms on their suppliers. This creates a situation in which
local firms are lock-in with foreign technology and at the same time S&T organizations arelock-out of technical interactions. The situation can be illustrated as in Figure 4 below.

- 85 -

Services
providers
Financial
Inst.

MNCs

Suppliers

Customer

Local firms

Government

S&T
Institutions

Figure 4: Interactions of local firms.
As mentioned earlier, suppliers and customers of local firms also have someinteraction. For customers, especially foreign ones, they might request the producers to buy
capital goods from reliable sources to guarantee quality. For suppliers, they might have tolink up local firms with customers so that they can convince them to buy their capital goods.
Suppliers and customers in Figure 4 can also be FDI firms in Vietnam. As such, the diamondin Figure 4 can represent the dominant production interactions of firms and the circle
surounding the diamond indicates that financial institutions, S&T institutions, other services
providers and government are locked out to different extend (the closer to the diamond, themore the interaction between these institutions and the elements of the diamond).
Learning from foreign affiliates in Vietnam
As disccused in previous section, foreign and FDI firms are expected as the importantsource for technology learning. Results from the innovation survey reveals that there are 71%
of SMEs and 93% of non-SMEs in mechanics sector reporting to have relationship withforeign/FDI firms. Table 6 provides a general pictures of the type of foreign/FDI firms thatdomestic firms have had interactions. It is not surprise that "main supplier of equipment" and"main customer" are reported as the most important channels for learning. The data also
indicates that proportion of non-SMEs that have relationship with foreign partners are higher
than SMEs in all categories. This means that big firms tend to have a larger window forlearning than small firms.
In terms of content of learning from foreign partner, in overall, "quality control" and"processing procedure" are the two most important areas of knowledge that local firms havelearned from foreign/FDI partners (Table 7).

- 86 -

Table 6: Type of FDI partner
Type of foreign or FDI partners

Mechanics
SME

non-SME

Foreign/FDI partner is the frequent supplier of materials

40%

62%

Foreign/FDI partner is the temporary supplier of materials

48%

54%

Foreign/FDI partner is the main supplier of equipment

55%

62%

Foreign/FDI partner is not the minor supplier of equipment

26%

54%

Foreign/FDI partner is the provider of technical service

23%

23%

Foreign/FDI partner is the main customer

39%

69%

Souce: Ibid.
Table 7: Type of knowledge learned from foreign/FDI partners
Mechanics

What the firms have learned

SME

non-SME

Marketing skils

2.83

2.75

Distribution network

2.80

2.58

Design and specification of the products

3.38

3.31

Quality control procedure

3.42

3.69

Operation management

2.92

3.31

Processing procedure/process technology

3.25

3.46

Source of materials/additives

2.68

2.92

Source of equipments

3.17

3.25

Training for workers

2.75

3.08

Training for engineers

2.52

3.08

Souce: Ibid
Technology Managment Practices
Earlier, I have argued that low level of technological capability of local firms canlimit them to play a more active role in the industry. This weakness is reflected partly intechnology management practices of local firms. Table 8 shows that SMEs are less capablethan non-SMEs in almost all iterms which reflect technology management practices of firms.
Majority of big firms are aware of technology used in the sector in the same local areas(93%), and the proportions are quite high when the geographical areas are expended to"Vietnam" (79%), and some countries in the world (71%). The similar proportions in SMEs
group are much lower, which are 71%, 69% và 49% arcordingly.
Table 8 also reveals that equipment management are much better done thanknowledge management. Almost all big firms and two third of SMEs have log-book to keep
track of main equipments, while only half of big firms and a quater of SMEs documented- 87 -

their skills, procedure and other technical information. Linkage with S&T organisations isquite weak with SMEs, while the linkage is stronger in non-SMEs group.
Table 8: Technology management practices, SMEs vs. non-SMEs
Mechanics

Technology management's practices

SMEs

Non-SMEs

Aware of technology used in the sector
in some coutries

49%

71%

Aware of technology used in the sector
in Vietnam

69%

79%

Aware of technology used in the sector
in province/city

71%

93%

Having log-book to monitor
operation of main equipment

66%

86%

Skills, procedures, technical information are well
documented

29%

57%

Organised examination to promote professional grade forworkers in at least every two years.

49%

86%

Staff are exchanged quite often from one department toanother

40%

36%

Having frequent relationship with
S&T organisations.

26%

57%

Souce: Ibid.
It can be argued that many of the above practices are standardized and can be easily
disseminated with appropriate training. Working on these simple things can improve a lot thetechnological capability of local firms and here we can see a potential for S&T institutions
and interventions of government.
Conclusion and policy orientations
This paper shows that FDI has significant impacts on development of motorbike
industry. However, FDI opearations tend to concentrade on production activities, using
proved technology to explore cheap labour advantage and/or market protected by high tradebarriers. This mode of investment determines the type of investment and knowledge transferfrom parent firms to their affiliates in Vietnam. Analysis in various sections of this paper
indicates that machinary investment and production technology are the main type of resource
transfer. Training is also concentrade on production management. There are few activities interms of design or more sophisticated engineering work. Some MNCs are just starting todevelop design capability and more advanced skills in their affiliates in Vietnam.
For local firms, results from the Innovation Survey indicate that linkage among
business sources plays a much more important role than linkage with academic sources forproblem solving. Within business community, foreign and/or FDI partners are indicated as
the main channel for learning, not only for technical issues, but also for issues related to- 88 -

product market and inputs market. Big firms seem to have better practices of technology
management than SMEs and they also have more chance to be part of production networks offoreign/FDI firms.
Studies in motorbike industry show that innovation requires many type of learning,some are industry specific and common among local firms. It would be a waste of efforts if
each firms try to address these problems individually. However, cooperation between
competitive firms are not easy and here the wise intervention of government and S&T
institutions are needed. These are areas where the government should support for cooperationof firms and S&T institutions and should be the areas for fruitful formal international
cooperation. In motorbike industry, this study has indentified following common areas:- CAD/CAM skills, both basic techniques and floor experience. Training by foreign
engineers are badly needed.
- CNC operations.
- Technology management training.
- Quality management training.
- Standard development.

- 89 -

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- 100 -LINK-UP PROGRAM BETWEEN FIRMS –RESEARCH INSTITUTES –STATEFOR TECHNONOLY INNOVATION AND BUSINESS COMPETITIVENESS INECONOMIC INTEGRATION

Department of Science and Technology
Ho Chi Minh City

In the course of international integration, all nations have to participate in thisprocess and face the competition of free trade. This is particularly true for a country of
low economic, science and technology capabilities like Vietnam. Having decided to
become a member of AFTA, APEC, a party to Vietnam-US bilateral trade Agreement
and WTO in the future, we have to compete in a general framework. This is not only aformidable challenge but also a good opportunity to access new markets for Vietnamese
enterprises during the course of integration.

At present there are about 6 million people in Ho Chi Minh City, with the average
per capita income of USD 2000 per year. Our city is one of the biggest economic, culturaland scientific centers in the country. The economy of the city is structured aroundservices and industries, characterized by finance, trade, tourism science and technology,
education, post and telecommunication, software development, manufacturing,
construction, electronics, food processing etc.

Recently, the science and technology activities in Ho Chi Minh City have seen
significant progresses and played a leading role in many fields thanks to the coordination
between agencies, authorities, research institutes and universities, to the efforts made byscientists and researchers and to the cooperation from enterprises.

In Ho Chi Minh City, there are many programs and projects to assist enterprisesin their innovations with respect to equipment, technology, managerial capabilities,
productivity improvement, and cost-reduction to improve competitiveness in the
integration tendency. Most notable is the program called “Enterprise assistance program- 101 -

to modernize with low cost, establish comprehensive competitiveness and export
promotion”(Implementing Directive No. 04/2000/CT-UB-KT dated 23 February 2000 by
Ho Chi Minh City People’s Committee).

This important program is directed by a Vice-president of the Ho Chi Minh City
People’s Committee, the Department for Science and Technology is the standingorganization whose responsibility is to coordinate with other departments, agencies suchas the Alliance of Science and Technology Associations in the city, research institutes,
and to oversee the implementation in firms and businesses from all economic sectors in
the city.

PART I: NOTABLE RESULTS FROM THE LINK-UP PROGRAM TO ASSISTENTERPRISES IN ECONOMIC INTEGRATIONThe conference held to evaluate after 4 years of operation of the program has
concluded that the Program 04 has met the needs of enterprises, boosted the roles ofscience and technology and the roles played by the state in assisting enterprises withtraining and updating knowledge of international economic integration, business
management, building quality control system, establishing trade marks and intellectual
property rights protection; designing and producing equipments and technologies withlow cost to replace imported ones, organizing market place for equipment andtechnologies as a step to establish market for science and technology, providing
information and assisting enterprises with trade promotion.

Results achieved from the Program 04 have had importance influence on thesocio-economic development in Ho Chi Minh City. All socio-economic performanceindicators have seen improvement, with the GDP grew by 9.5% in 2001 and 11.6% in
2004, the highest level since 1998.

Program 04 has resulted in practical impacts both extensively and intensively on
enterprises in the innovation of equipment, technology, higher product quality, better- 102 -

managerial capabilities, and bigger export market, all of these have contributed to theindustrial growth in the city (15-16%), the recognition of the roles played by science andtechnology in modernizing production processes. Indeed, the objective of the program
was achieved, that is to create a comprehensive competitive advantage.

Result 1: Establishing and developing “triangle link-up: Enterprises –State –Research Institute”model in science and technology activities as follows:

1- Program to design and manufacture advanced technological equipments withlow cost to replace imported equipments:
In Ho Chi Minh City, there are more than 40 universities and colleges, 60 research
institutes and centers with 300,000 science-technology researchers, accounting for
25% to the total number of sci-tech staff in the country. These are the resources theenterprises can resort to when they need technology innovations to produce at low
costs, improve their managerial capabilities and competitiveness.

By the triangle link-up Enterprises –State –Research Institute mechanism in which
the Department of Science and Technology serves as a bridge between production
and research organizations, projects and research topics can be selected to produce
good which can compete with imported goods and meet the needs of the majority offirms and enterprises in each industry.

* After 4 years of implementation, we have achieved the following results- Designed 37 types of equipments and technologies to replace imported equipments
and technologies with the total investment of VND 24 billion. The costs of homemade products are about 30-70% of imported ones.
- Transfer 250 equipments and save USD 18 million (over VND 270 billion) for firms
and enterprises.
- Outputs of the programs have been exported to other countries such as Laos,
Thailand, Australia, Cambodia, and Taiwan with the revenue of USD 1.5 million after
2 years of implementation.

- 103 -

2. Mechanization of sugar cane industry: 3 types of complex equipments: growing,
serving and harvesting the sugar cane. They have been demonstrated andcommissioned at Nuoc Trong plantation, Tay Ninh province. The technology wasthen transferred to Dong Nai and Phu Yen province: the productivity of sugar cane
production doubled, with a cost reduction of about 30-40%.

3. The implementation of investment project to build and equip for the Center
for Designing New Equipment –Neptech has been approved by the People’s
Committee (the City invest 29 VND billion in the first phase). The project also
receives supports from Ministry of Science and Technology in terms of equipment.
The center is the gathering place of science-technology people to research ontechnology improvement and pilot production of equipments which contribute to themodernization of key industries of the City.

The triangle link-up model has associated scientific research with business andproduction; demonstrated the capability to replace imported technologies andequipment with home-made substitutes; assisted enterprises to modernize with low
costs; contributed to the modernization of several industries (pharmaceutical,
construction materials, food processing, agricultural mechanization, etc), enhanced
firms’competitiveness. However, there are several limitations and difficulties suchas: slow progress in transferring equipments as compared with the actual need andpotential; unclear profit-sharing mechanism which impedes the transferring progress;
inadequate conditions to develop high technologies due to lack of research facilities.

Result 2: Initial achievement in establishing market for science and technology
by means of setting up market places for equipments and sci-tech consultancy

Initial success in establishing market for science and technology by setting up 19
trade fairs for equipment, technology and softwares in Ho Chi Minh City, Hanoi,
Danang, Dong Nai, Dac lac, Gia Lai, Can Tho ect. Through these trade fairs near

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10000 contracts and memorandum for transferring equipments, technologies,
production solutions, softwares were concluded with the estimated total value ofnearly VND 1000 billion.

In 2004, in addition to organizing the market place for equipments and technologies,
we also set up a market place for sci-tech consultancy services at Gia Lai province onan experimental basis focusing on 4 areas, i.e. forestry-agriculture, processing
industry, IP, information technology. We also organized a large scale sci-tech
consultancy market during the Week of Science-Technology and Higher Education,
No.II in Ho Chi Minh City with the participation of 30 consulting firms, resulted in
95 business memorandums; 500 visits paid by customers to contact, discuss with
consulting firms on the setting up of a market for sci-tech consultancy and business
management consultancy. 5 contracts were concluded at the market with the total
value of nearly VND 400 million.

- Business consultancy helps to assess the requirement and problems to be address in theprocess of innovation and modernization of businesses: production organization,
application of information technology to collect information and improve management
efficiency; improvement, innovation and modernization of equipment-technology,
product diversification and quality improvement in connection with environmental
protection and sustainable development; assistance in technology transfer allowing
enterprises to access and develop new and modern technologies with high intelligencecontent.

- Organize 10 training courses on the evaluation of intangible, protection in technology
transfer for 450 participants from sci-tech consulting firms with an aim to improve theirprofessional capability in sci-tech consultancy.

In addition, an on-line market place has also been set up at the address
htttp://db3.hochiminhcity.gov.vn/techmart, in which over 2000 equipment, technologies- 105 -

and softwares are put on sales, over 1000 buyers and nearly 1000 transactions wereconcluded.
The market for sci-tech consultancy and the market for equipment and technology havecontributed to the development of market for science and technology, thecommercialization of science and technology products, the promotion of the applicationof scientific and technological research results in production, and played an importantpart in turning science and technology into a driving force in national industrializationand modernization.

Ho Chi Minh City itself has transferred the technology to organize market places forequipments and technologies to other provinces and to the Ministry of Science andTechnology. Through these activities, Ho Chi Minh City has strengthened its cooperative
relationship with other provinces and cities (Hanoi, Dac lac, Da Nang, Dong Nai, Can
Tho, etc) for the purpose of promoting science and technology potentials of economic
regions and the whole country.

Result 3: Providing training and assistance to enterprises during the course ofinternational economic integration

To assist firms and enterprises to improve their knowledge during the course ofinternational economic integration, the program includes seminars, conferences, training
courses to provide managers of enterprises with knowledge about AFTA and WTO.
1-Training courses for 1000 directors and managers of enterprises
The first stage from 1999-2003 was completed. Up to now, the program hasorganized 13 training courses (10 month each) for 800 participants of whom 657 hascompleted 11 courses with the success rate of over 80%. Over 95% of participants
responded that they can apply the knowledge learnt after the training courses.
In the second stage, the program has been improved to meet the demand fromenterprises. In addition to 10-month long courses, the program also provides shortcourses on such topics as human resource management, finance and accounting, etc.

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2. Training to enhance the competitiveness for integration: training programs on tradepromotion (Vietnam-US trade agreement, WTO), international quality standardization
system, IP, trade mark have been organized.
During the last 3 years, Investment & Trade Promotion Center (ITPC) has organizedover 100 training courses and seminars on enhancing the competitiveness in
integration, export, trade promotion for enterprises in the City for over 6000
entrepreneurs.

The City also organizes training programs on international quality control systems(ISO 9000, ISO 140000, HACP, SA 8000, OHSAS 18000, GMP etc) for which unto
now, over 130 courses have been organized with 3500 participants; trade markregistration and protection (10 courses on preparing application for trade markregistration for over 500 enterprises); energy savings (12 courses for over 400
participants from 200 enterprises in fishery, plastics , rubber, paper, food processing,
services and tourism businesses); information technology (applying CMM on
software development, E-commerce, web designs etc).

3. Assisting enterprises in applying international quality control system, especially
ISO 9000; trade mark registration; scientific solutions in energy savings:- Assisting enterprises in applying advanced quality control system: The city funds 1015% of the cost in applying ISO 9000 (consultancy, training and certification fee);
provides consultancy on the implementation of ISO 9000 at businesses; and provides
consultants during the implementation of ISO 9000.
Up to now, the city has assisted more than 2000 enterprises in their application ofinternational quality control system, of which 78 enterprises have been certified.

- Registration and protection of trade marks: Over 500 enterprises participated in the
program to assist enterprises in designing, registration and protection of over 1000 trade
marks. Free look-up for 373 trade marks saves VND 75 million for enterprises. The book“Registration Guidance for Enterprises”was completed. Consultancy was provided toover 1000 individuals and organizations on the IPR procedures and protection. 3- 107 -

collective trade marks were also registered. The regulation on the use of “Saigon and Ben
Thanh Market”symbol was also prepared. 2700 IPR cases were investigated.
- Energy savings: Information was provided to 10,000 enterprises. Auditing andconsulting services were provided to over 100 enterprises on energy savings solutions,enabling them to save more then 10% of energy consumed.

Result 4: Program to provide information to enterprises- Ho Chi Minh city has built a database on market information for such countries as UK,
Germany, France, USA, Japan, Korea, China, Russia, South Africa, etc. Setting up
investment web pages in foreign languages such as English, French, Japanese, andChinese to provide foreign investors access to speedy and correct information.

- Establishing dialogue channel between enterprises and city’s authorities at the following
address: http://doithoaidn.hochiminhcity.gov.vn with the participation of 18 departments
and agencies to provide answers to any questions raised by the businesses. The system isdesigned and operated 24/7. The system allows speedy and timely response to questions
raised to meet the need of enterprises. With this system, leaders of the City People’s
Committee can oversee the processing of requests and questions from enterprises to State
management agencies. The dialogue has met the demand for questions to be answered byenterprises. At present, over 200 enterprises participated in the system.

Result 5: Program to develop key industrial products of Ho Chi Minh City

The city encourages the participation by enterprises in the program to improve theircompetitiveness.
Requirements: high quality and reliable trade marks; low production costs; modern anduseful designs; high production capabilities and good working environment; giving
priority to domestic technologies and materials; big market potential; high economic
efficiency for enterprises and significant contribution to the city GDP.
From 2003-2010, the city is aiming to develop 60-100 key products which can contribute10-15% of the city GDP.

- 108 -

43 products from 35 enterprises have been chosen as key industrial products of the city
including mechanics, electronics, plastic, rubber, wood processing, food processing,paper, leather shoes etc. Credit subsidy, marketing assistance, domestic and foreign
market information, free consultancy of trade mark registration abroad, raising
Vietnamese standards for each product according to international standards, and capitalsubsidy for technology innovation are provided to firms producing these products. The
purpose is to improve the competitiveness of these products, to raise the economic
efficiency for enterprises so that they can contribute significantly to the city’s GDP.

Five-component assistance program for the city’s key industrial products includes:
registration of trade marks abroad and processing of claims on violation of IPR;
assistance to develop and apply advanced quality control and technical process;assistance for consultancy; assistance for implementation of research projects to apply
science and technology in production.

PART II: ANALYSIS OF SUCCESS FACTORS AND LIMITATIONS
1- Based on analyzing “opportunities and challenges”, advantages and disadvantages,
Ho Chi Minh City has made the right decisions and appropriate solutions totimely promote production, to raise the competitiveness of enterprises and speed
up economic integration process.
2- With the coordination of departments and agencies, under the guidance by astranding vice-president of the People’s Committee, and with the active
participation by Alliances of Science and Technology Associations, universities,
research institutes and enterprises, Science and Technology Department as astanding organization has prepared plans to assign subordinate agencies to carryout specific duties and regularly checked the implementation progress so thattimely instruction could be given.
3- With all three forces in the link-up triangle, domestic capabilities can be put intofull play, be associated with production needs to boost up demand and at the sametime to create a market for science and technology. The close connection between
scientist among many research institutes and universities in many diverse fields- 109 -

will create a formidable combination of forces capable of solving many big
problems, inter-agency problems, and creating products of high scientific contents.
As results, enterprises may be able to create their own products of highcompetitiveness which promote the development of some industries.
4- Under the direct and strict guidance from leaders of the city, the support from the
Ministry of Science and Technology a team of whole-hearted staff has beengathered to follow-up these activities, from the beginning to the end. The program
has also received the cooperation and support from public media.

Limitation:
1. The potential of the science and technology resources in the city has not beenbrought into full play. And science and technology has not become the driving
forces of the industrialization and modernization of the city and the region.
2. Although the market for science and technology was set up, its scope and social
roles are still limited
3. Although the science and technology management mechanism has been gradually
improved, it has not been able to encourage the investment from all economic
sectors for science and technology activities.
4. Most of enterprises have not understood and planned to invest in productinnovation, in technology development, in the improvement of productivity andproduct quality, and trade mark development.

PART III: ASSISTANCE PROGRAM FOR ENTERPRISES IN 2004-2005
1. Objectives of the program•

Continue to promote state management, establishing the connections between
State agencies –enterprises –scientists with a view to promote industrializationand modernization of enterprises; developing the connection between sci-techresearch with actual production needs by domestic resources.

•

Assist enterprises to improve their competitiveness by providing them withnecessary knowledge and implementing solutions and measures to raise
productivity, quality and energy savings, clean production, and promoting exports.

- 110 -

•Develop markets for science and technology, for sci-tech consultancy, and for
economic and business management.

2. Content of the program: includes 3 groups of solution•

Assisting enterprises in productivity and quality improvement and in clean
production for sustainable development•

Developing markets for science and technology, for sci-tech consultancy andbusiness management•

Assisting enterprises in international economic integration.

- 111 -

- 112 -Hiroyuki Odagiri’s Summary (Session 1)
Let me start with saying I have learned a lot from the four lectures of this session including
mine. Particularly the presentation of Mr. Luong of the Ho Chi Minh City government
impressed me in that Vietnamese officials exercise quite a few policies in an active manner.
Being a discussant myself, I don’t have any room to comment on specific points made ineach of the lectures. So please permit me only to deliver my general impression of the
discussions so far.
My lecture focused on the past Japanese experience. Although I believe it is not whollyirrelevant at all, those days are quite different from the current situation surrounding
Vietnam in many respects — geopolitical power balance, presence of foreign
multinationals, increasing importance of IPR, and so on. Information technology haschanged business landscape and the speed of commercialization and spread of newtechnologies. Yet there are a couple of very important lessons we should learn from theJapanese experience.
First, learning takes time. On one hand, you learn many things from foreign companies oryou import foreign technologies; and, on the other, you learn science for your own R&D
researches. In both cases, it takes a very long time to gather your crops. This is not only
true when Mr. Hung talked about the motorbike industry that learned from foreign makers,
but also true when Mr. Sawai discussed about the importance of technological innovation
in a more forefront industry. So anyone who wants to prosper for long periods needs toconsider learning as a cycle of R&D, implementation, and innovation. This kind of learning
is no business for short-term gainers.
Secondly, to help such learning, policy makers must maintain consistency over time. If theyoften change their policies, no companies could afford investments that require long-term
learning. Consistent policies are of basic importance.
In terms of learning in association with seeding an innovation in Vietnam, the Vietnamese
firms who learn from FDI companies admit the value of learning as suggested in the survey- 113 -

answers in the first presentation. They recognize learning technology is learning everythingaround it such as quality control, management, and workers’morale. In terms of learning in
the context of research activities, innovative, forefront technologies do not spring fromnothing; rather they are outcome of gradual improvements.
This symposium is supported by the Honda Foundation, so let’s take Mr. Soichiro Honda
for example. It is a famous story that the first CEO of Honda still sweated and got his hands
dirty in the factory amid his workers. This tells how Mr. Honda knew the importance of“on-the-spot”experiments, ingenuity and improvements and valued it.
All the above discussions converge with the importance of education; and especiallycrucial is which you put more weight on — precept or practice? In universities, students
learn frontier theories in paper and do researches. This is only half done. They can learn
more if they go to a laboratory for experiments or assemble a machine by themselves.
Making such attitudes their custom habit is important. In this context, “get your hands dirty”
carries a positive connotation.
We should train students in this manner at elementary and high-school levels to enhancetheir appetite for learning and working through practice. Youngsters become moreinterested in science and technology if they use their hands for experiments and see what
actually happens. This constructs motivation in them beyond mere passive knowledge. In
my opinion, we need to stress the importance of this type of practice in our education
system today.
Unfortunately I don’t have yet an opportunity to visit schools in Vietnam, thus myknowledge on the Vietnamese education is fairly limited. Please tolerate me if mysuggestions are irrelevant, but I believe learning with the spirit of “get your hands dirty”hastimely importance and implications for the orientation of sci-tech education. In fact, many
Japanese thinkers worry the past overemphasis on theories, and lack of practice, in ourscience education. Their worries may be not a reality in Vietnam, but you better watch out.
That’s it for today: My general impression of the discussions rather than comments on
specific details. Thank you.

- 114 -

Prof.Nguyen Quang Thai Co-Chair-1 DSP/MPI
We have completed 4 reports and the brief and interesting remarks by cochairman from Japanese Fund. Thanks to all of these valuable
contributions which cover from general experience on technology
innovation to the specific experience from NTT Corporation. This
provides us with precious lessons of the process of transformation into
the most industrialized nation in the world so we could research andstudy. Through this, the very lesson we learn is that so we must often
update and modify continually our policies. There is not only uniquepolicy applied for all countries in each development period.
The speech about specific experiences in the fields of FDI( Foreign
Direct Investment) on Motorbike industry in Vietnam as well as
experiences from delegates of HCM City are precious lessons about
triangle linkages between Research Institutes, Universities, Enterprises andthe intervention of the government. Motorbike industries with foreign
investment create important conditions for innovative process in Vietnam.
Especially, at the moment of highpressures of integration andcompetitiveness, the technology innovation needs be controlled and studied
reasonably at the level of our development period. In coming years,
integration has become very important to Vietnam, so that our policy needs
be updated to keep up with new conditions which are large challenges.
Precious lessons given by Thailand lecturer are very useful and encourage
us to think about the relatively low development in Vietnam. We think that
4 presentations in this morning are helpful as well. Because of time limit,
we have a working dinner and we will discuss more with some delegates.
And if there are so many lecturers, discussion will be taken place during
the lunch. We hope that our sustainable relationship is strengthened in- 115 -

order to find out appropriate innovation policy on technology and linkage
in enterprises to serve development policy in each nation. Thank you
Ladies and Gentlemen, Please take a rest and the morning forum is over.

- 116 -

The Honda Foundation International Symposium

Nobuya Haraguchi

THE DYNAMICS OF THE NATIONAL SYSTEM OF INNOVATION- A CASE OF THE THAI AUTOMOBILE INDUSTRY -This paper examines the technological development or underdevelopment of the Thai
automobile industry from the perspective of the national system of innovation, as aresult of a study based on questionnaire surveys (6 assemblers and 85 parts suppliers)
and interviews in addition to statistical analysis and a literature review on the Thai
automobile industry.

For this end, it looks into the principal actors of the Thai

automobile industry and above all investigates the interactions of the strategies ofmultinational corporations, the policies of the Thai government and the management
structures of the Thai firm in order to shed light on how the path of the industry’s
technological development has been shaped.
At the beginning of the 21st century, when a country takes on the development of a scaleintensive industry, such as automobile manufacturing, the chances of the country
pursuing a relatively liberal development approach like Thailand seem much greaterthan the other end of continuum, state-led development, because of the past failure ofgovernment intervention, globalisation of the world economy, and by the default
condition of the increasing difficulty of undertaking state-led industrialisation due tointernational pressure.

In this sense, after due consideration of specific differences ofdomestic and international conditions of the time, the case of the Thai automobile
industry may be able to provide important lessons for countries in this period of
globalisation, where many of the governments are likely to have fewer measuresavailable for industrial development than the counterparts until two or three decades
ago.
The Thai automobile industry grew in quantitative terms until 1996 with the relatively
less interventionist approach of the Thai government and active participation of a large
number of multinational corporations.

However, the author’s study found thatquantitative expansion did not bring qualitative, technological improvement at the samepace.

After 40 years of the industry’s operation, the Thai automobile firms were still

lagging behind in terms of Lall’s definition of technological capabilities which include
investment

capabilities,

production

capabilities

andlinkagecapabilities.

The

comparisons of production functions between Thai firms and foreign invested firms
suggested the limited investment capabilities of the Thai firms which generally confined
their operations in small-scale, labour intensive productions.

As for production

capabilities, the Thai firms have been slow in their improvement of productivity
measured in both total factor productivity and physical productivity, and also slow
progress in the development of adaptability was evident in questionnaire surveys.
Finally, the limitation in the linkage capability and hence shallow industrial structure wasnoticed in the input-output analysis. In a recent study, on a net basis, local content rate

1

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The Honda Foundation International Symposium

Nobuya Haraguchi

including parts procured from other ASEAN countries was still around 24% (Takayasu
and Mori, 2004).
The main objective of this paper is to examine how the path of the technologicaldevelopment of the Thai automobile industry has been shaped by the three main actorsof the industry’s national innovation system.

To analyze their interactions and assess

the effect of these interactions on the technological development of the Thai automobile
industry, this paper focuses on the underlying forces and main characteristics of eachactor based on the results of the author’s questionnaire and literature surveys.

In

reality, there was no clear-cut single characteristic representing each actor; moreover,the effects of characteristics have changed over time.

There has also been overlapping

However, the importance of understandingof strategies and policies in a single period.

their interactions at a conceptual level forces us to look at the cores of the characteristics
and changes through a degree of abstraction.
The first section depicts the principal processes of their interaction.

These processes

have had a lasting influence on the technological state of the Thai automobile industry
throughout the three development periods.

After identifying the underlying forces

behind technological underdevelopment, the second section introduces dynamism to theframework, looking at how the interactions have changed in the three different periods.
Within the limit of their principal relations, we have seen changes in interaction, in eachperiodproducingdevelopment.

different

opportunities

for

and

constraintsontechnologicalThis dynamic nature in turn suggests that within limits more beneficial

interactions are possible for a national system for technological development dependingon the adoption of the right policy mix.

Thus, the last section discusses some policy

recommendations for the Thai automobile industry.

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The Honda Foundation International Symposium

Nobuya Haraguchi

THE INTERACTIONS OF PRINCIPAL CHARACTERISTICS
Conceptual Framework
Government
Relatively
non-Interventionist

MarketMultinationals

Thai Firms

Centralisation ofDecision Making

FamilyManagement

From early on, multinational automobile firms, especially from Japan, dominated theThai automobile industry, and were generally able to operate on their own terms in the
wide-open Thai market.

This behaviour of the multinationals was based on or madepossible by several relations shown in the above conceptual framework.

First,

represented by arrow A, multinational corporations possessed something very attractive
to the Thai government, that is technology.

Their skills and technological know-how

gave multinational corporations a strong bargaining power over the government.

Thegovernment did not necessarily give in to the demands of the multinationals all the time,
but especially when multinationals were closely united, they were able to push theirdemands through.
Second, the limited interference of the Thai government to the activities of themultinationals, represented by arrow B, also helped multinational corporations tooperate in relatively unrestrained environment.

Essentially, the government wanted todevelop the automobile industry, and, given the situation of local firms lacking thenecessary technology, the government was generally supportive rather than hostile toforeign automobile firms coming into the Thai market.

When local development needs

came into conflict with the activities of multinational corporations, the government
intervened in the industry.

However, the effectiveness of the intervention wasconditioned by state capability and the relationship between the government and Thai

3

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The Honda Foundation International Symposium

firms.

Nobuya Haraguchi

Often bureaucratic in-fighting prevented effective intervention, whilst weak

government-business relationships could not constitute a strong counterforce against
multinational corporations.

The growth of local parts firms during the importsubstitution period strengthened the ties between Thai firms and the government
through a formal association.

Yet, as indicated by arrow C, the association was notorganisationally cohesive, accepting companies of different kinds into membership,
ranging from majority foreign-owned firms to small Thai firms manufacturing only spareparts.

Nor was the government so keen to foster the relationship, as was the case with

the Korean and Japanese governments when they tried to develop their domestic
automobile industries.
Finally, the existence of very few technologically capable Thai firms made multinationals
conduct business with firms with their own group or with advanced foreign firms.
Keeping the production chain in the hands of multinational corporations was also
convenient for and strategically compatible with assemblers in Thailand.

Theirheadquarters in home countries centralised decision making for its role in research anddevelopment and co-ordination with their group firms.

Thus, it was much easier for an

assembler to purchase parts from a foreign-affiliated firm with whom a business relation
had already been established at the level of their headquarters, probably through joint
participation in product development or at least regular meetings at a suppliers’
association.

In addition, when Japanese multinational corporations sought a supplier,they were interested in more than the quality and price of a product.

They were moreinterested in the production system which reliably assured high quality and low cost of
product.

Since the system was developed in Japan and involves such aspects as

employment practice, training, and management-labour relations, it takes time totransfer the system to a Thai company which engages in the industry via different
institutions from those of the Japanese automobile industry.

Consequently, Japanese

automobile firms conducted business largely with foreign-affiliated firms and had very
weak relations with Thai firms as shown by arrows E and F in the framework.

Although

Thai firms were able to expand their business opportunities as the government
increased the local content requirement, wholly Thai-owned firms usually came to last in
the list of potential parts suppliers because of their technological underdevelopment andthe above behaviour of multinational corporations.
These three factors enabled multinational corporations to enter in droves into the Thai
market and to operate based on their own strategies, as arrow H indicates.

More thana dozen multinational corporations produced vehicles in the Thai market.

Moreover,the small market size was further fragmented with numerous vehicle models and types.
This customisation strategy of multinational corporations was designed to keep a higher
profit margin in the Thai market, where customer tastes were highly differentiated andprice elasticity of demand was low.

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The Honda Foundation International Symposium

Nobuya Haraguchi.

Opening

up the Thai market with investment incentives helped to bring multinational
corporations into Thailand.

Once they were in the market and had started production,

it was not easy for the government to reduce the number of manufacturers.
do was to forbid new entrants.

All it could

In addition, the failure of the government to regulate

the crowded sustained market conditions which limited the benefits of economies ofscale.

The government’s minimal intervention in the market due to the lack ofadministrative capability and industrial know-how, as indicated by arrow G, coupled withthe oligopolistic behaviour of multinational corporations and their long experience in theautomobile industry, therefore, resulted in the fragmentation of the Thai auto market.
Turning to the government’s effort to upgrade the skills of Thai firms and the generalpublic at large, policy implementation was both qualitatively and quantitatively limited(arrow D).

Other than the local content requirement, the government did not have somany tools to improve the technological state of Thai firms.

When they did extend theirassistance to the Thai firms, as seen in the example of the ‘Vender Meet Customers’
Program, it was hardly sufficient to change technological conditions in any significant
way.
Similarly, governmental promotion was inadequate in advancing the country’s
education, and science and technology capacities.

Low enrolment in secondary schools

was alarming since secondary education was often considered a minimum qualification
As for higher education, the expertise ofnecessary for skill development at work.

graduates supplied by universities did not meet the demand of industries.
government policy initiatives were needed to ameliorate the situation.

Strong

The shortage ofengineers hobbled every stage of technological adoption, adaptation and innovation.
Ultimately, government support in research and development was insufficient to meetthe country’s technological needs.

Funding as well as co-operation with academia andthe private sector were lacking.
Of course, the government was not omnipotent.
a government can do.

There are practical limitations to what

This is especially so for the government of a developing country,

often constrained in terms of financial, technical and managerial resources.

Whatshould be emphasised here, however, is that in the case of the Thai government, there
seems to have been a predisposition to a lower level of intervention, which characterised
the overall action of the government.

Whether it was caused deliberately or not, that

low-level intervention of the Thai government was likely to be rooted in given
institutions.
So far discussion has centred mainly on multinational corporations, the Thaigovernment, the market and their interactions, explaining how their actions, reactions,and inaction affected the development of the Thai automobile industry.

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Based on theThe Honda Foundation International Symposium

Nobuya Haraguchi

discussion, this section concludes with an analysis of the causes of the technologicalunderdevelopment of Thai firms, one of the central themes of this paper.
As shown in the framework, Thai firms had possibly three external supports for theirtechnological development: technology transfer from multinational corporations (arrowE), government promotion (arrow D) and market forces (arrow I).
explained, these are not independent one another.

As alreadyA degree of influence from one

source is often determined by its relation with others, including Thai firms.

Also theeffectiveness of these external factors on the technological development of Thai firms
depended on internal factors of the Thai firms themselves, such as the level oftechnological accumulation and management characteristics.
First, looking at the influence from multinational corporations, the discussion explained
the marginal business relations between multinational corporations and Thai firms incomparison with the relations among multinational corporations themselves and theirrelations with their headquarters.

The strategies of multinational corporations, theweak intervention of the Thai government and the lack of technological know-how andskills of Thai firms all contributed to this weak linkage between multinational
corporations and Thai firms.

Since the existence of business relations is a minimum

condition necessary for technology transfer to take place, Thai firms were not able tobenefit significantly from this source for technological development.
Second, support derived from government policy was equally insubstantial.

The

technological superiority of multinational corporations and their long experience in theautomobile industry often made the strategies and demands of multinational
corporations prevail in the Thai automobile industry, limiting the scope of government
policy for the development of Thai firms.

This influence from multinational corporations

was certainly in addition to the government’s own characteristic low-level intervention.
State fragmentation and lack of know-how resulted in insufficient and ineffective policy
intervention at both industry-specific and functional levels, and the relatively weak
government-business relation did not help the situation.
Finally, market conditions were not conducive to the sound development of the Thaifirms.

The open-market policy of the government brought a large number ofmultinational corporations to the small Thai automobile market and, after theirentrance, failed to reduce the number of vehicle models and types.

Marketfragmentation and model proliferation limited benefits of the economies of scale, whichlargely determines the kinds of products that can be produced in the market.

Fromtheir incipient stage of development, thus, Thai firms had to face market conditions
which, except in terms of volume, rather resembled those of a developed country: asegmented market with frequent model changes.

Without being given an opportunity

to accumulate the learning experience of one production, Thai firms were not able

6

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Nobuya Haraguchi

rapidly to run down the learning curve, which is necessary for gaining competitivenessand further acquisition of technological capability.
Accordingly, all the three external factors, the behaviour of multinational corporations,
government policy and market conditions, were not helpful to the Thai firms.
were in an unfavourable environment for their technological development.

They

However, it

should be remembered here that the effects of these factors were determined throughtheir interaction with the internal factors of the Thai firms.

Their family management

system seems to have slowed the progress of skill formation which probably further
dimmed the prospect of business opportunities with multinational corporations.

Also,

they failed to make full use of the period of government protection throughmodernisation of management.

Little improvement in the competitiveness of the Thaifirms led the Thai government to lose confidence in the continuation of the importsubstitution policy, resulting in a gradual shift in the policy towards liberalisation.
Based on the principal characteristic of each actor, this section examined the causes oftechnological underdevelopment of Thai firms by looking at the interactions of theactors.

Since principal characteristics and their basic relations among actors were slow

to evolve, the underlying forces which shaped the development of the Thai automobile
industry have had lasting effects on the technological development of Thai firms
throughout the periods covered in this study.

While the above analysis epitomises thecondition of the Thai automobile industry in general, there was also dynamism in theirinteractions as the strategies, policies and the positions of the actors changed.

The

concurrence could be explained by the fact that each actor is a source of influence onother actors, and this again points to the importance of putting the actors together in ananalysis of their interactions. To look at the dynamism of industrial development, thefollowing section looks at the interactions of the actors in three distinctive periods.

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Nobuya Haraguchi

THE DYNAMICS OF THE INTERACTIONS
From the beginning of the 1960s to the beginning of the 1970s
Figure 1

Government
Laisser Faire

MarketMultinationals

Thai Firms

Ethnocentric
Orientation

Dependency

In this early period of the Thai automobile industry, the foremost priority of the Thaigovernment was to attract foreign automobile manufactures into the Thai market anddevelop the industry.

The lack of technological capability among Thai firms, and thegovernment’s distant attitude to local capital led to a development driven by themultinational corporations.

Thus, there was little the government could do other thanmaking sure that the market climate was conducive to foreign direct investment.
As a result, multinational corporations did not face much regulation and were largely
free to operate according to their own strategies.

In addition, Japanese automobile

firms, the majority of the multinational corporations in Thailand, were inexperienced inforeign direct investment; their Thai subsidiaries were one of the first foreignsubsidiaries they established.

When a firm is novice in international business, it tends

to prefer an ethnocentric orientation in which the management style of the headquarters
is applied to the subsidiary.

Hence, Thai government non-intervention was compatible

with the international business strategies of the multinational corporations new toforeign subsidiary operation.

Their strategic intention supported by the open

investment climate resulted in minimum local production taking place.

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Nobuya Haraguchi

multinational corporations preferred to import most of the parts from their own
long-time group suppliers and were allowed to do so by the government’s laisser fairepolicy.
At this stage of the Thai automobile industry, the number of Thai firms was small andtheir technological capability was very limited.

Most of the Thai firms entering into thisrelatively new industry were not technologically oriented, as evidenced by their previous
activities as importers and retailers of automobile products.
technological capability nor ability to produce at low costs.

They had neither

Despite their lack of skills

and technology, they were able to enter into automobile production through connections
with multinational corporations from their previous businesses, by making use of theirmerchant talents.

These connections were necessary to compensate for theirtechnological deficiency and, if firms could also secure political connection, they wereeven in an even better position.

In the authoritarian regime of the 1960s, when thegovernment-business relationship was still governed by patron-client ties, having apolitical connection was an important competitive advantage for firms relatively new tothe industry.

Hence, the Thai firms were dependent on technological connections withmultinational corporations and political connections with the government.

They were in

no position to influence, let alone alter, the strategies of multinational corporations andthe policies of the government.
Unopposed, indeed facilitated, by the Thai government and local firms, as discussed
above, multinational corporations were able to operate on their own terms.

Theymaintained close relations with their headquarters in home countries and undertook
only the final assembly process in Thailand using largely imported parts.

Under these

conditions there were not many opportunities for technology transfer from multinational
corporations to Thai firms.

Added to this, Thai firms themselves seemed to have beeninterested in investing more in connections than in technology.

Finally, hordes offoreign investors in the Thai market as a result of the government’s open-market policy
sowed the seeds for model proliferation and hence limited economies of scale, a lasting
legacy of this period.

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Nobuya Haraguchi

From the beginning of the 1970s to the middle of the 1980s
Figure 2

Government
Import-Substitution
Industrialisation

MarketMultinationals

Thai Firms

Polycentric
Orientation

Empowerment

Although tariffs were levied on imported auto parts from the beginning of the Thai
automobile industry, their effect on the behaviour of the multinational corporations was
minimal.

As long as they were allowed to, they imported auto parts because they could
In this sense, a non-tariff measure introduced in this period

not find them in Thailand.

changed the relations among actors in a significant way because it forced assemblers topurchase parts in Thailand.
The local content requirement, born in the context of a domestic cry for industrial
deepening,

was

thus

considered

thebeginningoftheimport-substitution

industrialisation in terms of the effects on the structure of the Thai automobile industry.
The government’s localisation policy increased the number of Thai auto firms, leadingthem to join hands to assert their interests through a formal association.

Empoweredquantitatively and institutionally, Thai firms were no longer a passive group.

Theirdemands were reflected in the measures of the localisation policy, which in turn further
strengthened the position of the Thai firms.
The forced purchase of local parts and the steady increase in the amount to bepurchased gave the multinational corporations no choice but to reorganise the way they
produced automobiles in Thailand.

It was no longer an option for them to assemble

vehicles through the wholesale import of parts from foreign countries.

Parts production

had increasingly to be based in Thailand, and the locally produced parts had to be10- 126 -

The Honda Foundation International Symposiumincluded in assembled vehicles.

Nobuya Haraguchi

Facing this new reality, multinational corporations had

two ways to cope with the situation.
First was to find or help establish, where unavailable, wholly Thai-owned firms andimprove their skills and production processes so that they could become parts suppliers.
Some of the foreign assemblers encouraged their former local parts importers andretailers to get into production, and provided necessary know-how to those new
producers.

Also, engineers from the assemblers visited their local suppliers andassisted in solving production problems.

In addition to these individual supports,

Japanese multinational corporations tried to transfer their production system en masseby establishing a suppliers’ association, which functioned well in Japan as a catalyst forinteractive learning among suppliers.

In these processes of upgrading the skills of

wholly Thai-owned firms, foreign parts suppliers, who had been associated with theirmultinational assemblers for a long time, were involved as advisers, technology
licensors and leaders in suppliers’ associations, to facilitate technology transfer.
The second measure taken by foreign assemblers for local procurement was toencourage foreign suppliers to start parts production in Thailand.

The close relations of

the assemblers’ headquarters with their group suppliers enabled the headquarters toplay a role in facilitating the direct investment of the parts suppliers into Thailand.
These multinational parts suppliers were greatly valued by the foreign assemblers since
they practiced the production system preferred by the assemblers, had expatriates
ready to act on the technical requests of the assemblers, and often shared a longexperience with the headquarters in home countries.

These advantages of themultinational parts suppliers, in addition to their technological capability, made themvery attractive and convenient to the assemblers.

As a result, a limited number offoreign parts suppliers and the small auto market in Thailand led to a loosening of thegroup business practice prevalent in Japan.

The parts makers supplied the products tomany, and often all, assemblers beyond the bounds of a keiretsu group, in order tosatisfy the needs of the assemblers who wanted to purchase from foreign suppliers asmuch as possible and the needs of the suppliers who wanted to have more customers inthe small market.
Of the two measures employed by assemblers to cope with parts localisation, theassemblers relied much more on foreign-affiliated firms because of closer ties throughthe headquarters and their superior technological capability. The localisation policy of
the Thai government increased the number of wholly Thai-owned firms and helped
technology transfer from foreign firms to Thai firms; however, the central energy offoreign firms was spent on expanding business with foreign-affiliated suppliers as the
local content requirement increased.

Thus, it appears the main effect of the localisation

policy was to localise the operations of foreign suppliers from whom the parts used to beimported in the past.

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Nobuya Haraguchi

The government policy forced multinational corporations to localise their production, butthat process of localisation was also supported by a shift in their strategies.

After

accumulating experience in international operations, the multinational corporations
became more comfortable in delegating some decision-making authority to their Thai
subsidiaries.

Especially, during this period, the Thai automobile industry was protectedfrom foreign competition and entirely oriented to the domestic market. In this situation,
the localisation of production accompanied by the delegation of appropriate authority
was likely to enhance the efficiency of the Thai subsidiary as well as the groupperformance of the parent multinational as a whole.

The localisation was, therefore,

not entirely against the interest of the multinational assemblers as seen in theirco-operation to the increase of local content rate up to a certain extent.
Summing up the local technological development of this period, the import-substitution
policy failed to establish the wholly Thai-owned firm as a major business partner of theNonetheless, Thai firms who entered into businesses with foreignforeign assembler.

assemblers were usually successful and increased their sales rapidly along with market
growth, since they did not have many competitors in Thailand and faced no threats fromimports due to government protection.

Sheltered from foreign competition and making

handsome profits, wholly Thai-owned firms felt little competitive pressure during thisimport-substitution period and hence had no incentive to modernise family management
for technological advancement.

Added to limited technology transfer from foreign

firms, little technological development from their own efforts slowed progress incompetitiveness.

In hindsight, these conditions failed to prepare Thai firms for the

coming market liberalisation and an industrial shakeout caused by the Asian economiccrisis.
From the middle of the 1980s to the present
Figure 3

Government
Export-Oriented
Industrialisation

MarketMultinationals

Thai Firms

Geocentric
Orientation

Disintegration

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Nobuya Haraguchi

The tide of the industry gradually turned in favour of export orientation, or at least
regional co-ordination, from the mid-1980s, becoming more apparent still in the 1990s.
In this period, the inflow of foreign direct investment continued and accelerated;
however, the investment was not only for purely localisation purposes to meet the
government regulation. The purpose and the kind of firms coming to Thailand varied,
including smaller and lower tier parts producers.
These changes in foreign direct investment and the growth of the Thai automobile
industry to become a regional production hub gave an incentive to the multinational
assemblers to concentrate more pro-actively in production in Thailand with a view toexporting pick-up trucks to the world market.

As the Thai automobile industry wasincreasingly integrated into the international division of labour, at least in the strategies
of multinational corporations, they increasingly relocated pick-up production to Thailandand suggested to the Thai government the need for an institutional infrastructure forregional co-operation.

The strategic shift of multinational corporations strengthened

the role of the headquarters once again, but in comparison with ethnocentricorientation, the roles of headquarters and subsidiaries were more differentiated, where
the headquarters exerted influence eclectically with an eye to improve co-ordination
among subsidiaries and the efficiency of the group’s global performance.
The changes in strategy and behaviour of multinational corporations proceeded ininteraction with the shift in government policy from mere localisation to industrial
deepening and to promoting international competitiveness through liberalisation.

Morethan a decade of forced localisation had engendered an uncompetitive industrial
structure, which allowed firms to be complacent inside the wall of government
protection, and to enjoy a high profit margin at the expense of consumers.
Technologically, the industry was stagnant and showing no sign of catching up withadvanced countries.

These conditions together with international pressure to liberalise

the market gradually formed a broad consensus for market liberalisation.

Initially,

opening the Thai auto market proceeded whilst maintaining the basic measures of
localisation, permitting the co-existence of both import-substitution and export-oriented
industrialisation policies.

Then, the Asian economic crisis tipped the scales toward fullderegulation.
The strategic change of multinational corporations and policy shift of the government
had considerable effects on the Thai firm.

Due to continued market growth andexistence of localisation measures, however, Thai firms were slow to realise the effects
and failed to adapt to the changing industrial environment.

Thus, when the crisis hit,

the Thai firms were suddenly exposed almost to the full effects of deregulation.

Facingthe dwindling auto market, the government was no longer in a position to localise theindustry, but instead needed to promote exports.

13- 129 -

Besides, abiding by an international

The Honda Foundation International Symposium

treaty, it was deprived of the measures of localisation.

Nobuya Haraguchi

Multinational corporations also

had to make every conceivable effort to export products and find parts of exportable
quality in Thailand or, if not available, through import.

Thai firms, caught short in thesesudden retreats from domestic orientation on the sides of both the government and themultinational corporation, was vulnerable without technological competitiveness andpolitical clout.

The association of Thai parts firms, already organisationally weakened,

was not able to help ameliorate the situation through political channels.
The economic crisis sifted firms with international competitiveness from those who could
survive only under heavy government protection.

Most wholly Thai-owned firms

belonged to the latter group and faced financial difficulties.

The firms in the former

category moved on to strengthen relations with multinational corporations.

At the endof the 20th century, the Thai firm was no longer an integrated actor in the industry.
Through the three periods of the Thai automobile industry, the prime determinant of theThai firm’s success has changed from connections, to protection and finally totechnological capability.

Among these, technological capability is the only determinant,which makes the firm truly sustainable.

Since the 1960s, the forty-year history has notbeen favourable for the development of this capability, as a result of the policies of thegovernment, strategies of multinational corporations, the management characteristicsof the Thai firm, and above all the way they interacted with each other.

IMPLICATION FOR POLICYAs the above discussion suggests, after the crisis, market forces are in full swing in theThai automobile industry. This situation makes it very difficult to recommend an
industry-specific policy which might accelerate the pace of the industry’s technologicalcapability faster than the pace dictated by those market forces.

Nevertheless, thissection tries to come up with a brief policy recommendation by drawing clues from theconceptual framework.

Since the wholly Thai-owned firm was especially hit severely by

the crisis, the recommendation will be directed particularly at improving the situation ofthis actor.

The first part will delineate the conditions of the Thai automobile industry

and suggest necessary institutional improvements, which have to be made before any
policy could be successful.

Then, assuming that the improvements take place, thesecond part will suggest realistically what kind of policy can be implemented effectively.

Institutional Improvement
As interactions among actors have indicated, a policy which has an effect on only one
actor does not seem so effective.

Interventions have to be made at multiple points andgenerate a positive synergy to create a favourable climate for technological14- 130 -

The Honda Foundation International Symposium

development.

Nobuya Haraguchi

In this sense, before a specific policy is forwarded, it is helpful toreiterate the capability of the government and the situations of other actors, and to
propose a basic institutional setting through which industrial policy has to be
implemented.
First, the relationships among actors have indicated that the Thai government faces
highly efficient, profit maximising multinational corporations.

In order to effectively

formulate and implement an industrial policy in such a situation, the government mustat least have a centralised policy institution, placed above policy-making authority
dispersed among the agencies involved, and free from political meddling.

Consideringthat disunity amongst the agencies supervising the automobile industry and an unstable
political environment weakened the bargaining power of the Thai government, theimprovement of the capacity of the policy-making agency is a prerequisite for almost
any policy intervention to be successful.
by the industry experts.

Needless to say, the agency has to be staffed

If not available in Thailand, the government should consider

hiring from abroad.
Second, the weak government-business relationship of the Thai automobile industry
prevented close exchanges of industrial know-how and government advice, and reduced
the opportunities and possibilities of successful intervention.

This relationship has tobe strengthened by reorganising industry associations and improving their operations.
It is likely that a business association functions better under a situation where it has
members representing similar interests, there are no other associations of the samekind, and it deals with fewer government agencies, which can co-ordinate and muster
co-operation from other agencies involved in issues discussed.

From these viewpoints,

there seems to be room for improvement in the current arrangement of the industry’s
associations, which have motley memberships and multiple associations in a single
sector.

It would be better if the associations were rearranged along the line ofindustrial sectors: assembling, OEM parts production, and spare parts production.
Existing associations can regroup themselves into these three associations throughmergers and separations.
Last but not least, for the relationship between the government and the industry, active
participation from multinational corporations is important since this actor plays a majorrole in the industry.

Close relations between the multinational corporation and both thegovernment and the Thai firm have to be an integral part of an overall improvement of
the government-business relationship.

Policy Intervention
It is impossible to exaggerate the importance of the capability of the government andfavourable government-business relations for effective intervention.

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Nobuya Haraguchi

government has to intervene at multiple points in the framework at once, co-ordinating
the interventions.

If the above two points are not firmly institutionalised, a major

government intervention is not likely to be effective or may even aggravate thesituation.

Therefore, in the case that these institutional improvements are notforthcoming, it is better for the government to opt out of industry-specific interventions.
In the post-crisis period, even if the purpose of a policy is to improve the condition of thewholly Thai-owned firm, the policy has to be one which makes use of market forces andcan obtain the co-operation of the multinational corporations.

This is not as easy as

imposing a local content requirement which simply forces the assembler to procure arequired amount of local parts without regard to the skill level of the local firm, thestrategy of the multination corporation and market conditions.
not in the past.

Such a policy cannot be

Even if possible, it will not be a solution as it was

implemented in post-crisis conditions.

So policy implementation at the beginning of the 2000s has to be moresophisticated and fine-tuned than those the Thai automobile industry experienced in thepast.

If it chooses to intervene, the Thai government has to devise a three-pronged

strategy, making use of competitive market forces, taking advantage of the technologyof multinational corporations, while making a real difference in the conditions of local
firm.

The difficulty of implementation of such policy is obvious since these three factors

have to be satisfied by the government which is deprived of many of its intervention
tools after liberalisation, even if we assume it has successfully achieved required
institutional capabilities.
The analysis of the Thai automobile industry revealed that the development of the Thai
firm was hindered by management characteristics, lack of competitive market forces
and a limited linkage with the multinational corporation.

The first two conditions are

relatively endogenous, and the country seems to have more control over these factors.
Besides, as far as the Thai market is concerned, it is already fairly competitive, withincreasing liberalisation, and the reversal of this situation is unlikely.

The most difficult

factor to handle is the last one, the lack of linkages with the multinational corporation.
Though not as footloose as portfolio investment, foreign direct investors can change thedegree of their commitments to the market according to local conditions.

If amultinational corporation finds that the negative consequence of a government policy
outweighs the relative attractiveness of the country, it can shift its investment andproduction priorities to other countries.
As has already been made clear, the fact that it is difficult to interact with themultinational corporation, however, does not allow us to ignore this actor in terms ofpolicy intervention.

Multinational corporations are a major source of technology andmore importantly, in the case of assemblers, they control the production chain of thewhole manufacturing process, being at the top of the production pyramid.

Therefore,

the focal point of the industrial policy should be to strengthen production linkages
between multinational corporations and Thai firms, whilst continuing efforts to improve16- 132 -

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Nobuya Haraguchi

the management of the Thai firm and develop sound market conditions based on market
principles.
Turning to the central point, linkage creation between multinational corporations andThai firms, the period and extent of government intervention should be minimal, but at
the same time the effect of the intervention has to be enduring.

It seems that the Thaigovernment does not have enough financial and managerial resources for continuousintervention in such a complex project.

Above all, any policy which requires perpetual

government intervention is itself a proof of failure since it seems to indicate that thepolicy is not compatible with market forces.

Thus, the government intervention shouldbe temporary and should work as a catalyst to generate a virtuous cycle for linkage
creation rather than become itself a source of bringing the two parties together.

Onesuch intervention would be to develop technology leaders among Thai firms who canabsorb technologies from multinational corporations and disseminate them to their Thai
suppliers, as the following figure indicates.

Government

Figure 4

MarketMultinationals

ThaiTechnology
Leaders

Thai Firms

Figure 4 is constructed by adding technology leaders to the original framework.
Considering that technological underdevelopment was the key problem preventing themultinational and the Thai firm from creating linkages, this scheme tries to develop
technology leaders among Thai auto firms and place them between the multinational
corporation and other Thai firms in order to facilitate the absorption and disseminationof technology.

In this scheme, although the government’s support is crucial at least

initially, the intervention by no means forces the parties to form business relations
against market principles.

On the contrary, the government is to play a role of catalyst17- 133 -

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Nobuya Haraguchi

and promote linkages through market forces or by strengthening them.

In addition,

this scheme also fits with the production system of automobile manufacturing, where
assemblers transact with a small number of relatively developed component
manufacturers who in turn hold business relations with a greater number of parts
suppliers.

Being compatible with the market system and the industry’s production

system, this policy seems to have a higher chance of success.
Having these advantages, however, a policy intervention, depicted in figure 4, does
require effective action by the Thai government and the efforts by Thai firms for building
strong linkages.

This scheme will not automatically generate linkages between

multinational corporations and Thai firms just by picking Thai technology leaders.

The

leaders have to be developed and directed so that they can perform the function as
linkage creators.

The local suppliers have to improve technological capabilities or atleast show potential for improvement initially so that they are ready to expand theirbusiness relations.
In the Thai automobile industry, candidates for technology leadership are a handful ofThai auto firms who successfully survived the economic crisis and are strengthening
their relations with multinational assemblers in the post-crisis period.

These Thai firms

have had reasonably long experience in the automobile industry, and although thecharacteristics of family management including business diversification also apply tothem, these firms have usually expanded their businesses centred around theautomobile industry.

Their already established connections with multinational

corporations, which prove their relatively superior technological capabilities, and theirwide-ranging presences in different product areas of the industry, make them suitable
for the role of the technology leader.
In order to help them to acquire higher technological capabilities, which are necessaryfor expanding the quantity and quality of transactions with multinational corporations,
the Thai government, after designating technology leaders, has to provide support forthem, accompanied with obligations.

Support could include subsidies or tax incentives(or both) for royalty to be paid for technology license agreements with foreign firms, forthe consultancy of foreign experts or technological institutions, for building an in-houseresearch and development centre, and for overseas training.
In return, the technology leaders should be obliged to create their own suppliers’
associations by closely modelling on the original suppliers’ associations in Japan, andevery year they should report the number of local suppliers with whom they do business,and the total amount of business transactions with local suppliers.

Based on theseannual reports from the leaders, the government adjusts financial incentives for eachleader upward or downward, or withholds incentives.

Through this system, thegovernment expects the leaders to make full use of suppliers’ associations and help their
suppliers improve technological capabilities by frequently holding seminars, giving

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Nobuya Haraguchi

feedback and technological assistance to individual firms, and jointly working with
suppliers in development and engineering works.

Thus, this system as a whole

facilitates the dissemination of technology first from multinational corporations to Thai
technology leaders and then to local suppliers.
In implementation of the policy, firstly, the government intervention should be
temporary, and the period of support to each designated leader should be fixed andannounced at the outset so as to enhance the firm’s efforts and make the firm show
results in a defined period.

Secondly, the number of technology leaders has to be large

enough to create competitive pressure among them and small enough to make itpossible for the government to concentrate their resources.

In this sense, designationof technology leaders should be flexible in order to introduce dynamism into the system.
The leaders, who accumulate technological capabilities to the level which allows them toexpand businesses with multinational corporations without further assistance, should
graduate from government support.

On the other hand, local suppliers, who develop

enough technological capabilities to supply their products directly to multinational
corporations, should be designated as technology leaders and be able to receive
government support in order to further improve their capabilities and to expand theirown linkages.
Finally, along with the implementation of this scheme, the government should create anevaluation team which is independent from the government agencies and staffed withThai and foreign industry experts.

They regularly visit the leader firms and local

suppliers to check their progress in technology and evaluate their linkage creations.
The information gathered by the evaluation team is reported to the government whichuses the information for incentive adjustments.
Once linkages are created, firms start exchanging information and jointly working inparts production in order to maintain quality, which is a common interest of customers
and suppliers.

Thus, the linkages generated through this scheme are likely to be

self-sustaining.

As the Thai firms expand business relations with multinational

corporations and among themselves, the government intervention should peter out.
This policy recommendation is designed just to tackle the key problem existing in theThai automobile industry.

The government needs also to upgrade education, scienceand technology, and financial markets, and Thai firm have to modernise their
management.

Yet, if they are to make progress in these areas, against all the odds,

there is still a possibility that the linkage scheme can become a focal point to create avirtuous cycle within the industry and to uplift the dire situation of the Thai firm.

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- 136 -From national innovation system to local knowledge
system: issues of institutional building in Vietnam
Tran Ngoc Ca
NISTPASS

Presented at the joint NISTPASS –HOF international symposium
Hanoi February 28, 2005

I.

The contextual background

Vietnam as a developing and transitional economy is experiencing the doubletransition. At the same time, it is moving from centrally planned economy tomarket economy, and moving from agricultural economy to industrial economy.

The economy is facing multiple challenges of globalisation, with the need toincrease the competitiveness of the economy in general and firms in particular.
Eventual goals of the country development is the industrialisation andmodernisation in about 15 years time, while joining international economic
institutions and regimes such as AFTA, BTA, and in the near future WTO.

In addition, the country has aimed at achieving MDG (Millennium
Development Goals), to reduce poverty and pursue equitable and sustainable
development of economy and society (UNDP, 2003)

As such, we are witnessing several couples of issues that come hand in handand sometime seem to have conflict of interests. First, the long-term goals for- 137 -

modernisation versus immediate need for poverty reduction. Second, theprocess of industrialisation versus current agro-based rural development. In theface of imminent international integration, the requirement of international
regimes seem to impact strongly the need and interests of domestic productive
enterprises. The new context that sees a moving closer to market orientation
also requires new kind of capability and skills. The future prosperity of thecountry will require a new configuration of skills, abilities, and competencies.
In addition, the widespread availability and use of information andcommunication technologies, the speed of scientific and technological advances,
accelerating global competition, and much shorter product life as a consequenceof changing consumer demands all contribute to the new setting of thedevelopment scene.

These factors emphasise that Vietnam’s successful

integration into the global economy and its sustained success in international
competition will depend increasingly on effective process and actors forinnovation.

II.

Key features of the national system of innovation in Vietnam

In general, the innovation system in Vietnam has some positive features:

To build up and maintain a substantial system of S&T personnel andinstitutions to carry out R&D activities.
To set up a system of supporting organisations for innovation activity suchas standardisation, quality control, IPR, information and libraries,
consultancy, etc.
To have some contribution to the production activities, although the impact
is still debatable.

- 138 -

Next to these, the system has several key weaknesses and problems:

S&T personnel are numerous but weak in terms of qualification, structure
and location. Problems of aging, waste of research capability, etc. arenotable.
Network of S&T organisations is not structured reasonably, strong
imbalance and lack of linkage with each other.
Despite some improvements lately, poor infrastructure for research
Quality of research is poor, far from the need of production. Very weaklinkage with productive area. Research and development are not initiatedfrom within the production need and cannot serve effectively the need of theenterprises.
Systems of S&T services, education and training are weakManagement system for S&T activity needs improvement
Capability of self-adjustment and respond to change is almost non-existed.
Overall, the level of development of S&T is still low compared to many
countries, far from international standard, even in the regional context.

Some more specific observations could be made here. First of all, the personnel
classified as being involved in R&D is quite numerous. The available data andresearch that has been carried out indicate, however, a number of difficulties,
challenges and barriers. Vietnam’s existing pool of scientists and engineers is
on average quite old. This age distribution is likely to present significant
limitations to Vietnam’s ambitions over the medium-term. In addition, many
Vietnamese scientists and engineers received their training in a different era
under an old moulded learning system based on an assumed linearity between
science and technology, on the technology of heavy industry and on stateplanning and control.

The aptitudes, skills and technological capabilities- 139 -

required for competition in the international economy are in relatively short
supply (Bezanson et al., 2001).

Secondly, there are a large number of established research institutes, including
many in both agricultural and industrial research. There are, however, severe
constraints to their impact on industry and national economic productivity. The
principal difficulty appears to have less to do with the institutes themselves thanwith the demand side – specifically with the relative absence of dynamic firms
in Vietnam that need to draw on R&D resources in order to remain competitive
and to grow.

In other words, the users of Vietnam’s S&T bases are noteffectively pulling the providers of scientific and technological resources in
directions that would enhance growth and competition. This appears to be theroot cause of the weak linkages between Vietnam’s mainly state-sponsored
S&T institutions on the one hand and firms, including SOEs, on the other. For
this reason, research in the Vietnamese national innovation system is mainly‘supply driven’. There is also an important constraint on the supply side: whatvery modest financing there is for R&D via the state budget is relatively
fragmented, resulting in such small amounts being available to individual
research projects as to make serious research very difficult.

The Government of Vietnam is clearly aware of these problems.

Severalstudies of national innovation revealed that the shift in social and economic
orientations brought on by doi moi had resulted in an increased demand fortechnological services but that the demand was not being met, especially in
SOEs, due to the sharp segmentation between production, on the one hand, andS&T institutions, on the other. The studies also highlighted the almost total
absence of private input in setting national R&D priorities. Government has
been attempting to respond to this situation through measures aimed at closer- 140 -

alignment of the national S&T systems to the needs of the productive sector.
Some of the main measures have included:• Granting authority to R&D institutions to enter into direct contracts
with industry and operate like an enterprise.
• According R&D institutions much increased flexibility to develop andprovide, in addition to research, a full range of services, including
technology transfer, consulting services, experimental and pilot
manufacturing, etc.
• Diversifying the potential for the financing of R&D, including theretaining of profits and legal authority to seek bank credit.
• Privatisation of R&D activities (i.e. removal of the previous statemonopoly) and a legal framework designed to provide enhanced
protection of intellectual property rights.

For the last few years, there have been much more active attempts to reform theinnovation system at the national level in adapting Vietnam's science policy andscientific research efforts to the priority tasks of Vietnam's development. The
approval and preparation of S&T Strategy to 2010, the projects of reforms of
S&T

management

mechanisms,

developmentoftechnology

market,international integration in S&T, etc. are some key actions. This is aimed atdealing with the legacy of central planning: continuing administrative
separation between teaching and research in universities, and lack of linkage
between research and industry (firms). The reform process also took place inimproving legal framework for innovation. Legal reforms have been undertaken
in drafting many key documents such as Law on S&T, and now Law on
Technology Transfer, Law of IPR, etc. Other activities in building up thenational innovation system include the establishment of S&T Foundation;
increasing the international cooperation and integration; sending for training- 141 -

young students in key areas at top international universities; and high-techdevelopment in selected areas like ICT, BioTech, etc. with more application
focus.

III.

Using knowledge for development and knowledge system

It can be without hesitance to say that as such, a national system of innovation
for Vietnam is taking shape, with or without certain elements. However, when it
comes to the contributions and real and immediate impact for many economic
and social activities, more are moving toward using knowledge for development
notion.

The point is that it is learning and organizing for learning that matter inacquiring technology. The same applies to knowledge. Developing countries
do need to gain access to the modern technologies of information and also to
global information. But it is not access to the technologies or to information
itself that makes the difference in terms of development. What does make thedifference is the capacity for and the process of absorption and ongoing learning.
The research on technology transfer and the processes through which newknowledge is incorporated demonstrate that the central requirements for successare organizational and cultural change.

Learning to learn and creatingorganizational structures that facilitate learning are the critical components forthe transfer of technology and knowledge (Bessand & French, 1999).

Knowledge is undeniably becoming one of the essential ingredients of both
wealth creation and improvements in the quality of life in the majority ofcountries of the world. For Vietnam to take full advantage of this will require astrategy that goes far beyond obtaining new hardware and gaining access to
information systems. It will require enhanced capabilities to perform five tasks- 142 -

with regard to knowledge. These are the ability to create knowledge; acquire
knowledge; assimilate knowledge; use knowledge; and to diffuse knowledge.

In a special context of Vietnam, the need for more local specificity ofknowledge and use of knowledge system seems to bear more importance. Not
all kind of readily available knowledge can be adopted and implemented.
Important point here is that knowledge should be selectively localised and thecreation and use of knowledge resources and system be geared to the specificneeds of circumstances and users.

In this vein, issue of knowledge management comes into the focus. The
collection, processing, distribution and use of information and documentation isa professional business. The whole concept of knowledge management helps todeal with the issue of knowledge in more systematic way. For Vietnam (and forother developing countries) these requirements pose particular challenges. First,
the ‘culture’of knowledge management in Vietnam is strongly grounded in an
antiquated model that is in need of major transformation. This is the linear
model that functions on the basis that knowledge is created in one set of
institutions (e.g. universities and research institutes) and then used by others in adifferent set of institutions (e.g. firms or public services). The underlying idea
is that knowledge is generated in one area by researchers and knowledge
producers and then used in another area by policy makers. Secondly, effective
knowledge management is not only a question of bringing about better
connections between existing institutions (e.g. between knowledge producers
and knowledge users), it is also a matter of the suitability of existing institutions.
The institutional structures of knowledge management in Vietnam are generally
governmental and rigid, not very dynamic and therefore slow, whereasknowledge based economies are based on institutions that process knowledge in- 143 -

‘real time’and whose decision makers are capable of agile policy responses to
new knowledge and changing circumstances.

Increasingly, since the 1970s, industrial countries have been abandoning thelinear model of knowledge. The viewpoint of many international firms, which
are more and more operating in Vietnam too, is that they need immediate accessto research and knowledge that will allow them not only to deliver low-priced
goods and services of greater quality and diversity, but also to retain and expand
their ‘market share.’ This, they have concluded, cannot be achieved without
integrating research, industrial design and production and ensuring continuous
innovation and improvements. Throughout the world, firms have restructured
their departments of research, applied research, engineering and strategicplanning and have integrated their functions more into their production
departments, some retain the focus on core competence and outsource the rest.
This could be the appropriate opportunity for both host economy like Vietnam
and multinational companies to cooperate.

Using knowledge concerns not only firms and farms, but the policy making
circles as well. There are some main features of the new ‘knowledge societies’as they relate to decision making and decision makers that should be taken into
account. The speed at which knowledge is being created is unprecedented.
Instead of rigid hierarchy structure, networks have become the organisational
basis for policy-making. Process of policy making and implementation has also
become more complex and difficult. This requires that the knowledge system bedesigned and operated flexible and dynamic accordingly.

This brief assessment indicates that integration into the global market isaccompanied by industrial, financial and policy processes that become more
knowledge and information intensive and more dependent on information- 144 -

technologies. Old approaches that focus on the provision of bits of knowledge
and information (i.e. filling important gaps) may be helpful but they are unlikely
to promote widespread development. Much broader approaches are needed that
aim at the underlying requirements for institutional and even cultural changes
and the development of the human capabilities needed for effective creation,acquisition, assimilation, use and diffusion of knowledge and technology.

Some authors even argue in this direction the concept of social intelligence
where every member of the society is to gather intelligence for their use insystematic, organised and effective way is the most suitable for knowledge andinnovation (Didjer, 1991). This in fact is very much a key philosophy of thelearning society and learning economy.

IV.

Some selected critical issues:

Among many notions of the innovation and knowledge system, there are several
selected issues that needed to be paid more attention in Vietnam.

The lesson from around Asian economies is that technological learning was
imperative to success and it was continuous. International factors have creatednumerous and quite easy opportunities for relatively low-cost industrial
production sites to integrate into the world economy. The international context
today is different, there has been a dramatic fall in the demand for unskilled
labour and raw materials per unit of industrial production. More demand forskilled labour is increased.

- 145 -

An effective economic and incentive regime is also imperative to attract andretain direct foreign investment (FDI). Although FDI represented a relatively
modest proportion of total investment in the newly industrialised countries, its
technological effects were exceedingly large. FDI was the most important factor
in opening up export markets to these economies. Research also shows that themultinationals frequently acted as demonstrators and role models for local
companies. Some foreign operations were responsible for extensive training ofengineers and managers, and for transferring skills. Experiences of companies
like Honda Vietnam demonstrated elsewhere in this workshop revealed this.
There is also evidence that local engineers trained by FDI investors left theparent firm to set up their own companies (often to supply the subsidiary withcomponents or some kind of technical services, thereby creating important
backward linkages). As such, the learning from foreign investors begin to takeplace in Vietnam (Hung, Ha and Ca, 2004).

To increase competitiveness of the economy and firms, and to attract FDI, thesolving problems related to IPR is critical. This could lead to a more favourable
environment for doing business, not to mention about the pre-condition forentering certain institutions of the international integration.

With enterprise as the centre of the innovation systems, the entrepreneurship
became a crucial dimension of the competition. Demand led innovation must be
the overall direction and set the tone for the whole range of activities in R&D.
This is still an issue that Vietnamese innovation system need to improve.

Majority of Vietnamese firms are small and medium enterprises (SME),
including various ownership of state, cooperative and private. Development oflinkage, networking and clustering of the organisations should be able to help
with increasing sustainability and competitiveness of firms via cooperation.

- 146 -

As mentioned, related policies of ‘implicit’nature are at least as important as‘explicit’ policies.

Studies in dozens of industrial countries have shownconsistently that successful linkages between technological behaviour andindustrial enterprises are as much determined by a country’s fiscal, trade andeducation policies (‘implicit’S&T policies), as by the more explicit technology
policies and strategies. This is even more so in the context of Vietnam where
dynamic firms are the one who pull the technology, knowledge and innovation.
Certainly their behaviour is decided by macro-economic setting and a range ofdifferent implicit policies for innovation.

V.

Conclusion

Innovation system in Vietnam needs a dynamic review and adaptation to theconstant and fast changes of the national and international context. Experiences
show that it takes time for the society like Vietnam to absorb the new vision andconcept suggested by international experts (System of Innovation is one of such
examples) and turned them into own action by the local efforts. Without thisslow, but firm, “policy assimilation” attempt to make changes could be short
lived.

In addition, focusing only on macro innovation system probably is not enoughfor having a profound impact and lasting change. To turn the actions aimed at
the macro level into something more concrete at the micro level with more
localized and specific nature is necessary. The regional, sectoral innovation
systems seem to become more useful concept. The move toward local
knowledge system with more specificity, more local content is a natural stepafter national innovation system.

- 147 -

Above all, the building and effectively operating the whole set of institutionalframework is the basis for these systems. Institution building is critical indeveloping knowledge system, promote innovation and learning via impacting
behaviour of firms managers, policy makers and investors.

Selected references

Bessand, John and R. French (1999) Using learning networks to help improve
manufacturing competitiveness, Technovation, Vol. 19.
Bezanson, K. et al. (2001) Science, technology and industry strategy for
Vietnam. UNDP/MPI. Hanoi. 2001.

Dedjier, S. (1991) Social intelligence. Lund University.

Hung, V.N, Ha, N. T and Ca, T.N. (2004) Three cases of foreign direct
investment in Vietnam: ABB, Carlsberg and Honda Vietnam. in Foreign direct
investment in emerging economies. Edward Elgar.

UNDP (2003) Millenium Development Goals. Bringing MDGs closer to thepeople. Hanoi.

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China’s Innovation Systems Reform and theDevelopment Strategy

February 28, 2005
At the Honda Foundation Symposium 2005 in Hanoi

Dr. Atsushi Sunami
Associate Professor at the National Graduate Institute for Policy Studies
Affiliated Fellow at the National Institute of Science and Technology Policy, MEXT

- 149 -

I. Introduction: China’s Science & Technology Policy and Institutional
ReformRecent China has attracted world attention for its advancement in science and technology,
particularly when the media reports on its success in the rice-genome decoding project and the firstmanned space flight. China’s economy recovery is an old story: people now keep an eye on the stateof its development in high-tech space. Not a few people even share the view that China enters a newstage of growth by creating a new industry based on IT, biotech, nanotech and other technologies;that is to say, the Chinese are “leapfrogging”into a knowledge-based economy if their ongoing
institutional reforms toward that goal end well.
For the last two decades, Deng’s allies and successors have been considering advanced science parks
as a key instrument to reform national innovation system. They first deployed many science parks allover the country, among which a well-known example is Haidian Science Park, a.k.a. China’s
Silicon Valley; and then they started to recruit workforce to work in. To do so, they restructured
existing education and science institutions and consolidated human resources scattered not only allover the nation but also across the borders. The government used industrial promotion and other tax
incentives to call researchers working overseas back. As a result of these reform efforts, realizing
China’
s greater presence in the world economy, many multinationals from the United States,
European Union, and Japan started to open their R&D operations in and around the science parks in
Beijing, Shanghai, and other larger cities. These foreign-affiliated organizations now started to build
close relations with neighbor Chinese universities.
Upon his decision to shed the stagnant old regime and embark on bold reforms for sci-tech-basedindustrialization, Deng and his allies realized the mobilization of human resources was the key tosuccess. This is why Central Government consolidated able workforce in strategically selected R&D
fields; modernized R&D facilities; and called back high-skilled researchers and professionals fromoverseas. Generous R&D support is proved right, and improvements are visible: more patents areapplied and more papers are in major science magazines, albeit Chinese share is not ranked with thelevel of the industrialized countries yet. The number of sci-tech papers by Chinese authors also
increases: it was ranked fifth in 2002, following the United States, Japan, the United Kingdom, andGermany (source ISTP). According to the SCI statistics, it has kept climbing to almost an equal levelto the leading industrial countries in the last decade.
Still, it may take time for Chinese sci-tech capabilities to reach the level of industrialized nations,partly because R&D expenses and R&D workforce are insufficient. In terms of impact factor,
scientific papers written by Chinese authors are far less influential compared with those written by
the Western and Japanese authors. Chinese technological development is rather strong, probably
because the Chinese are adept to network knowledge with overseas fellows. Notable fields include- 150 -

computer software, genome and nanotech studies. Biotech advancement is not as high as manymight suppose. Like most East Asian countries, China is not as good at biotech as IT although theirbiotech patent applications increase maybe because of reputation of the rice genome decoding.
The 7th Mid- and Long-Term National Sci-Tech Program from 2006 to 2020
The first Chinese efforts to adopt modern science began in the early 20th century. But, as evidenced
in the Shenzhou V space project and decoding of the rice genome, the current progress in scienceand technology owes much to the institutional reforms since the 1980s when Deng Xiaoping decided
to break away from a systemic fatigue of the centrally planned economy. Deng, declaring “scienceand technology are the number one factors in the productive force,”reorganized most of national
universities and research institutions into more capitalistic-like, non-state enterprises. These freer
enterprises can dispatch researchers to most needed areas as a hub of interactions between domestic
and foreign scientists, and in turn enhanced national sci-tech productivity.
A drastic policy change was witnessed in 1985 when Central Committee declared reform andopening-up policies, placing an emphasis on sci-tech-based industrialization. Important points
include:•Deregulation of institutional restrictions imposed on R&D institutions and promotion ofindividual discretion of researchers.

•

Higher mobility of human resources and promotion of inter-organizational collaborations.

•

Incentives and preferential taxation to provoke competitive research and industrial
environments.

So far these goals have been only half reached, but it is noted China remains consistent in the
directions set forth in Deng’s grand design of reform policies.
Currently Wen Jiabao’s government is preparing the 7th mid- and long-term national sci-techprogram for the period between 2006 and 2020. It is said the first plan (1956-68) was developed by ateam of more than 700 scientists under the guidance of Chou En-lai. For the 7th national sci-techprogram, far more than 700 science experts from the Chinese Academy of Sciences and premier
universities join and discuss the future of sci-tech development in 20 different working groups.

- 151 -

II. China’s Reform of State-Owned R&D Institutions: University
Liberalization and Promotion of Industry-University Cooperation
China’
s sci-tech driven growth strategy requires officials to bolster its education and training
systems through university reforms. In 1994, the State Council issued a policy statement called“Program for China's Educational Reform and Development.”One of the most important aspects in
it is the government grants independently enforceable, decision-making authority to higher education
institutions under the principle of self-responsibility. Then the People's Republic of China Education
Act enacted on September 11 1995 followed. In Article 31, it grants corporate status to formerlystate-owned higher education institutions; that is, academic and vocational schools shall be given
corporate status upon their registration of incorporation so long as they satisfy due requirements.
This incorporation of higher education institutions came from the basically two motives of thecentral government: first to streamline universities scattered throughout the country on a ministry orprovincial basis by introducing the principle of competition; and then to reduce the fiscal burden of
Beijing by extending revenue-earning choices so local universities can more freely financethemselves without subsidies.
The central government also eased regulations and standards with regard to the establishment ofschools to cope with diversified educational needs in the rapidly changing society. After thesereforms, the number of universities in the whole nation remained around 1,000 until 2000. However,in the process of university consolidation, newly-established private colleges and universities havegrown in number as more and more people want higher education. After the Enlarge Recruit Scale
policy implemented (a measure to enlarge university enrollment where students not reaching apassing score of the entrance exam can also enroll by paying a staged “complement”fee), there werestartling rises in university enrollment. Some suspect, albeit former Deputy Premier Li Lanqing, apurportedly central figure in these educational reforms may have thought improvements in higher
education would sustain China’s growth in economy, his intention was to take advantage ofuniversity enrollment as a remedy for unemployment among the younger generation. Others worry
China must pay the cost of the Enlarge Recruit Scale policy as ballooning university population
outpaces job creation and causes serious hiring slump in the future.
Most of new universities established after 2000 are in Beijing, Shanghai and other big cities. They
were funded and privately operated under the tutelage of local governments. The aforementioned
educational reform program stipulates China authority shall increase this type of non-state
educational institutions in parallel with state-operated universities. Particularly increasing in number
are vocational training institutions. For example, the Neusoft Institute of Information in the Dalian
Software Park provides extensive training for future IT and software development professionals.
This college was co-founded by Northeastern University and its IT spinoff Neusoft Group to- 152 -

leverage Northeastern University’s expertise in education to address a constant shortage of high-skill
IT professionals.
The State Council has gradually delegated operations of universities to local authorities while
consolidating principal universities under the jurisdiction of the Ministry of Education. Consideredby many as the essential of the university reform stipulated in the 9th 5-year development plan, the“211 Project”effective from 1996 aims to achieve a sci-tech driven national development bybringing the market mechanism to the academic. For this end, the central government designates 100
universities a prioritized institution (and specific disciplines a strategic discipline) and extends
support for them in cooperation with local agencies. This privatization movement constitutes part ofincorporation of university in which the government less intervenes in the administration ofuniversity to meet diversified educational needs of the market.
“Prioritized Universities”in the 211 Project and Growing Regional Disparities in Education
Chinese universities still have a number of hurdles to overcome; for instance, there are unsettled
issues concerning the ownership of properties between the government and universities while thegovernance of academic institutions is increasingly promoted. Newly established private universities
which are authorized to confer academic degrees also face similar ownership issues, and as is thegeneral case with other business and university-launched venture firms in China, with the exceptionof Tsinghua University and Peking University which clarify the ownership of assets by, for instance,
being a stockholder of their affiliated corporations.
Facing a thrust into fierce competition, a majority of the Chinese universities must try every means
they can to increase revenue or receive government’s fund support. Creating a university venture
firm is always a choice but too risky for many as they have little experience in private business
operation. In transition to the market economy, they also feel funding basic researches increasingly
difficult because commercialization of such studies takes time.
Many universities, however, realize their future depends largely on the expansion of basic studies
and have common concerns the deterioration of long-term basic research in general is a possible
threat to China’s competitive advantages. Although the government in response announced a policy
to promote basic research, some of the 211 Project prioritized universities have already strengthened
association with foreign firms who provide financial backing for them. The inclination to foreign
capital is thought by many to grow further as the government encourages those universities to do so.
Most of the 211 Project prioritized universities are situated in Beijing, Shanghai, and other coastal
cities. They have played a significant role to send able workforce extensively in the coastal China,
resulting in intensification of regional disparities between the shoreline and the rest of the country.
The central government attempts to solve this problem through its Grand Development of the West- 153 -

policy, in which midland universities are required to contribute more to regional development.
Nevertheless, most of these universities suffer severer financial difficulties to do so.
Thanks to the Enlarge Recruit Scale policy, more students come to the prioritized universities fromalmost every corner of China. This contributes to extending regional gaps in terms of educational
quality. As a result, midland universities only send fewer competent graduates to the society.
Today the central government tacitly permits the decentralization of educational administration to
local jurisdiction to control its vast land and diversified cultures, expecting local and provincial
universities to activate regional economy. The reality is, however, jobless youngsters increase in theunderdeveloped West, and the influx of able manpower to Beijing and Shanghai never stops. It isthus an urgent need for China to try all conceivable means to bolster regional universities to the levelof the U.S. state universities that make a great contribution to their respective local communities.
On the positive side, the Chinese universities in general have propelled progress inindustry-university collaborations. Given an increasingly liberalized environment, they become able
to place the right people in the right jobs: more people are exchanged between academic institutions
and their affiliated business firms, and these organizations hire more people from overseas, both
Chinese and foreigners. To help this continue, the government has provided Chinese students andresearchers overseas with subsidy and tax incentives.
For further advancement of the Chinese universities, it is a key to make their recruit and personnel
systems more flexible so they can hire and train able workforce more, especially in context ofcooperation between universities and state-operated institutions. At the same time, China could bebetter off only when regional gaps between the coastal areas and the rest of the country narrow andthe 211 Project prioritized universities reach world-class educational and research capabilities.
Development of University-Launched Venture Firms: Separation of Education and Business
Management and Industry-university Joint Efforts
In China, universities’involvement in business operations started in the 1950s when “Juggling Workand Study”was a national slogan. Peking University, for instance, launched a university-operated
factory and sent its students in science and engineering for practical training. This factory became
fairly profitable in the 1960s.
In 1992, Deng’s famous "Speech after the Southern Tour" called for bold market opening andacross-the-board economic reforms to let market forces play a greater role in a socialist economy
with Chinese characteristics. Immediately after the speech, the State Council manifested its intention
to expedite incorporation of universities and development of university-launched venture firms.
Many universities, in response to an abrupt atmospheric change to a free economy, scrambled intocreating startup companies. According to the Ministry of Education figures, sales of- 154 -

university-launched venture firms in 1992 amounted to 2.9 billion yuan from 1.7 billion yuan in theprevious year, and then climbed to 37.9 billion yuan in 1999. To sustain this boom, the State Council
implemented tax breaks1 for university-launched venture firms through income tax reduction2.
Over the past two decades, Chinese universities, especially sci-tech institutions, have expanded theirbusiness involvement; from vocational training factories in the 1950s, then service firms such as
printing, publishing, and guesthouse operation, and now to venture firms that facilitate the transfer oftechnology from academia to industry.
Currently a majority of startups are high-tech firms that capitalize on their academic R&D
capabilities for commercialization of the seeds of new technologies. According to the government’sstatistics in 1995, approximately 700 out of 1000 Chinese universities run one or more venture firms.
Among them, 300 universities operate more than 2,000 high-tech firms with net sales of 36.8 billion
yuan and a profit of more than 3.5 billion yuan in 2000. Net sales from these high-tech firms accountfor 75% of total income of university-launched venture firms. These university-launched venturefirms use 230K workers and 78K of them work are sci-tech specialists and researchers. They reward
their mother universities with 1.685 billion yuan and pay the government an income tax of 2.5
billion yuan. High-tech orientation and profitability of university-launched business are still apparent
in a 2001 statistics. Possible reasons behind such orientation to prosperity of high-tech firms in an
increasingly market-driven, deregulated environment include:•

First, the Chinese market long lacked the needs to commercialize the seeds of new technologies,
if any, that universities possessed. In the Soviet innovation system that pre-reform China
followed, the people had little idea to capitalize on intellectual property. They did not realize theimportance of developing R&D capabilities, and there hardly was technology transfer between
academia and industry. Then Deng’s China abruptly opened up the market, and universities in
response had to start commercializing their technological assets. All this stimulated demands inthe sleeping market.

•

Second, high-tech turned around universities’finance. Universities secured their own revenue
sources while the government cut subsidies for higher education. They started to sustain theirfinance by marketing their intellectual properties and directly controlling profits from theirventure businesses.

1

With regard to the qualifications for tax break, the official documents, No.(78)1238 of Ministry of
Education, No.(78)373 of Ministry of Finance (December 21, 1978), and No.52 of the State Council(1980), collectively stipulate the government eases income tax for earnings of educational organizations,
including university-launched enterprises, from "juggling work and study" activities.
2 "The People's Republic of China Corporate Tax Interim Regulation (State Council Law 137, December
13, 1993)" defines corporate income tax must be paid for a sum of earnings from corporate production,
operation, and other activities based on the predetermined rate. Income tax rate is 33%.

- 155 -

Statistics for 2000 and later shows the government has started to differentiate its financial support foruniversities. It uses more funds for the 211 Project prioritized universities such as Tsinghua
University, while newer, emerging organizations such as Northeastern University (Neusoft Group)
yield their revenue from industrial consignments. In general, the prioritized universities, especially
sci-tech institutions, rely more heavily on government’s budget.
Since around 2000, however, some of Tsinghua University and government’s education officials
have suggested the university administration rethink of direct intervention in their own venture firms.
Their rationale is: there are some successful venture firms that went public on the stock exchange
before establishing due corporate governance in terms of clarifying ownership issues between
university and firm, and these firms have not fulfilled accountability for the market yet. A few evendisputed, as university venture firms rely on the brand value of their mother universities, nobody
may have any means to identify their true market valuation. All this is the issue of corporate
governance that arose in the midst of government’s trot to free market by little spontaneoustechnology transfer and capitalization on academic knowledge. Recently, as discussed in detail later,some of the 211 Project prioritized universities have stepped back and declared, “We are nothing but
a shareholder. We won’t interfere in corporate management.”The government too encourages
improvements in corporate governance. It is obvious the Chinese universities-launched venture firms
are undergoing their most significant changes since their inception.

- 156 -

III. China’s Reform of State-Owned R&D Institutions: Chinese
Academy of Sciences and Other National Institutions
Many Japanese calling for pubic institution reform identify it as an integral part of reforms ofnational innovations system. Sci-tech research and development are greatly affected by education,
taxation, IPR management and other social systems, and how to reform these institutions will
determine the motives and performance of R&D workforce. The same holds for China.
The Chinese government has implemented its public institution reforms since the late 1990s. It
identifies the Chinese Academy of Sciences (CAS) reform as the single most important project to
cap a decade of national research institute reforms; for the CAS is a supreme organ of all public
higher-education, academic, and research institutions. Except the CAS, the public institutions weresupervised at the level of an individual ministry or agency in the old regime. Officialdom longdepressed researchers’motives and productivity. So, with the reform and open policy that Dengbequeathed, Beijing started sweeping restructuring of the institutions and organizations thatgoverned research activities. In essence, they semi-privatized the public institutions and let market
forces work for efficiency and competitiveness. Behind such bold reforms was the fact China neededa new industry and fresh institutions that enable the commercialization of technologies. Otherwise,
they didn’t think they could sustain its tremendous economic growth.
In May 1999, the State Council privatized 242 research institutions under the jurisdiction of State
Economic and Trade Commission: 131 transferred to private business groups, 40 ceded to sci-tech
private firms, 18 transferred to intermediary organizations, 24 merged into universities, and 29 ceded
to national large sic-tech firm. This large-scale privatization was an important step in the reform of
the China’s national innovations system. Consequently, current and former bureaucrats realized they
could not survive without making money out of their expertise.
Chinese Academy of Sciences and National Innovation Projects
Established in 1945, the Chinese Academy of Sciences (CAS) is a giant national scientific research
institute. A supreme academic organization, it is the mentor behind natural scientists and high-techprofessionals. Around 50,000 researchers work for 108 different locations. As of the end of 2002, theAcademy consists of the following divisions:•

The administrative division is responsible for CAS policymaking and supervision of the entire
organization. Headquarters in Beijing and district offices nationwide.

•

The research division takes care of scientific researches. Each of the CAS subsidiaries pursues
its specialized disciplines and expertise.

•

Education division operates University of Science and Technology of China in Hefei, Anhui- 157 -

Province. Also operates the Graduate School of University of Science and Technology of China
in Beijing.
•

Information and publishing division publishes journals and books and operates libraries.

The Academy has identified its “prioritized”areas of research as life science, nanotech, alternate
energy, IT, and space engineering. This prioritization is a reflection of the government’s competitive
subsidy system as well as a guideline for the Academy to propel its convergence and evaluation tasks
against subsidiary institutions. The Academy is characterized by its focus on basic research, whichreflects its central mission since its inception to advance the level of science capabilities of thenation. As a result, the Academy is less active in transfer and commercialization of scientificfindings, development projects and practical tests.
The Academy submits more and more patent applications these days, exceeding a national average
growth rate in the number of patent application. Most of applications are for inventions as, again, aproof of its focus on basic research. Also the CAS papers are more frequently cited by others andpublished in major publications. These increments are particularly evident after 1998 when many
Chinese researchers returned home from overseas and the research environment became increasinglycompetitive. That the number of approved patents also increased in the same era proves the
Academy’s reforms achieved some positive results.
In terms of discipline of papers to be cited by others, physics and chemistry comprise a majority ofcitations, followed by biology and material science. Top 10 research institutions reported by both
SCIE and ISTP are all the CAS organizations, including the Shanghai Institute of Ceramics
renowned worldwide as a researcher and inventor of new materials; the Laboratory of Remote
Sensing Information Sciences being a center of space development in China; and the Shanghai
Institute of Biological Sciences brought to international attention for its genomic analysis in
agricultural biology.
As for finance, the Academy receives more and more subsidy from the government and extends its
total revenue. As the model case of national innovational reforms, the Academy attracts a larger
portion of R&D governmental funds. In this regard, the Academy works a magic to the public tobelieve in the reform and open policies: many are inclined to think there is hardly a pain that should
accompany the reforms if an old structure like the CAS can be more efficient while increasing
revenue.
Despite a decrease in full-time workers, the Academy increases payroll costs. This signifies, incomparison with the old regime, higher salaries are paid to the increasing number of general workers
and specialist, including ace researchers with strong performance. It is noted the Academy employ acompetitive merit-based system instead of using a fixed salary package.

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The Academy has launched a number of the CAS-originated venture firms, including a famous IT
firm called Legend. Although mergers and consolidation of these firms are, and will be, in progressbecause the market requires further streamlining of corporate management these days, the number ofpayrolls keeps growing. This alone exemplifies the effects and importance of privatizing publicresearch institutions. There is no doubt the Academy will keep its financial feasibility with its
administrative capabilities for privatized organizations and overall success of these spin-offs.
Many people keep an eye on the proceedings of the Knowledge Innovation Project that the Academy
initiated in June 1998 based on the State Council’s decision on commencing an attempt toward thenext-generation national innovations system. This is 13-year project phased into three parts:
1998-2000, 2001-2005, and 2006-2010. So far the Academy has implemented reform objectives on abroad scale, including identification of forefront technologies to pursue and strategic directions,organizing focused research projects, and definition of the CAS-wide and institution-specific goalsin sci-tech innovation activities. Based on these reform objectives, the Academy boldly reorganizeditself and brought a drastic change to the sci-tech research environment in China. More specifically,
the Academy holds the following three programs:•

Educational program to train personnel to lead Sci-Tech innovations. It aims to establish apersonnel system that meet international standards in pursuit of cost-effectiveness of research,coordinated personnel assignment, adequate incentives, and merit-based pay system.

•

Structural reform program to reorganize the national R&D institutions and reallocate theirresources. It aims to reorganize the whole CAS structure into five areas; namely, basic science,
strategic forefront technology, natural resource/environmental studies, agricultural high-tech,and high-tech related to national security.

•

Administrative reform program to reform the administration of the national R&D institutions. It
aims to build a modern, internationally-accepted form of administrative organization by, forexample, introducing an administrative board and setting up a research fund. It also aims togive stronger power to individual institutions in activities such as budgeting, allocation of
resources, planning and management of projects, and recruitment of faculty.
“World-Class”Research Institutions without “Excessive”Reforms

Statistics shows the Academy reduced the number of older and less capable workers and researchers.
Although the Academy appears to have streamlined itself and achieved rejuvenation of its personnel,
most of those workers and researchers still work under it: some became part-timers, some moved toleisurely posts, and the other moved to another CAS-affiliated firm. In this sense, this restructuring is
superficial and supposedly-restructured staffs reach mandatory retirement age as a CAS worker.
Nevertheless, the Academy’s reforms can be characterized by bold changes to institutional design:- 159 -

subsidiary research institutions were consolidated after the removal of overlapped research themes
and inefficient methods, and a new merit-based pay system was applied to all administrative workers
and researchers. Generally older researchers from the old regime were less efficient and capable than
young researchers. The Academy gave incentives to promote younger generations, especially thoseeducated overseas; and allowed much latitude in their research. For instance, they are allowed toparticipate in upgrading public works through public involvement. The Academy bolsteredcompetition both in terms of wage and budget allocation to expedite generational change. Losers in
the competition were encouraged to become a part-timer or move to backoffice or a CAS-affiliatedprivate firm. The Academy also applied a stricter evaluation system to backoffice workers, andstarted a new rule that staffs are recruited internationally if new posts are created or existing posts
become available due to personnel transfers.
Some officials of the Academy, however, argue the excessive reforms in the last decade resulted in
an excessive pay-for-performance system, and more researchers become confrontational each otherand monopolize their findings. Although moderate competition works, researchers also need a freecommunity, both physical and mental, to exchange ideas and opinions on their subjects of researchin order for the Academy as a whole to become a world-class research organization. A well-balanced
competitive research environment is a necessity for Academy’s further advancement.

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IV. China’s Regional Innovation System and Torch Program
As part of reforms of its national innovation system, China launched the Torch Program anddesignated economically important areas a “development zone.”This program provides a good
example with regard to how the central government tries to utilize the development zones.
The Torch Program’s goal of developing new/high-tech industries in China has been chased bydynamic industry-university collaborations based in Beijing, Shanghai and other coastal cities. A
typical development zone is the Haidian Science Park (HSP), widely known as China’s Silicon
Valley, in Zhongguancun located in northwest Beijing. Surrounded by Peking University, Tsinghua
University, the CAS research institutions as well as many foreign-affiliate high-tech firms anddomestic university spinoffs, the HSP is always recognized as a model for industry-university joint
efforts; however, Zhongguancun is not a result of government-led reforms. The true builder of thishigh-tech town was a herd of privatized sci-tech firms which gathered here spontaneously, and thegovernment later approved Zhongguancun as the core of the development zones in the country.
The history of Zhongguancun as a high-tech concentration started when Dr. Chen Chunxian, aresearcher of the CAS influenced by the success of the U.S. Silicon Valley, founded a non-statetechnology firm under the Beijing Society of Plasma Physics. Backed by the reform and opening-up
policy, high-tech firms gathered one after another and formed a symbolic economy zone. Early
founders include the famous university IT spinoffs such as Sitong and Lenovo; university joint
high-tech ventures like Peking University’s PKU Founder and Tsinghua University’s Tsinghua
Unisplendour Corporation Limited (TH-UNIS). Now 4000-5000 high-tech firms cluster around
Zhongguancun, whose gross sales exceed 0.1 trillion yuan. Zhongguancun became the firststate-approved, high-tech industrial development zone in 1988, followed by the State Council’srecognition of Zhongguancun as a pillar of its slogan National Development through Science and
Education in 1999. In fact, most of the policies related to this slogan have been proposed byinforpreneurs and researchers who aim to launch a new business in this area. It appears thegovernment leads the reforms, but actually it has been pushed by the dynamic forces of
Zhongguancun.
Ministry of Science and Technology and the Torch Program
The Torch Program, with a history of promotion for 15 year by the Ministry of Science andTechnology and affiliated agencies, is a major high-tech commercialization program to be
implemented intensively in Zhongguancun and other development zones. So far 53 national scienceparks have been officially approved, each of which plays an important role to nurture a region-level
innovation system. Each of the science parks has its own strategy with regional characteristics and,leveraging state-promoted incentives and preferential taxation, courts domestic and foreign high-techfirms. Collectively they are the underlying force of China’s dynamic economic growth.

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Naturally the science parks face with harsh competition. There are still regional gaps between the
coastal area and the rest of China. Beijing and Shanghai particularly enjoy competitive advantages
with the high concentrations of capital, high-tech, and brains. To cope with this reality, regional
cities have adopted one-of-a-kind strategies. For example, Dalian has historically closer relationships
with Japan and focuses on the development of computer software based on the Japanese language inorder to strengthen its linkage with the Japanese firms. This example alone shows the science parks
are not uniform. They have different goals and historic development; and evolved in accordance withthe regional needs and strengths.
Many of the science parks have upped their scale for the past few years. For example,
Zhongguancun consist of five different development zones in the Beijing city. Originally, it only
covered the Haidian District where Peking University and Tsinghua University are located, but now it
is a gigantic zone that extends over the entire Beijing city and its suburbs.
Corporate R&D spending increases, suggesting more capital is placed in high-tech realms; and more
firms move to the science parks. This means active high-tech firms increase. All in all, the Torch
Program has achieved some positive results.
Foreign companies (“three-capital”enterprises), a true driving force behind economic boom in
China, have increasingly come to the science parks since the 1990s. They are still an integral part of
the reforms although present mostly in the coastal areas. Chinese businessmen often depict Beijing
as “Mao-jacketed Zhongguancun”and Shanghai as “suit-wearing Shanghai.”This shows a bit ofsense of crisis among them that Zhongguancun would not grow further unless suit-wearing
foreigners come to the HSP more. In fact, the percentage of foreign entries in Zhongguancun has
decreased since 2000.
Yet, in all the science parks, foreign firms’revenue per company is substantially higher than that ofChinese firms. This is another reason why science parks eagerly court foreign companies. For areas
like Shanghai, Shenzhen, and Guangzhou, Taiwan and Hong Kong firms are especially important.
It is important for Chinese university joint venture firms to go into the science park to propel theacademia to industry transfer of technology. The number of these firms that actually operate in thescience park is still limited, but they occupy more than half of revenue among the entire university
joint venture firms. The main source of their revenue is the IT-related business; and biotech-related
revenue remains relatively low as biotech is still in its infancy, albeit its high profile. In terms ofnanotech, a majority of revenue of the Chinese firms come from new materials business which iseasier to catch up, not from advanced fine processing or manufacturing technology.
As universities expectations to the potentials of science parks intensify, the central government
officially approves more and more science parks as a base of the Torch Program. Many of these- 162 -

science parks are classified as a National Technology Transfer Center and closely associated withfamous universities like Tsinghua, Peking, Tianji, and Shanghai.
Regional Gaps and Expectations for the Torch Program
Despite its implication, the China’s reforms of “national”innovation system extend regional gaps:
Most of major actors of the reforms, pivotal universities and state research institutions, concentrateon the coastal area. For example, R&D concentration in Beijing is as high as the State of California
in the United States. The Torch Program emphasizes the importance on the nation’s balanced growth,and expects the midland areas to grow as a result of each having a regionally tailored innovation
system. In this context, many larger peripheral cities started implementing strategies to become oneof the national technopolis. For example, the city of Dalian set up a concept called Greater Dalian,including transforming the Lushun naval port into a commercial one and promoting high-tech basedindustrialization with close linkage with the Japanese firms. For the reforms to become “national,”it
is important to support the regional efforts to compete with the capital-rich coastal zones. In otherwords, the Torch Program must be a long-lasting guideline to correct regional imbalances forsustainable national development of China.

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V. Sci-Tech Human Resource within the Context of Innovation System
Human resource is a central force to bear and spur sci-tech development— this seems to be a lesson
Beijing has learned from the experience of “brain drain.”To stop the drain, the government
introduced a preferential tax and incentive policy to call back sci-tech researchers working overseas.
These “drained”brains must be “circulated”to substantiate the Beijing’s slogan: National
Development through Science and Education.
These preferential measures, however, caused another problem: most companies and R&D
institutions scrambled for high skill worker, and it disrupted the labor supply-demand balance. It
appears this imbalance remains as long as the “brain circulation”is the driving force behind Chinese
economic development.
Beijing then started an initiative to conjure up the domestic workforce so China can be lessdependent on such sci-tech remigrants. Now the government signs agreements with multinationals
one after another for their comprehensive support in education and training with help from premier
universities. Some of the science institutes under the Chinese Academy of Science began to recruit
researchers from overseas. In fact, one of these institutes accepted Indian postdoctoral fellows withfellowship support.
Foreign-Educated Researchers and Hai-Gui’s
Since the beginning of the reform and open policy, two types of workforce, the Xia-Hai’s and theHai-Gui’s, have been considered to lead China’s economic development: the Xia-Hai’s are ex-public
workers who become an entrepreneur or high-tech businessman while the Hai-Gui’s areforeign-educated, remigrant researchers and businessmen. These labor forces are treated favorably
by the government’s policy. Especially, the Hai-Gui’s are most valued and all central and regional
science parks want them. Many Hai-Gui’s visit one of the remigrants’venture support offices
established in the science parks nationwide.
The number of Chinese students studying overseas had increased until last year until recently. It
started to go sideways and at last decreased last year. This is partly because the United States limits
the number of foreign students after the September 11th attacks, and partly because the Chinese top
universities upgrade their faculty, curriculum, and the level of researches. Many students have cometo think they don’t need to go abroad.
Meanwhile the number of Hai-Gui’s increases, especially in the past few years. This is partly due tothe government’s remigrant incentive packages; but many remigrants spontaneously began to comehome, being aware of China’s remarkable improvements in macroeconomic conditions such as theliving standards and high-tech job opportunities, particularly in hub cities like Beijing and Shanghai.

- 164 -

In terms of funding, the vast majority of students go abroad on a private basis as the number ofgovernment-sponsored students is limited. Many of government-sponsored students are selected andsent by the ministries or their affiliated agencies such as the CAS. The number of these students
stays almost flat in association with the agreements and exchange programs with the recipient
countries. So a large portion of the increase of Chinese students studying overseas is occupied bythose who are privately-financed or financed by their company. This trend continues as long as the
Chinese income level rises.
The most popular destination is the United States, followed by Japan and individual EU countries.
The Chinese students account for more than 10%, and near 15% inclusive of Taiwanese, of sci-techdoctoral graduates in the United States. Many began to pay attention to the networks of the
U.S.-trained Taiwanese and Shanghai IT professionals as they greatly influence the flow of
information, capital, and human resources in the East Asia. In fact, the triangle of Silicon Valley,
Shanghai, and Hsinchu of Taiwan, as Dr. Saxenian of the University of California pointed out, may
have greater implications to the future of mainland China. Also in Japan, a majority of sci-techforeign students are from mainland China; but it may take some time until intellectual networks asones between Silicon Valley and Shanghai are shaped in Japan due to the lack of preconditions.
Beijing’s preferential measures for high-tech professionals overseas have been conducted on aministry basis. For example, the CAS enforced “100 Plan”which grant subsidy to researchers intheir 30s to 40s working in the front lines overseas if they return home. Without these researchers
coming home, the famous rice-genome decoding project couldn’t have succeeded.
Institutional Reforms Associated with Sci-Tech Human Resources
China has faced with low mobility in domestic labor due to obstacles like the family registration
system. So to mobilize sci-tech human resources, the State Council permits provincial authorities toapply preferential treatments to sci-tech professionals. For instance, under the Shanghai’spostdoctoral incentive policy, if researchers and entrepreneurs move to Shanghai from anotherprovince, they can exceptionally receive a family register in Shanghai. Having a family register insomewhere outside one’s hometown (in fact, family) is very prestigious (exceptional) in China.
The government’s support for students coming back from overseas include assistance in the startup
support centers as well as grants for research and initial funding. Also, it actively hosts career
conferences in China and overseas and provide job information in cooperation with overseas student
organizations and recruiting services.
Overall, a tremendous influx of labor from midland continues in hub cities in the coastal areas;
especially, R&D workforce has intensively shifted to the eastern and coastal high-tech cities. This
trend appears not to stop for coming year.

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The Chinese government has implemented a series of institutional reforms since the decision on the
sci-tech based modernization in 1985. These reforms broke free of rigid national research
institutions; improved the overall employment situation; and thus increased the mobilization ofhuman resources across organizations. However, as a relatively few people move from national
research institutions and universities to industry, the Chinese industrial R&D workforce still remains
weak.
The ultimate goal of reform and opening-up policies is, by establishing a competition-based flexible
labor market, to achieve the labor supply-demand balance through the market mechanism. Albeit
only half done, these social reforms have improved the Chinese labor rigidified under the planned
economy, and built up the infrastructure to match the right person to the right place in society,including able researchers coming back from overseas. These improvements allowed the Chinese
sci-tech R&D forces to play rapid catch-up in the past decade.
A good example of the strengthening of the Chinese sci-tech R&D forces is the National PrioritizedLaboratory Program. This program aims for flexible R&D job reallocation with competitive researchfunds. Once a research project is certified as a prioritized laboratory, its principal investigator (PI)may set up a research team at his/her discretion, except the team must be comprised of resident andtemporary researchers. Like a similar system in the United States, the PI is given authority to decide
everything with regard to the research project, including procurement of facilities and employmentof assistant staffs.
Foreign Capital-Backed R&D Centers and China’s Strategies for Development of Human
Resources
In parallel with calling back the Hai-Gui’s from overseas, the Chinese government has attracted
high-tech multinationals like Microsoft and Intel and promoted the construction of foreign
capital-backed R&D centers. Government officials are convinced such measure would enhance its
R&D workforce with help from experienced foreign experts and professionals. A few years ago,
China’
s State Development and Reform Commission and Microsoft announced the Great Wall Planin which the US company assists China’s software development education and training. This is atypical example of an increasing foreign influence on the Chinese high-tech industrialization.
Recent Microsoft’s pushes forced other tech-giants like Nokia and Motorola to sign education andtraining, as well as R&D, joint efforts with China. This trend in expanding joint R&D andeducational ventures appears to intensify for several reasons, including that there is a bunch of able
R&D labor unfound in China; that such workforce is relatively cheap and in an urgent need in
China; and that the enhancement in R&D capabilities would up China’s appeal to foreign prospects
in high-tech industry.

- 166 -

China has a smaller able R&D workforce in the industry sector. As a means to push more researchers
to the industry, the Chinese government has privatized and sold a lot of national institutions.
However, such measures do not necessarily encourage R&D activities in the private sector.
Quantitatively OK, but qualitatively so-so. In fact, if almost obsolete research institutions aretransferred, degradation of R&D workforce in the industry may result.
Many foreign firms are not shortsighted: They maintain a long-term perspective to cultivate andnurture the next generation of sci-tech workforce. Actually most of their R&D operations in China
have dedicated staffs to build link-ups with Chinese universities and research institutions. This
stance is shared with the government officials in the United States and Europe. Examples include:
Germany’s Fraunhofer-Gesellschaft is active exchanging researchers between Germany and China;
Germany’s Max Planck Institute and Volkswagen Foundation co-established Shanghai Institute forAdvanced Studies within the CAS as an international, multidisciplinary research center; and the Ministryof Education of France signed a researcher exchange program with T singhua University last year.

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VI. Conclusion: Challenges and Perspective
As observed above, China’s reform and open policy has been successful so far; but there are stillseveral hurdles to bolster their development in science and technology:•First, China needs to minimize regional gaps. The vast majority of R&D resources andoperations concentrate in Beijing, Shanghai, and other coastal areas. The Chinese government
should leverage the powers of sci-tech so the midlanders are not left behind in the economic
growth.

•Second, China needs to improve a national innovation system in which education, R&D,
industry-university linkage, and IPR management function in a balanced manner.

•

Third, China needs a more open, free research environment as R&D activities become complex
and intricate. Such a need is gradually recognized after incidents like the SARS scare.

•

Finally, China needs to relax researchers. Currently Chinese officials discuss what else they can
do to call people back to mainland, in response to criticism that the excessive reforms resulted
in an excessive pay-for-performance system, and more researchers become confrontational eachother and monopolize their findings. In the world’s highest level of research environment,
researchers are not in the tense competition. Rather, they form a free scientists’salon andexchange ideas and opinions on their subjects. But in China, some Hai-Gui’s argue, people
won’t disclose their findings until publication, caught in a nearsighted competition for a better
performance score.

The author believes whether these problems will be solved or not holds a key to Chinese sustainable
development in science and technology— a success in the context of their embracing “science-based
economic progress.”- 168 -

References
Atsushi Sunami
中国の大学企業と産学「合作」、『産学連携』、東洋経済新報社（2003 年）「中国の産学研連携」インターラボ No.57（2003 年７月）
「中国の科学技術政策とイノベーション・システム」PRI Discussion Paper（2003
年 6 月）「中国のイノベーション・システム改革と科学技術政策」

研究・技術・計画

Vol.16.No.3/4.2001（2003 年）「中国の大学企業と産学『合作』」JST-R&D 戦略センター

RIETI Working Paper

中国科学技術マンスリーレポート（2003 年）
（2004 年度）

Xue Lan “University-Market Linkages in China: the Case of University-Affiliated Enterprises”,
MIMEO（2002 年）

鄧小平南巡談話（原題「在武昌、深セン、珠海、上海等地的談話要点」) （1992 年）
中国高等学校校弁産業統計報告 2001 年度
中華人民共和国国務院公告 1999 年 13 号
中華人民共和国国務院公告 2000 年 17 号
中国統計年鑑 2001 年、2002 年、2003 年、2004 年
中国科技統計年鑑 2002 年、2003 年
中国高技術産業統計年鑑 2002 年、2003 年
中国高等学校科技統計資料 2003 年
中国科技技術指標 1998 年
中国清華大学大学与企業合作委員会資料

http://www.chinaedu.edu.cn/中国教育信息網
http://www.moe.edu.cn/中国教育部
http://www.cutech.edu.cn/中国教育部科技発展中心
http://www.china-school.net 中国高校網- 169 -

- 170 -Akira Goto’s Summary (Session 2)
Hello. As time presses and you all may be impatient for coffee break, I will end this session
by briefly commenting on the previous discussions. I have a couple of points to mention:
One, the importance of improving systems and general conditions to support the market
mechanism; two, the importance of industrial and technology policies that promoteinteraction between different economic actors.
As for the first point, I must express deep respect to all previous Vietnamese speakers whoemphasized the importance to adapt the Vietnamese industrial, legal, business conditions
to the market mechanism. The market mechanism looks wasteful in the short-term
perspective; but, as modern history proves, it is actually far more efficient than any othereconomic system in the longer run. However, without adequate underlying conditions, nomarket economy can work effective and make people materially and mentally prosperous.
So the top priority is to establish a social environment in line with market principles.
In his keynote address, Dr. Doanh insisted it was very important to prepare and implement
adequate corporate, competition, and patent laws. It is very much so, but there are twopoints you need to be careful from the experience of failure of Japan.
First, implementation and operation of new laws and systems are crucial than preparing orchanging them because maintenance requires far more time and energy than creation.
Japanese government made the patent law in the 19th century and the competition law in1940, but their enforcement began, or just became possible, during 1970’s or 1980’
s. It is avery tough work to establish a fair market system by substantializing the spirit of those lawsin everyday economic activities. Precisely because it’s tough, the operation of law iscrucial.
Secondly, updating systems and laws is important, too. Technologies, international
environment, and domestic market condition — everything changes quickly these days andmakes systems and laws outdated soon. In the worst case, they may become an obstacle
for future growth. Naturally every nation needs to update its systems and laws and adapt- 171 -

them to the newer environment. This is a tough work, too, at least in Japan. There havebeen reform efforts, but they are hampered by high barriers thrown up by the politicians
combined with vested interests that have grown under the existing laws and systems.
Slashing away this sort of resistance is no easy job.
To put it short, the market mechanism is a system of change; and thus, you need toaddress it with a package of measures; that is, making, operating, and updating necessary
laws and social infrastructures.
The point two is about industrial and technology policies. As our four discussants havealready made it clear, everyone stresses the importance of linkage, networking,cooperation in different economic actors. One national innovation system comprises
foreign multinationals and domestic companies — big and small, modern and household. It
also requires collaborative relationships among university and government researchersand private corporations.
As Dr. Ca emphasized, new knowledge is an outcome of learning process; and, in this light
too, interactions between different actors are indispensable. Dr. Gwen stressed the roles ofengineers. In my paraphrase, as a bridge between science and industry, engineers play a
key role in the context of business-academia collaboration. Dr. Haraguchi gave us a casestudy in Thailand with regard to how we can foster local firms so they can successfully
collaborate with foreign companies. Dr. Sunami talked about how Chinese universities andgovernment research institutes in the post-reform era actively connect with the industry.
All these discourses converge on the significance of mutual collaboration of the actors thatcomprise the national innovation system, and deepening it. As a famous architect said,“God is in the details.”Our “godlike”knowledge is left unfound, untapped, or scatteredacross the points of production, distribution, and sales. To facilitate innovation, you need tofind and integrate such pieces of knowledge into a unified context; and, in that context,
devise strategies and policies to substantialize them. All industrial and technology policies
must be oriented toward strengthening this knowledge integration and linkage of theeconomic actors. In this sense, I totally agree with what our four discussants suggested.

- 172 -

Well, my speech is almost done. Before I leave, I have one more thing to share with you.
As we heard today, learning foreign technology policies is quite important. For example, in
his famous study on the very successful association system of collaborative research inJapan, particularly in semi-conductor and computer industry, Dr. Sunami points out thingsdeveloped in a reciprocal fashion: Bureaucrats of the MITI of Japan first adapted theoriginal form of this association from England; and then England and the U.S. started tolearn this “Japanese”collaborative research system under the stimulus of Japan’s success.
This is a good example of how mutual learning of policies is fruitful. I believe today’ssymposium is one good example of mutual learning, and deeply thank all the participants
here, especially HOF, NISTPASS and other Vietnamese people for giving me such a
precious occasion. Thank you.

- 173 -

- 174 -Dr.Nguyen Manh Quan

Co-chair-2

Ministry of Industry

Thank you Prof. Akira Goto for quite short and correct comment
related to the content of the second part “strategies and policies intechnology innovation and enterpreneurship”and Part II finished 4
presentations.
We have received several questions concerning the topics coveredin part II, like in part I in the morning. We have to say that the 10
minutes reserved for part II is over. Please take a rest andcontinually discuss part IV. If we have some free time left at theend of part IV, we will have the open forum then and the speakers
will answer all your questions, we do encourage all participants towrite down all your questions and pass them on to the Secretariat.
Please write your name, email address or office fax number so thatin case we have no time to answer your questions this afternoon,
the lecturers can reply by email or fax.
Once again, I would like to thank our speakers, and Prof. Akira Gotofor ensuring the success of part II of this forum.

- 175 -

- 176 -I have the pleasesure to make the presentation of my paper in the International symposium“Innovation, Entrepreneurship and Link-up Implementation for Developing Countries”. The
theme of this symposium is most appropriate for our development. The developing countries
today are facing with poverty, hunger, disease, civil strife, illiteracy, natural disaster,
contamination of soil and water, deterioration of environment, lose of biodiversity, pollutionof air and many natural resources are in critical use. Their people lack of access to education,
healthcare, employment, energy, food, house, water, sanitation… The market of Science,
Engineering and Technology is not available. The competitiveness of Vietnam is low, lack ofskilled workers, qualified engineers and ethical code. Quality of education and service is low,
corruption, damaged of buildings, settlement of roads, collapse of structures… have the same
reason : Low quality of people, lack of expertise, engineering capacity, responsibility,transparency and ethics. The innovation of new idea, new way of thinking, new engineeringsolution, new management and technology are not yet the key of promotion. All above
factors threat the property, safety, security, integration and sustainable development.
This paper make the general review on the actual situation, challenges and suggestions for
future development. We all together “Bring the Enjoyment and Quality to the life”.

Classes of people

GDP in US$ per capita.

No of People(Purchasing Power Parity Corrected)

1. The Poor

< 40004 Billion.

2. The Transitional

4000 – 1600

1.2 Billion

3. The Rich

> 16000

0.8 Billion
Total : 6.0 Billion- 177 -

Classes of people

World Consumption of energy

World Consumption ofMaterials

The Rich 20%

86%

86%

The Poorest 20%

1.3%

1.3%

Classes of People

WealthEnergy Consumption

Carbon Emision

The Rich

98

8The Poor111Character and Index

No of People

Daily income of less than US$ 1.00

1.3 billion

Daily income of less than US$ 2.00

3.0 billion

Food insecurity

0.8 billion

HIV positive

50 million

Water scarcity

1.0 billion

No access to commercial energy

2.0 billion.

2003

2004

% of Increasing

Total

336.242362.092

7.7

Agriculture forest and70.82773.3093.5

129.399142.601

10.2

136.016146.182

7.47

Plan 2004

Implemented

fish
Industry andConstruction
Services% Increasing incomparison with 2003

Total

249.3

258.7

- 178 -

17.7

State

142.0

145.0

17.9

Private

67.0

69.5

19.6

FDI

40.3

44.2

14.5

Country

GDP (Billion US$)Per Capita (US$)

Emission of CO2
Million of Ton

China

1417

1100

2790

Japan

4390

34510

1184.5

Sweden

258

28840

46.9

Thailand

136

2190

198.6

USA

10946

37610

5601.5

Malaysia

94

3780

144.4

Korea

576

12020

427.0

Vietnam

39

480

57.5

World

34491

5500

22994

Low Income

1038

450

2066

Average Income

5732

1920

9129

High Income

27732

28550

11804.3

Country

Clarification

CPI

Finland1

9.7

Sweden6

9.2

Singapore

5

9.3

USA

17

7.5

Japan

24

6.9

Korea

47

4.5

Cuba

62

3.7

Thailand

64

3.6

China

71

3.4

Vietnam102

2.6- 179 -Strength

Abundance of landarea
Young and growing
population
High economic grow(more than 7%/year)
Dynamic
development of private
sector.
Good contribution to

Weekness

Lack of good
infrastructure.

Opportunities

Threats

Undeveloped land.

Too many small

Expansion of

Weak financial

infrastructure.

capacity.

Need for skill training.

Technology not as
advanced as other

Need for professional
registration.

country.

Development ofLack of researchmaterial of construction.

and information.

Government

Low quality ofrecognition of the sector as

GDP from FDI andeducation, training and

an important engine forprivate sector.

human resources.

growth.

Increasing of export
and import.
36% of GDP in
investment.
Cultural value.

Lack of

Major players look at

professional, skilledconstruction opportunities

workers and goodin foreign countries.
High chances of getting

project managers.
Lack of track record

Historical lessons

and experience in large

Appreciation of

infrastructure projects

foreign people.
Good contribution to
ASEAN policies.
Establish joint-stockcompanies (stateprivate, private)i.e. highway, tunnel,

local project due to “whoyou know” culture.
Local infrastructure
project.

bridges, airport,

Venture into otherrefinery, landcountries because have thereclamation, protection

financial and technological.

of water soil.

Investment in urban

Lack of finance fordevelopment, housing,players.
Corruption.
No transparency intender.
Unemployment.
Low efficiency ofinvestment.
Loan and borrowed
money.
Low quality of many
projects, short time ofservices.
Deterioration ofenvironment.
Natural and manmade disaster.
Contamination ofsoil, water, chemical
product (dioxin).
High cost of landcities.
Gaps between richand poor are extended.
About 80% of

Increment of FDI

investment in large

program, material

population has theGained experiences

project.

production, energy

income less than 1

infrastructures.

USD/day.

for construction

No participation ofhydropower plan,

private sector in

Need trends ofMaterialism,

cement factory.

infrastructure

construction industry.

individualism... are

Growth ofdevelopment.

International

construction sector isfrom 10 - 12%.
Export of
construction materials

Very few BOT

integration.

projects.

Increase the number ofLack of technology
and professionalism.

dominant.
No promotion forcontinuity study.

people for export of labor

Trade activities inservice (7054 workers are

education, research,business.

about 65 million USD in

Lack ofworking in Malaysia (2801)

2003, and import in thetransparency,

and the rest of the world.

Total borrowed

same year is 455 million

responsibility and

Want to be the best,budget is about 13

USD.

Democracy.

better quality of life.

- 180 -

billions of USD and GDP

The increasing of
turover of a good

Profit / loss is notis estimated to be aboutclear.

Vietnamese construction
firms is about 20 – 30%
per year

39 billions USD/year.

Patronage – Client

Total income fromthe Tax is about 8

relationship.
Lack of regulations,billions USD/year.
Every 5 years

standards, study, law.
Definition of value.

government need to pay
15000 billions VND forstate companies andorganization in order tobe survive.

Diagram to show the study on Competitiveness and Impacts for integration
and Globalization
China, Russia
WTO/GATSEU
USA, India

A SIAN + 3 (China, Japan, Korea)
Government of Vietnam
Policies.
Regulation

Globalization
USA, EU
Developed
Countries

Environment-To Build abetter Word

Development of Vietnam- Strength, weakness.
- Opportunities, threat.
- Challenges.
- Conditions Demand.
- Structures.
- Determinant.
- Indicators.
-Cultural Value.
- Perspectives.
- Human Resources

Sustainable
Development
Win-Win

Australian
Asian
Developed
Counties

Poverty Alleviation
A Better Quality of life
AFTA
AFTA

ASEAN
AFTA

- 181 -ASEAN

Basic infrastructure i.e roads, schools, sanitation, irrigation, clinics, telecommunications,energy etc… are build up by Engineers and Engineering.
Basic industries, small and medium enterprises (SME) for supply of goods and services toagricultural, natural resources exploitation industries need innovations, science,engineering, technology and expertise of local technicians.
For the implementation of the above the science, engineering, technology in developing
countries need to be reoriented, reorganized with more government support and funding
from different sources.
It is important the role of Academics of engineering and technological sciences,
professional engineering and technological associations, industrial and trade associations.
Science, Innovation need engineering and technology.
Modern hospitals need sophisticated scanners, life support system, information system,computer system and sanitized environment… These operation and maintenance needengineer and technicians.
Reduction, Mitigation, Prevention… of a natural disaster need the knowledge andexpertise of Engineer and Engineering system.
The engineers are bringing safe water and adequate sanitation to all people.
Modern Bioengineering, Eco-Technology, Eco-Materials and sustainable farming system
are carried out by Engineers and Engineering solutions.
Blue revolution in agriculture depends on innovation in water and irrigation engineering.
“More crop per drop of water”. 70% of world water is utilized for agriculture. (2000 ton ofwater produce 1 ton of rice and 1000 tons of water produce 1 ton of wheat).
In India 20% of energy consumption is for pumping water for irrigation.
Reuse, Recycle, remanufactures… of materials need engineering solution. In theEuropean Countries, it is required to recycle 85% of a vehicles weight in 2005 and rising
to 95% by 2015.
Engineering and Technology transform scientific concept and innovation from thelaboratories and theories into system, equipment, devices… into the commercial andfinancial world.
It is very important to have a proper understanding of the respective role of Science,
Engineering and Technology (SET). The developed countries are responsible for scientificdiscoveries. The developing countries should pay more attention on engineering andtechnology that have largely been responsible for wealth creation and to lift the countries
out of poverty. Academician Dato Lee Yee Cheong, president of WFEO urge to promote
the use of the terminology “SET” in place of “S & T”.

- 182 -

The key factor of developing countries is to build up indigenous engineering construction
capability and indigenous engineering human resource for new and existing challenges.
4. OUR WAY OF THINGKING.

The experiences and lessons learned from the developed countries and the from the west aregood for our development. Vietnam had more than 4000 years old. However in the first decadeof the 20th century the concept of Science, Engineering and Technology was introduced toVietnam. Under the French colonial regime (1884 – 1945), French colonialism only stressed
trade, exploration of mine and not industrialization. The long time of colonization and war as wellas the civilization and cultural flush from the west, have upset the traditional value. Indeed
Vietnamese nation has been formed and affirmed by the mixture of an original culture andassimilation, adaptation of multiples cultures coming from outside. To ensure nation building inpeacetime, Vietnam need to be “advanced culture strongly market by national identity”.
Economic progress, innovation, engineering, technology and business do not harm our culturalvalue. Business and war are different in objectives but both need to be independent of the othe
parties. We know that “strategy not being a lengthy action plan but the evolution of central idea
through continually changing circumstances”.
The changing circumstances may be is from negative to positive and need to pass the inflection
point or from convex to concave. Today we have the strategic inflection Point and S curve
Theories.

- 183 -

A : Inflection Point.
A-B : Business goes on to the new heights (Sustainable development)
B-C : Reduction of the profit and development (transition to the new or to future).
C-D : New S curve need to build up.
E-F : Business declines.
The following observation can be made :Science, Engineering and technology need to changed by the S curve or strategic
Inflection Point or by both.
New Product, new business, new opportunities… become old with time.
It is important to know things are different, something has changed.
Past is Negative, Future is Positive. We need to keep balance in the Present.
The managers and engineers need to keep balance and are facing the new changing andchallenge. They need to have INNOVATION.
They also need to know and understand the tangible and intangible Value.
The Inflection Strategic Point and S curve Theory are the combination of the concepts
from the west (Adrew Grove, President and CEO of Intel Corporation) and East (Prof.
Choo, Singapore).
The inflection Point is also the crisis point that challenge every people and company.
S curve mean sustainable development, safety security… is important find the newopportunities and new challenge.
We need to know and understand : Who we are, where we are, when we need to havethe new S curve for a new development.
4.2 RESPONSIBILITY
The most important responsibility of Managers and Engineers is to build a better quality of life
for public’s demands. Managers and Engineers need to keep the balance between thedevelopment and conservation of nature, make the satisfaction to our generation and future
generation. According to the ASIA culture:
Sustainable development= Keep the Balance of Negative and positive balance

Stable development= According and follow the Principles of 5 basics materials

Continuously Development and Renovation = Iching
Protection of Environment=

Respect the Fongsui

In this actual situation, the responsibility and tasks of Vietnamese Managers and Engineers are:
To make the contribution for engineering building capacity poverty alleviation, sustainable
development, international integration, reduce the gaps between the rich and poor people
increasing the competitiveness by engineering solutions and technology transfers.

- 184 -

4.3

HE ENGINEERS NEED TO PROTEC THE ENVIRONMENT.

The Managers and Engineers need to provide engineering solutions, technology and best
Management to use lessand less natural resources, less and less waste, reuse, recycle,

remanufacture of materials (3R), protection and mitigation of disaster and contamination. Long
time ago, the Earth existed only mountain, highland, rivers, lakes, trees, sea... men were living
in a caverns mountain, use the rivers as main roads and living by lake, forest and trees. Today,
we build up high rise building dams, bridges and roads. This means:
High rise building= Mountain and highland

All kind of roads= RivesDams and lakes= Small sea

Bridges= Cross of old road (river) and new road (high way).

Managers and Engineers need to protect Lake, Sea, Forest, bio-diversity for today and tomorrow.
4.4 CODE OF ETHICS.
The Managers and Engineers need to have high standard of ethical code and practice in theirprofessional life: Quality control, reduction of cost, improvement of safety, saving of Energy andwater, prevention of disaster, reuse of materials, clean product, eco-materials in order to satisfy
cultural value and for people. Asian Cultures referred to the old philosophy to be gentlemen,
good man have great value. The Engineers need to be correct, right, she/he need to know therole of Engineer and his/her behavior to the society, environment, colleagues and friends.
He/she needs to keep the balance of negative and positive in his/her body, sentiment andknowledge. Please refer to the code of ethics of P.E.
4.5 MULTILITERAL COOPERATION, FRIEND OF ALL.
Vietnamese Managers and Engineers are facing the less competitiveness and very complex
problem of sustainable Development. We need to make the promotion of the cooperation in
many form, multilateral directions. We appreciate the international cooperation with 3 East Asian
countries and ASEAN countries. We need to have close friends in near countries. We can work
together for the creation of the new knowledge and use new knowledge in practical life. We
need to have concrete engineering solution, technology, pilot testing and application of newmaterial, new technology. We need to combile the knowledge and expertise of Scientific, Social,
Economical, Science, Engineering, Technology and Management... for creation of real Culturalvalue. We have 5 basic materials: Gold or Iron, Trees, Water, Fire and Earth. The logic of 5 basic
materials is very important for Sustainable Development. Experience and knowledge from Asian
countries are important for Vietnam. During the last 10 years, the contributions from JapaneseEngineers and business man from Japan are very valuable for Vietnam.

- 185 -

Poverty

alleviation,

sustainable

development,international

integration,

increasingofcompetitiveness, natural disaster prevention and mitigation and prevention of corruption need toincrease the quality of people. Managers and Engineers, quality of Education and creation,
innovation in science engineering and technology . The Engineer needs to study, to build up thecapacity. Textbook, curriculum... should be renovated and updated. Teaching and study on
knowledge of Environment, Economy, Law, organization, Management and work together. The
Engineers need to study professional knowledge, expertise, code of ethics, English, culturalvalue, and make the Civil Engineering, Geotechnical Engineering, Geo-engineering to be
attractive for the future generation. The Asian philosophy for continuously study is important for
professional Engineers. The competitiveness is dependent on the human resources quality who
are working as Engineers, Corporate Governance, Researchers, Staffs of Authorities, Investor.
The Engineer need to provide the driver force.
4. 7 ENGINEERING & TECHNOLOGY.
The Managers and Engineers work always with science engineering and technology.
Engineering is the bridge between the Science and Technology. Engineering solutions andtechnology of Civil Engineering and Geotechnical Engineering need to provide the rightanswers to the following demands of the life:
Design and construction of houses and infrastructure projects in flooding area, mountainarea, Tay Nguyen, highlands.
Technology and materials of construction for Schools and Children Garden in poor
communities.
Engineering, Technology and Material for apartment and high rise buildings.
Protection and prevention of slope stability, debris flow, landslide, riverbank and seabank.
Dams and lake for water.
Treatment of water.
Tunnels.
Industrial buildings.
Lightweight concrete.
Nano Technology, Eco Technology.
High strength concrete.
Glass fiber in construction.
Ferro cement.
Lime and cement column.
Band drain.
Mini pile.

- 186 -

Embankment in soft soil.
Offshore construction.
Treatment of waste.
Cleaning of contaminated soil and water.
Engineering solutions, technology and Innovations need to be connected to the investment andProduction. Feasibility study should be made using an experiences from developed countries.
Need to pay very high attention for technology transfer from Japan, Korea, China, ASEAN
countries to Vietnam for new technology and new materials.
5. PROPOSAL & SUGGESTIONS.
Registration of Engineers according to ASEAN / APEC.
Establish the Association of Engineers or Institute of Engineers in Vietnam.
Establish the program of cooperation with our friends and colleagues for development ofprojects and application of the research results in real conditions.
Establish the research Projects and program of cooperation between Vietnam and Japan,
using budget from different sources.
Establish in the new University of Engineering, Technology and Management with thesupport and help from ASEAN, Japan, Korea, China and other developed countries .
Establish the Joint Venture Company between Vietnam and Japan for consulting services
and technology transfer.
Formation of the Information system for a better communication and cooperation.
Increasing the cooperation between Professional Association.
Participation the ASEAN Academy of Engineering and Technology.
6. CONCLUSION
The result from this Symposium is appreciated by all participants, our colleagues andfriends. The Symposium will be successful and we are satisfied for all contribution.
Engineers and Managers play important role for poverty reduction, sustainable
development and international integration.
It is necessary to make use of the results from this Symposium in our professional life.
It is very important the role of Engineers for future development. Registration of Engineer
is important task and challenge.
It is recommended to have new form of cooperation between Vietnam and Japan:+ Education and Training.
+ Research.
+ Technology transfer.

- 187 -

+ Consulting services.
+ Investment.
The gaps between Vietnam and developed courtiers may be is about 20, 30, 40 and 50
years. We need your help, assistance and contribution from colleagues and fiends fromJapan.
In the recent ASEAN Business Summit in Vientiane, The Philippine’s President, H.E Gloria
Arroy. Macapagal told “There is only one way forward, not by looking West but by looking
inward”. We need to understand our culture, our natural and human resources as well as
our intangible values for innovations, competitiveness, making our region of Asean andAsia to be a better and high quality place to live. We are in the best position to promote
good will, understanding, cooperation and innovation.

1

Research, Education and Consulting Service for poverty alleviation
sustainable Development and International Integration, CECAR3,
Soul, Korea.

2

New Trends in Construction Industry in Vietnam, CECAR 3, Soul,
Korea.

3

Theo role of civil engineering in poverty reduction, sustainable
and international integration, Proc. Of Seminar on Registration ofEngineer (SRE), Hanoi, Vietnam.

4

Code of Ethics of Engineers Proc. Of SRE, Hanoi, Vietnam.

5

25 years of experiences on cooperation with Sweden, Vietnam –Sweden Seminar.

6

25 years of experiences on Geotechnics and Geo-environment
Engineering of Vietnam. Key note Lecture VJSHE, 2004, Hanoi.

7

Proceeding of Second World Engineer Convention (WEC),
Shanghai, China.

8

Declaration of Engineers for Sustainable Development, WEC,
Shanghai, China.

9

Proposal to establish Mekong Institute for Engineering andTechnology.

10

Theo role of Civil Engineers, VJSGE, Hanoi, Vietnam.

11

The delay for Payment (debt) in Construction Service, who are
you – Seminar of VACC, Hanoi, Vietnam.

12

Responsibility in Construction Management, Journal ofManagement.

13

Application of ASIAN culture in Planning, Design andConstruction.

14

Only the Paranoid survive

15

Straight from the Gut.

- 188 -

ECO-TECHNOLOGY— Human Environment Conscious Science & Technology
Dr. Hirohisa Uchida
Dean, School of Engineering, Tokai University
1117 Kita-Kaname, Hiratsuka, Kanagawa 259-1292, Japan
1. Introduction
Science and technology advanced with a focus on materials and energy from the late 19th century
through until mid-1900s. For instance, coal played a crucial role in the European industrial
revolution. Burning coal in the newly invented steam engine generated huge power as a result oftransformation of heat into mechanical energy. In the 20th century, petroleum became a dominantsource for mass-production in heavy industry, and sustained vigorous economic growth worldwide,
especially in the West and Japan.
As a result, the environment was polluted and the pollution became a world issue. Mass emission ofcarbon dioxide and chlorofluorocarbon caused global warming and harmful climatic changes while
microelements existing in the atmosphere are said to arouse hormone imbalance inside our body.
Given these facts, I would like to emphasize the necessity of a new way of scientific andtechnological thinking which I would call Eco-Technology, i.e. Human Environment COnscious
Technology. To think about the human environment, we need to briefly look at changes in theparadigm of science and technology.
The original definition of the term Eco-Technology, a merger of ecology and technology [1], may
sound different from my implication of Eco-Technology, a framework of scientific thinking
conscious of the human environment [2]. However, their ultimate goal is common: Pursuit ofscience and technology more benign to the human environment.
2. Paradigm Changes in Science and Technology [3-6]
Until the mid-1900s in the postindustrial era, Materials (M) and Energy (E) had been the central
focus that sets the paradigm of science and technology.
In the 20th century, there were two important discoveries in terms of material: nuclear reactions andsemiconductor. Nuclear reactions shifted human understanding in terms of the relationship ofmaterial and energy: In nuclear reactions, a small change in the quantity of material releases far
more energy than chemical reactions like burning coal or petroleum; and the same is true with thenuclear fusion of hydrogen. Nuclear power plants use uranium fission to yield electric energy.
Continuous nuclear fusions of hydrogen happening inside the sun is a mother of existence; and nonatural phenomena including human existence are possible without them.
Another important discovery was semiconductor. Electrically speaking, materials are a conductor,
an insulator, or a semiconductor which exists in between. Combining semiconductors, transistor
devices were invented and replaced the role of vacuum tubes which are made of glass and metal
because they can better control electric currents and amplify voltages. Transistors evolved into

- 189 -

micro devices like IC and LSI chips for use in computing and telecommunications. This added a
new factor, Information and communications (I), to the old M-E paradigm of science andtechnology (Figure 1).
Information-communications technology enabled remote sensing devices and microcomputers to beequipped on artificial satellites: We can monitor environmental pollutions, natural disasters, andmilitary actions from the face of the earth. These capabilities are a fundamental part of modern
politics and economic advantages.
Today at the wake of the new century, one more factor, Life (L) including mankind, is being
incorporated in the paradigm of Materials (M), Energy (E), and Information and communications(I) (Figure 2).
An example illustrates this: Modern doctors can make intact, detailed observations of humanorgans and brain by use of a scanning technology called the nuclear magnetic resonance computed
tomography (NMR-CT) which is empowered by the superconducting magnet. They can also use asuperconducting quantum interference device (SQUID) to diagnose minim magnetic field emitted
from a patient’s brain or heart because the SQUID device is capable of sensing a magnetic field as
minim in the order of several tens of thousands as the earth magnetism.
As a natural result, modern science and technology face intricate humanity issues, including
bioethics which entails cultural and religious implications. We have restless controversies overpossible discrimination against preborn babies by using techniques of genetic engineering, such as
producing embryonic stem cells from cloned embryos, or in vitro fertilization.
There is no doubt many genetic scientists work to overcome intractable diseases like AIDS andcancer. But when some of them use their knowledge to choose a “high-quality”egg less geneticallyprone to cancer from test-tube eggs, we may call it discrimination against preborn babies; or when
they use stem cells from human embryos or aborted fetuses for research and treatment purposes, wemust still say a human uses another human as a material.
I always ask a question in my university class on bioethics, “When do you think a life begins?
When a sperm meets an egg? When they become fertilized? When a fertilized egg grows to acertain degree? Or when it is born out of the womb?”
Advanced medicine can mechanically keep the unconscious alive, and the definition of death hereis switching off the life-prolonging device. People see birth and death self-evident because theyoccur day-in-day-out, but such perception is losing ground as the modern paradigm of science andtechnology meets the challenge of the Life (L) factor.
Scientists have based their legitimacy on the universality, objectivity, and rationality of science
while technologists stepped in and explored every avenue to substantiate scientific findings. The
consequence was an endless cycle of technology after technology catching up newer scientificfindings. Where universality, objectivity, and rationality prevail, ethical concerns are secondary andthe use of scientific knowledge could always be a double-edged sword.
3. Human Environment
From the viewpoint of universal truth, human world is vague: Man’s sense of value and ethics varyand are strongly influenced by his/her environment, i.e. family, community, country, school,- 190 -

tradition, culture, religion, economic and political system, and so on. Likewise, man’s concept oflife and death and standard for value judgment reflect the diversity of the natural environment andlocality surrounding him/her. So, vague things like human emotions or subjective sensitivity
coming from the five senses have been excluded from the scientific and technological thinking
which serves the kingdom of universality, objectivity, and rationality.
But who is the protagonist in the paradigm of science and technology? Man. This fact has long
been overlooked by scientists and researchers. It is then quite natural robotics engineers confront ahuge challenge how to make robots “understand”man’s occasional irrationality and emotions.
Different cultures perceive life and death differently. What is wrong with this? Do we need to passa scientific or congressional resolution to authorize a universal concept of life and death?
Important thing to remember is experts could not assume entire responsibilities over scientificachievements anymore. Common people need to think and act critically toward scientificdevelopments. As pointed out above, it is prime time for the scientific paradigm to incorporate theLife (L) factor, and there is no doubt the L factor entails man’s diversity, emotions, sensitivity, andirrationality.
4. Diversified Human Environment and Society
We are accustomed to the cliché that the degradation of the natural surroundings is a major
environmental issue. But, if we define the term environment as any circumstance surrounding
humans that influences their growth and mentality, the crisis of the environment is not restricted tothe components of nature such as atmosphere, water, plants and animals. When we say theprotection of the natural surroundings is a top priority, a logical conclusion is mankind is a top
victimizer that should become extinct first and the several millions of living organisms on the earthnext.
For us to prosper eternally on this planet, what should we do? I suppose it is more reasonable toconsider environmental deterioration as an issue of the human environment. The September 11
terrorist attacks in New York induced the military attacks against Afghanistan and Iraq. Somepeople argue desertification and poverty in those areas produce terrorists. They say terrorism is a
result of environmental deterioration. Other discuss ethic feuds underlie the conflict between
different value systems. From the standpoint of the human environment, however, terrorism andenvironmental deterioration are the same in that both threaten the security of mankind [7].
5. Technology Transfer in Light of Eco-Technology
When you transfer or import foreign technology to your region, a particular human environment,
preparing an acceptance system is a necessity. Ignoring locality, your own culture and way of living,no “universal high-tech”can take root.
The earth is a constellated mosaic of diverse cultures and value systems. The same is true in the SE
Asia. Under the banner of universality and rationality, how many intrinsic traditions and culturalexperiences did perish from this planet? To think any legitimate application of advanced scienceshall come off anywhere because it is universal is a conventional thinking. Likewise, without
considering the local human environment, any regional improvement plan shall end up with an- 191 -

off-the-shelf, do-what-others-do type of scheme.
To say all new products and high-tech systems are universally adaptive is a supply-side politics that
benefits producers and industry and compel consumers and users, and is becoming obsolete.
Emerging thinkers recognize not only producers but also consumers have a part in environmental
destruction. They see production and consumption as a cyclic system consisting of materials,
energy, and the environment; and thus advocate an environment-conscious, recycling society. Bothlocal and global societies can be sustainable only if new technology is transferred
eco-technologically; that is, we adapt it in a way diversity of local human environments and theirintrinsic values are well maintained.
6. Conclusion
Eco-Technology is a mother concept that germinates newer areas of study and concepts like
Eco-Material and Eco-Balance. It is not merely an extension of ecological science and technology
when we step toward a recycling society for the sake of sustainable development of humancivilization. Eco-technological thinkers rather think all fields of science and technology in thecontext of the human environment where man is born, grows, lives, and forms the foundation oflife— his/her individuality, locally intrinsic values, and standard for value judgment. The earth is aconstellated mosaic of diverse cultures and value systems. Eco-Technological discipline isindispensable to let mankind prosper on the earth for eternity.
References
1) S.Aida, “Eco-Technology”, TBS Britanica 1986. (Japanese)
2) H.Uchida, “Ecomaterials for Energy Systems Benign to Human Environment”,
Energy & Resources 23(2002)30. (Japanese)
3) H.Uchida, "Materials Revolution Towards the 21 Century", Proc.Japan-Taiwan Symp. on
Progress of Asia-Pacific Region and Science & Technology, Taipei, Taiwan, Sep. 1992, pub.
(1) Chinese by the Asian Pacific Science & Technology Association, Taipei, Taiwan, March
1993, pp.189-202. (English)4) H.Uchida, "Role of University Education in the Paradigm Shift of Science and Technology
Towards Future", Proc. Int.Cong.LOMONOSOV 94, Oct.1994, Moscow State University, pub.
by Moscow State Uiversity, March 1995, ISBN5-88091-006-7, p.148-152. (English)5) H.Uchida, "University Education in the Shift of Science & Technology Paradigm Toward
Global Security and Eco-Technology", J.Advanced Science 10 (1998), 244-249. (English)
6) H.Uchida,"The Paradigm Shift of Science & Technology and Human Environment", Proc. of
the 1st Int. Symp. on EcoDesign'99, Feb.1-3, Tokyo, Japan, pub. by the IEEE (The Institute ofElectrical and Electronics Engineering, Inc.),

ISBN 0-7695-0007-2, Feb.1999, pp.184-189.

(English)
7) “Terrorism”, ed. by International Research Institute of Peace Strategic Study,
Tokai University, pub. by Tokai University Press, 1998, ISBN 4-486-01444-8. (Japanese)- 192 -

Figure Captions
Figure 1. Science and Technology Paradigm until the 20 th Century.
(M) Materials(E) Energy( I ) Information andTelecommunication.
Figure 2. Science and Technology Paradigm in the 21 s t century.
(M) Materials, (E) Energy, ( I ) Information andTelecommunication, and (L) Life and Human being.

- 193 -

Fig.1 Science and Technology Paradigm until the 20th Century.
(M) Materials (E) Energy ( I ) Information and Telecommunication- 194 -

Fig.2 Science and Technology Paradigm in the 21st Century.
(M) Materials (E) Energy ( I ) Information and Telecommunication( L ) Life and Human being- 195 -

- 196 -“CLEAN” MOTORCYCLES
Professor Bui Van Ga
Danang University of Technology
54, Nguyen Luong Bang, Danang, Vietnam
Tel: (84) 511 736 445, Fax (84) 511 842 771, Email: buivanga@dng.vnn.vn

ABSTRACTThe long term aim of our research on “clean vehicle” is reducing pollution
emission of in-used motorcycles in Vietnam to limits between EURO III and EURO IV
standards. The project is carried out by two stages:
1. Utilization of LPG on motorcycles
2. Application of catalyst converter for post treatment on LPG motorcycles
The present paper focuses on the first stage of the project. For this purpose, anexperimental study of combustion LPG-air mixture has been carried out on experimental
engines. The result shows that this mixture can be burnt with very low equivalent ratio.
The specific fuel consumption is reduced considerably at this limit. This is an important
advantage of gas fuel for vehicles running in urban conditions.
For applying the result, a new bi-fuel system (LPG/Gasoline) has been studied
and manufactured for adapting LPG on original gasoline motorcycles which are largely
used actually in Vietnam. In the system, the LPG in gaseous state at 30mbar is used,no evaporator is needed and the mixture fraction at any regime of engine is controlled
by a throttling valve and depression in admission manifold. The gas throttling can bemade manually or automatically which allows the motorcycle to run with lean mixture at
low load regime. The installation of new fuel system doesn’t cause any change of thestructure and outside view of the original motorcycle.
In case of necessity, the LPG/Gasoline motorcycle can be easily changed to run
on gasoline by turning the fuel valve to gasoline position. Thus, this is comfortable forthe users in the first step while the LPG supplying network is not largely installed.
The motorcycle running on LPG with the proposal fuel system has an emission
reduction of about 80% of CO concentration and about 60% of HC concentration incomparison with original gasoline running. The durability of LPG motorcycles is better
than that of gasoline ones since the gas doesn’t wash away the lubrication film. The fuelconsumption is tested with 50cc, 100cc and 110cc motorcycles. With 1kg LPG they canrun from 90 to 120km depending on road conditions.
Application of LPG on motorcycles is thus an appropriate way to reduce pollution
emission and fuel consumption for transport in Vietnam.

Key Words: LPG, bi-fuel carburettor, motorcycle, pollution- 197 -

INTRODUCTION
In Vietnam motorcycle, main individual vehicles are more than 12 millions
actually. According to the forecast, the automobile market in the country will not have an
extraordinary develop in next decade. So the motorcycles will be continued in use for along future. As the urban infrastructure in the country hasn’t been well- developed, themotorcycles run usually at low load regime: high fuel consumption and serious pollution
emission are thus as result. “Cleaner motorcycles” for these operation conditions istarget of our research.
In recent year, many solutions have been applied for automobile for this purpose[1], while there are not many modifications relating to the motorcycle engines. In fact,
because of small and compact engines, the advanced technologies applied successfully
on automobile engines have difficulty in applying on motorcycles [5]. The application ofelectrical energy on motorcycles faces another difficulty relating to the batteries capacity
which limits vehicles independent operation distances. Fuel cells are actually notpractical because of the high cost. Utilization of hydrogen or natural gas NGV with highpressure gas cylinder is not convenient for small size motorcycles. Thus the mostsuitable solution is utilization of Liquefied Petroleum Gas LPG with catalyst converter for
cleaner motorcycles [7], [8].
In fact, utilization of LPG for vehicles is now considered as an effective solution
for urban air pollution in many countries. The transformation of gasoline car to LPG one
is carried out easily thanks to the existent accessory kits (NECAM, LOVATO...
accessories for example) [2]. There is no available similar kit for small cylinder
motorcycles actually.
Since 2000, the Environment Protection Research Center has carried out aresearch project on “clean motorcycle”. The long term aim of the project is reducing
pollution emission of in-used motorcycles to limits between EURO III and EURO IV
standards. The research is carried out by two stages:
1. Utilization of LPG on motorcycles
2. Application of catalyst converter for post treatment on LPG motorcycles
In the present work, we will focus on experimental study of lean combustion of
LPG-air mixture and LPG kit to transform traditional motorcycles into LPG or
LPG/gasoline ones [6]. The kit is simple, local manufactured, low cost, conserves the
structure and outside of motorcycle. The new LPG system allows the motorcycles to run
in appropriate regime for economizing fuel and reducing pollution emission.
The essential problem needed to be solved for gaseous fuel application on
motorcycles is supplying the mixture with suitable fraction at any operating regimes. For
small power engine of motorcycles, the fuel consumption is not quite important so that
we can use the gas directly at gaseous state [6]. The gas supplied to the Venturie isadjusted by depression in admission manifold thanks to two vacuum valves one in gas
hose and the other in the air one.

- 198 -

EXPERIMENTAL STUDY
Study of combustion of LPG-air mixture is carried out on an experimental engine
which have rectangular combustion chamber 68x34x47mm 3. The engine has twotransparency windows for light access. The experimental apparatus was presented in
our previous works [4].
Fuel supply is done by injection LPG in gaseous state into admission manifold or
injection of LPG liquid state directly into the combustion chamber. The figure 1 shows
evolutions of flame front and pressure in combustion chamber of the engine of lean
mixture combustion. The recognized pressure is shown on the figure 2. The maximalpressure attaints 46 bars when equivalent ratio is 1.05 and it is reduced to 20 bars atlean combustion with =0.6. Thanks to gaseous state, the mixture is more homogenythat allows the LPG engine to run with very lean mixture.

Fig. 1: Evolution of flame front and pressure in combustion chamber of
LPG experimental engine
48

p(bar)
1.4

40
32

450

0.8
24

0.7

16

400
350

0.6

300

8

(deg)

0
-80

-40

gi(g/kWh)

500

1.0

0

40

250

80

120

Fig. 2: Effect of equivalent ratio on pressure
evolution (n=1000rpm)- 199 -

0,6

0,8

1

1,2

1,4

Fig. 3: Effect of equivalent ration on
fuel consumptionEffect of equivalent ratio on specific fuel consumption is presented on the figure
3. The result shows that the fuel consumption is double when equivalent ratio changes
from 0.6 to 1.4. This observation is very interesting in practice. In fact, the motorcycles
in urban condition run most of the time at low load regime. With original gasoline
carburettor, at this regime the mixture is very rich so that the fuel consumption andpollution emission are too high. In our research we try to solve this problem with our
new LPG kit.
PRATICAL REALIZATIONAs we have mentioned, for
reducing fuel consumption andpollution emission of motorcycles,
the essential problem needed to besolved is supplying the mixture withsuitable fraction at any operating
regimes. In the LPG system of
automobile, the fuel exits thereservoir in liquid state and thenvaporizes
invaporizer/pressure
reducer system. The gas pressure
decreases to a value lightly inferior
to atmospheric one. The LPG gas isthen aspirated to the Venturie throat
by depression as the gasoline
carburettor. With this principle, thecharacteristic
curvesofLPG
carburettor are similar to thegasoline one.
For small power engines ofmotorcycles, the fuel consumption is Fig. 4: LPG/gasoline bifuel system for motorcycles
not quite important so that liquid
exiting LPG vessel may be the cause of an excessive fuel.
Otherwise, the liquid LPG needs the vaporizer/pressure
reducer, the cumbersome apparatus which will not besuitable for limited space of the vehicle. Thus the mostsuitable for motorcycles is supplying of LPG in gas state withpressure slightly higher than that of atmosphere [5], [8]. The
gas supplied to the Venturie isadjusted by both the pressure ingas pipe and the depression in the
Venturie. The figure 4 introduces
the scheme of LPG/gasoline fuelsystem. Gas in injected in
upstream of the throat via thevacuum valve and gas injector (fig.
5). The gasoline fuel system is noFig. 6: LPG/gasolinechanged.
Fig. 5: LPG/gasoline
bifuel carburettor

In the idle regime, LPG gas- 200 -

caburettor with automatic
obturating valve

Excess air coefficientpasses via the idle system with adjustment screw. When engine load increases, thevalve opens gradually the gas supplying exit at the same time with opening of the air
supplying section by the air valve device. LPG quantity, so that the mixture fraction, isthen controlled by restriction in the valve and the depression in Venturie.

Manual obturating
valve

1,1

1
Automatic
obturating valve

With this system, the excessive air
coefficient increases in function of load. For
obtaining an appropriate mixture at low load
regime, a manual obturating gas valve isinstalled in downstream of the pressure
reducer. This can be obtained automaticallyby mounting the valve on guiding device of
air controller.

No gas obturating
valve

0,9

The characteristic curves of the
carburettor
running with LPG are introduced
Load (%)
0,8
on the figure 7. In case of no obturating
valve, the excess air coefficient increases in
0
20
40
60
80
100
function of load. The mixture is rich at low
Fig. 7: Characteristic curves of LPG
load but it becomes poor at high load. So,
carburetor
for a correct function at high regime, theengine performance at low load regime is
weak. To improve this problem, we suggest two solutions:
1. Put a manual gas obturating valve downstream of the pressure reducer;
2. Install an automatic gas obturating valve on the guide pipe of gas control device.

b.

a.

d.

c.

Fig. 8: LPG/gasoline bifuel tank componants (a, b), Bifuel system set up (c)and LPG tank (d)- 201 -

In the second case, the fraction mixture is changed automatically with gas valve
open. This solution is more expensive because of high precision of the manufacture of
the obturating valve. For reducing the cost, the first solution in preferred. In fact thefunction of motorcycles can be resumed in two regimes: urban conditions and highway
conditions. The drivers can change position of obturating valve corresponding to roadconditions.

Fig. 9: Different possibilities of LPG/gasoline bifuel system installation on motorcycles

Basing on the principle, we modified the original gasoline motorcycle to bi-fuelLPG/gasoline motorcycle. Fig. 8 shows photos of a real LPG/gasoline tanks. The bestsolution is the “two in one” fuel tank where the LPG tank is put inside the gasoline
original tank.
Figure 9 shows different possibilities of LPG/gasoline bifuel motorcycles. The
structure and the style of the original motorbikes are preserved after the new fuelsystem has been installed.
PERFORMANCE OF LPG MOTORCYCLESThe LPG motorcycle is tested on testing bench and on road with different
operating conditions. The results are as following:- Pollutant emission: Pollution analysis in different operation conditions shows that
the CO, HC concentrations of LPG case are inferior than that of gasoline case. Pollution
reduction rate may reach from 30 to 80%. Reduction rate is much more when engine
load increased. The figure 10 presents the result of CO measure in exhaust gas of LPG
motorcycle in comparison with gasoline case. When the engine speed increases, COconcentration in exhaust gas of LPG motorcycle decreases rapidly while it increases in- 202 -

gasoline case. At engine speed of 60km/h, the concentration of CO in exhaust gas of
LPG driven case reaches only 25% of this value in gasoline driven case.

400

HC

CO
8

HC (ppmV)

CO (%V)

10

6

Gasoline

300

Gasoline
200

LPG

4
100

LPG
2

0

0

20

40

60

80

60 Speed (km/h) 80

Speed (km/h)

Fig. 10: Comparison of CO emission in
exhaust gas of gasoline and LPG motorcycles

Fig. 11: Comparison of HC emission in exhaustgas of gasoline and LPG motorcycles

20

40

The figure 11 presents the comparison between HC concentrations given bygasoline and LPG running cases. At 50km/h, the HC concentration of LPG running caseis about 50% the value given by gasoline running case.

- Engine power and longevity: The
power of LPG engines may be reduced to
10% in comparison with original gasoline
engines if there is no modification of
combustion chamber because of the
reduction of volume efficiency due togaseous state fuel. Since the octane
number of LPG fuel is higher than that ofgasoline, the compression ratio of LPG
engines can be chosen higher. In thiscase, the engine power can be preserved.

Efficiency (km/kgLPG)- Economy: The fuel efficiency of LPG motorcycle is presented on the figure 12.
The average fuel consumption is 1kg LPG/120km in comparison with 3 litters ofgasoline for an 110cc cylinder motorcycle running in the same road conditions. The
users’interest depends on the fuel price policy of each country. Some governments
applied the special tax regime for LPG used for vehicles. In this case the km cost of
LPG running case is much lower than that of gasoline running case. This policy
encourages the utilization of LPG
motorbikes so it is very significant for
250
pollution reduction.
With gas
throttle valve

200
150
100

without gas
throttle valve

50
Speed (km/h)

0
25

30

35

40

45

50

Fig. 12: Fuel efficiency of LPG motorcycle

The durability of LPG motorcycles is better than that of gasoline ones since thegas doesn’t wash away the lubrication film on the surface of cylinder.
CONCLUSIONSThe LPG motorcycle using the fuel system presented in the paper has many
advantages in both environment protection and economic aspect. The application of thiskind of vehicle will certainly reduce urban pollution in countries where motorcycle parks
are important such as in Vietnam.

- 203 -

The application of this solution requires the establishment of LPG supplying
network and it can be developed quickly if the Government applies a special tax policy
to reduce the LPG price for transportation purposes.
This work is funded by the National Fundamental Research Program, Project N o
320604
REFERENCES
1. BUI VAN GA, VAN THI BONG, PHAM XUAN MAI, TRAN VAN NAM, TRAN
THANH HAI TUNG: “Automobile and Pollution”; Publisher EDUCATION, 1999
2. BUI VAN GA, TRAN VAN NAM, TRAN THANH HAI TUNG, HO TAN QUYEN:“Motorbikes using Liquefied Petroleum Gas LPG”: International Conference on
Automotive Technology ICAT’99, pp. 133-139, Hanoi, October 21-24, 1999
3. BUI VAN GA, TRAN VAN NAM, TRAN THANH HAI TUNG, HO TAN QUYEN:“Some experimental results on LPG motorcycle”, Journal of Transport, 5/2000,
pp. 35-37
4. BUI VAN GA, LE VAN TUY, M. BRUN: “Influence of operating parameters on
performances of LPG engine”Journal of Transport, No 10/2000, pp. 27-29
5. BUI VAN GA: “Technology of transformation of gasoline motorbike to LPG
motorbike”MoET research project B00-III-14TD, 2000
6. BUI VAN GA, NGUYEN HUU HUE: “Mixing system for two wheel motorcycle
using LPG”, Journal of Transport, No 12/2000, pp. 44-47
7. BUI VAN GA: “The Two Wheels Motorcycle Running on Liquefied Petroleum
Gas (LPG) : A Solution for Urban Air Pollution in Vietnam”, 6th ASEAN Science
Technology Week, pp. 221, Brunei 17-19 Septembre 2001.
8. BUI VAN GA, TRAN VAN NAM, TRAN THANH HAI TUNG: “LPG
Motorcycles”, ICAT 2002, PROCEEDINGS International conference on
automotive technology, paper 031, Science and Technics publishing house.
9. BUI VAN GA: “Combstion of LPG-air lean mixture and its application on
motorcycle engines”. The ASEM workshop on EU/ASIA Science andTechnology co-operation on clean technology. Hanoi, 3-4 November, 2004

- 204 -

Introduction of Future Study at the Honda R&D

A Presentation for
The Honda Foundation Symposium in Hanoi
At 15:00 on February 28, 2005

- 205 -

1. Introduction
We will look at the Honda R&D’s approaches to environmental issues in the creation of new motorcycles.
In essence, we have focused on how our powertrains can help overcome climatic change and energy issues,
including prevention of air pollution and global warming as well as use of alternate energy source in theface of depletion of fossil fuel reserves. It is important then to develop a technology for cleaner exhaustgas; for lower CO2 emissions through higher fuel economy; and for higher use of regenerable energy.

2. Efforts for Cleaner Exhaust Gas
For further purification of exhaust gas, it is important to adopt a fuel injection system. We at Honda havedeveloped an electronically-controlled fuel injection system called the Programmed Fuel Injection(PGM-FI). The PGM-FI is a Honda’s unique injection control mechanism that supplies engine with fuel atan always optimized air-fuel ratio. The ANF-FI is an example which adopts this PGM-FI system.
2.1 New Model “Wave125FI”
Motorcycles used to rely upon an injection carburetor system in which the carburetor supplies engine with
fuel and air, using negative pressure resulting from reciprocating motion of engine pistons. Our“Wave125FI”model uses, instead, an advanced fuel injection system in which a pressure pump pressurizes
fuel and injects it into the engine.
The PGM-FI for the new “Wave125FI”has five sensors for injection control. Each of them monitors andgathers control information including the state of engine operation, the state of outside air, and the rider’sthrottle operation to dispatch it to a computerized Engine Control Unit (ECU). The ECU then analyzes theinformation from the sensors; determines the best amounts of intake air and fuel to inject; and controls thetiming of injection and ignition for optimized combustion.
The PGM-FI for the “Wave125FI”has three advantages:•

Fits with air-cooled engines;•

Fits with engines started by kick starter;•

Compact in size and simple in design.

2.2 Clean Exhaust Gas
The "Wave 125FI" equipped with the PGM-FI emits CO approximately 1/3, and HC+NOx 1/4 of the 4th
Exhaust Emission Control of Thailand regulation figures, thus attaining a very high level of cleanliness.
The figures are less than half of the 5th regulation figures to be applied in near future.
2.3 Fuel Economy
The "Wave 125FI" maintains the same level of fuel economy in ECE40 mode as the Wave 125, which has
accomplished the remarkable improvement of fuel economy from the Wave110. By accurately controlling- 206 -

the fuel injection volume in the practical revolution ranges, the fuel consumption is reduced, attaining
approximately 6% less fuel consumption from the current Wave 125 in the actual driving tests in Thailand.
Meanwhile in Japan, we introduced this PGM-FI technology in March 2004 for the 4-stroke engine used in
the “Smart Dio Z4 50cc”model. To install the PGM-FI in a small-sized engine, we reduced its size andweight and implemented a microscopic control of fuel flow rate. We also lessened the size and weight of
the ECU, and adopted a 4-valve mechanism for the first time in 50cc scooter engine to optimize power.

3. Efforts to Improve Fuel Economy
We conduct active R&D activities in hybrid technology for motorcycles, four-wheel vehicles, andgeneral-purpose engines. For motorcycles, we have developed a 50cc hybrid scooter prototype. This hybrid
scooter’s internal combustion engine and direct rear-wheel-drive electric motor function in two distinct
modes. In “series”mode, the engine only powers the electric motor. In “parallel”mode, the electric motor
assists the engine. This system has attained more than 160% higher fuel economy from the current scooter
models.
3.1 “Series”Travel Mode
The “series”travel mode is used when rider travels on flat ground and high output is not required; thus, theengine just powers the electric motor. The scooter runs by electric power which is transmitted to the motor
on the rear wheel from the engine.
3.2 “Parallel”Travel Mode
The “parallel”travel mode is used when high output is required. When accelerated, the hybrid powertrain
supplies the engine with additional electric power generated through the regenerative-brake power
generation mechanism, and thus helps save gas consumption.

4. Fuel Cell Technology
For its entire product areas, Honda has been working toward clean fuel cell powertrains in consideration ofswitching from fossil fuel to hydrogen as a future energy source.
4.1 Usability of Fuel Cell Motorcycles
Aiming to market a green, quiet vehicle like bicycle, makers of electromotive motorcycle reduce its size
and weight for ultimate usability. Likewise, Honda aims to create a fuel cell motorcycle as usable asexisting gasoline scooters. For this end, we have chosen a 125cc-class scooter, a mainstream commuter inthe world, as a flagship fuel cell motorcycle. We have lessened the size and weight of the fuel cell stack by
applying our fuel cell stacking technology developed for four-wheel vehicles. We have also applied acentered disposition of electric motor and control unit for a smaller and lighter body.

- 207 -

4.2 New Fuel Cell Stacking
In comparison with the four-wheel FCX-V3, the fuel cell stack for the flagship motorcycle has more thandoubled the volume-power and weight-power densities. These ratios are the highest level in the world.
For a fuel cell to work properly, conductivity must be maintained. To do so, the hydrogen, air, and coolant
in each cell of a stack must be stringently sealed, and its lamination layer load must be kept at an optimallevel. We have thus molded the sealed compartment with the laminated metal-pressed separators in a single
mold while they are used to be assembled separately. The metal-pressed separators are elastic; and bylaminating them, their lamination layer load becomes optimized throughout low and high temperature
ranges.
In addition, the new fuel cell stack is easier to install because it has a simplified, panel-wrapped structure:
We cut the number of parts in half by not using through-bolts and disc springs used to assemble the existing
fuel cells.
4.3 Capability of Starting in Sub-freezing Temperatures
There are chiefly three reasons for the existing fuel cell vehicles to fail to start in sub-freezing
temperatures:•First, the conductivity of hydrogen ion used in fuel cell deteriorates below the freezing point because
sub-freezing temperatures keep hydrogen ions from permeating the fuel cell’s electrolytic films andthus fail to generate electricity.

•

Second, the conductivity on the contact surface of the carbon separator deteriorates because its contact
resistance intensifies as temperature decreases, and thus fails to transmit electricity effectively.

•

Third, the fuel cell stack’s warming ability was such that ionized water freezes before it warms thefuel cell up. Once frozen, the ionized water bars the fuel passage and hinders electricity to reach thefuel cell.

To overcome the first problem, hydrogen ions need to smoothly permeate the electrolytic films on the fuelcells. Against the shortcomings of the existing fuel cells whose conductivity deteriorates in sub-freezing
temperatures, we have developed an “aromatic”electrolytic film whose film resistance is reduced in half ofthat of the existing electrolytic films and capable of working in a sub-freezing condition.
To overcome the second problem, the fuel cells must be stacked in series; otherwise, like in the case of theexisting carbon separators, increasing contact resistance bars efficient transmission of power between fuelcells as temperature becomes lower. To beat these shortcomings, we have developed a metal-pressed
separator whose contact resistance, 1/4 of that of the carbon separators, won’t deteriorate much in a
sub-freezing condition.
The development of the metal-pressed separator helps overcome the third problem: With this we succeededin simplifying the structure of the fuel cell stack, which results in cutting warm-up time in 1/5 compared tothe existing fuel cell stacks.

- 208 -

5. Future Goal: 30% Reduction in CO2 Emissions
With our hybrid capabilities, we see a possibility to market hybrid vehicles with a 30% reduction in CO2emissions. In terms of electric and fuel cell vehicles, we can further reduce CO2 emissions through higher
efficiency in hydrogen production.

6. Conclusion
Honda will host various events and user-participating races in pursuit of better mobilization. We will also
continue to put best efforts in technological and commercial R&D activities. Our motto is “Wise Fun.”Thisshould read: Share fun with our customers in an environmentally wise manner, both today and tomorrow.
Thank you.

- 209 -

- 210 -Summary of SXSH Program

Xuan Hoa Company

Introduction
Name of company: Xuan Hoa Company
Address:
Headquater and Factory No.1:Xu©n Hoµ - Mª Linh - VÜnh Phóc
Factory No. 2 : CÇu DiÔn - Tõ Liªm - Hµ Néi
Tel: 0211.863244 Fax: 0211.863019
No. of staff : 932 people
No. of production units: 6 units
The company produces over 300 product types including bicycle parts,
interior decoration products (i.e. tables, beds, wardrobe etc). Company’sproducts are sold domestically and exported to many countries.
Value of industrial production: nearly VND 200 billion/year
Design capabilities: Office equipments such as tables, chairs, and cabinets ofall kinds .

- 211 -

Focus of evaluation
Automatic Ni-Cr 3 galvanization production chain
Static-electric painting system
Considering the application of SXSH at some stages oftheproduction
chain:
galvanization
chain,
pressorized-air supply system, and water-consuming
and energy-consuming stages that the company isfocusing on.

Implementation results
49 SXSH solutions have been proposed
Number of implemented solutions:45
Number of solutions that needfurther analysis and study: 4
Number of solution unused: 0- 212 -

Interior control: 28
Better process management: 6
Replacement of equipment : 3
Replacement of processes: 4
Circulation re-use: 4

Implemented solutions
I Automatic Ni-Cr 3 galvanization chain
1.1.1. Close water valves at the end of the shift.
1.1.2. Adjusting water valves at appropriate levels.
1.1.3. Applying strict bonus-penalty rules to ensure proper operation according to regulation by
workers.
1.2.1. Recover cooling water.
1.3.1. Recover circulating water at boilers or use for cleaning stage.
2.1.1. Adjusting hangers and hookers optimally for water draining.
2.1.2. Setting time for automatic controllers according to designs.
2.1.3 Controlling components of solution tanks to the standard level.
2.1.4. Hanging galvanized products at the right water draining place.
3.1.1. Improve the recovered amount by condensing recycled solutions and return togalvanization tanks.
3.1.2. Increasing the number of recovering tanks by changing unnecessary cleaning tanks into
recovery tanks (sonic cleaning after Cr galvanization)
4.1.1. Adjusting the air-oil ratio in boilers.
4.1.2. Cooling drying ovens.
5.1.1. Similar to 1.1.3
5.2.2. Improving water treatment at the water tanks of the company.

Implemented solutions
II. Detail zinc galvanization chain.
1.1.1. Changing to reverse cleaning mode.
1.2.1. Adjusting water valves at appropriate level.
1.2.2. Close water valves at the end of the shifts.
2.1.1. Adjusting hangers and hookers optimally for water draining.
2.1.2. Increase water draining time to > seconds10 (due to the factthat the system is manually operated, workers may move thehangers immediately)
2.1.3. Applying strict bonus-penalty rules to ensure proper
operation according to regulation by workers.
2.2.1. Repairing and build new water recovery system between twotanks.
3.1.1. Replace the whole production chain.
4.11. Similar to 5.1.1; 5.2.1- 213 -

Implemented solutions
III. Taiwanese static electric painting chain
1.1.1. Changing to reverse cleaning mode.
2.1.1. Regularly checking chemical and water spaying valves of the surface treatment system.
2.2.1 Controlling components of solution tanks to the standard level.
2.2.2. Hanging galvanized products at the right water draining place.
3.1.1. Technical training and work ethics for workers.
3.2.1. Regular maintenance of painting guns.
3.2.2. Repairing automatic painting system.
3.3.1. Maintenance and upgradation of paint recovery system.
4.1.1. Good production planning to idle chains.
4.1.2. Switch off drying system and conveyor by the end of shift.
4.2.1. Training the workers according to the operation procedures.
4.2.2. Maintenance of equipments and control the burning process of the optimal drying oven..
4.3.1. Removing unnecessary and redundant system.
4.3.2. Maintenance of the whole conveying system.
4.4.1. Reducing the distance between two hangers.
4.4.2. Increasing the numbers of hookers.
4.5.1. Increase the length of the dryers.
4.5.2. Improve the cooling at places of high heat losses.
5.1.1. Install a new phosphatic solution spraying system.

Implemented Solution
IV. Pressorized air supplying system
1.1.1. water cooling circulation system.
V. Company level
1.1.1. Improve interior control, implementing cost saving program in the whole
company.
2.1.1. Improve the lake of whole company into high quality water treatment system
to contain water for production.
2.1.2. Implement the water saving program in the company.
3.1.1. Study to re-use post-treatment drainage water for production.
4.1.1. Improve power supply system for the whole company.
4.1.2. Implement the power saving program in the company.

- 214 -

Implementation results
Total investment capital for SXSH program: VND
212.000.000
Total economic benefits from SXSH program:
VND 1.176.427.115/year
Reduction in water consumption 30%
Power savings 12,6%
Fuel savings 13,3%
Gas savings 9,3%
Reduction in chemicals used 3-5%
Environmental benefits:
Reduction in water drainage 30%
Reduction in emission (CO2) 10%

Lessons learnt
Lessons and experiences obtained from SXSH program
Assistance from Vietnam Painting Production Center(Written by the Company)- 215 -

Thank you- 216 -

Dr.Nguyen Danh Son Co-chair-3 NISTPASSProfessor. Uchida gave an interesting and plausible speech. He introduced
two concepts which may be new are “ecological technology and humanenvironment”. This version translated into Vietnamese is a bit different
compared to English origin. In his opinion, ecological technology is not
only link between technology and ecology but also includes changes intechnology and science mode regarding to the human environment. Firstly,
those changes in science and technology only include raw materials andenergy and then also raw material, energy, information, informatic
technology modes and finally, in 21st century, the last model is to focus
on life of human beings and living quality regarding to worldwide
sustainable development. With such interesting ideas, I hope there arequestions evoked, please write down your full name, email address oroffice fax number so that lecturers can reply in the case we have no time toanswer your questions right now.
Dr . Bui Van Ga’s speech was very attractive and detailed with clear
illustrations. Thank you Prof. Bui Van Ga’s speech so much. Perhaps, youwill agree with me that Dr. Bui Van Ga’s presentation is a good example ofthe importance of technology innovation and improvement in contributing
efficiently for sustainable development in Vietnam.
Mr. Horii’s presentation was technical, we can easily recognize thatbehind the technical terms, his message is full with humanity, living
standard, especially in the last sentence of his speech. I would like to repeat
the slogan of Honda Corporation “Intellectually happy within research
department of Honda Corporation” meaning that beside the technicalspecification, the approaches of Research and Development department isalways related to others requirements that are how to make Honda
Corporation consumers. I believe that this is a good demonstration of theconcept of ecological technology mentioned in Professor Uchida’s talk.

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Mr. Doan Van Bang’s speech is a detailed example in the specific case in
Vietnam. It is a general strategy and a cleaner productive principle in a
specific firm which contribute to environmental protection and economic
advantages of a company in Vietnam. Once more I have to say that thisspeech is compiled with the help of Dr. Tran Van Nhan, Director of
Vietnamese clean production center of Polytechnic University of Hanoi .
We have completed 4 reports within the schedule time in the program.
According to organizers’idea, we would like to spend time to discuss.
Unfortunately, like other parts, our time is limited right now. To guarantee
the time for forum, I warmly introduce Professor. Kunio Nakajima. He will
make conclusions of presentations and comment.
According to the forum’s schedule, we have to discuss. However, we
do not have time enough to discuss and it is the organizers to find ways tosolve the problem in this part. To complete part III, on behalf of organizers,
thank you 4 lecturers for outstanding speeches, participants and Prof. Kunai
Nakajima, my co- organizer. Once more, we long for seeing all of you
again to continually discuss these problems.
On behalf of organizers, I would like to give some remarks to close
our forum. We have one full day of energetic discussion to complete
successfully 3 sessions and have exchanged several crucial problems suchas theory of Balance “Âm Duông”between negative and positive, Dong
Du movement, cooperation between Vietnam and Japan in particular,Southeast Asia and Eastern Asia in general. We have also discuss problems
at micro level on technology of how to manufacture motorbike in thisforum. The main topics of this forum is about linkage between technology
renovation and enterprises which is very necessary for all nations at any
development level. It also indicates closed cooperation between Vietnam
and Japan and between Asian economies in future. To follow this forum, as
forum organizers we will finish all reports for printing and we will also
discuss to exchange with you about our coming activities.

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Finally, I would like to express our sincere thanks the for closed
cooperation from our co-sponsor, Honda Foundation, to participants, andthe organizers, especially the 6 members in Organizing committee whowork day and night to make this forum successful. Without their efforts,
our forum does not achieve this successful result. To our Institute, wewould like to acknowledge Mr. Nguyen Vo Hung, Ms. Chu Thu Ha and Ms.
Nguyen Phuong Mai and Mr. Toshio Ban, Mr.Yutaka Ishihara andMr.Atsushi Sunami from the Honda Foundation who contributed toensuring the success of this forum. By this, I would like to close this forum
today. I wish you all will have a nice evening and enjoyable coming days in
Vietnam.

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- 220 -Kunio Nakajima’s Summary (Session 3)
Hello, I’m Kunio Nakajima. Unlike previous two sessions prior to this one, four speakers
talked in more specific topics. You can see environment and energy construct their chief
concern.
As Dr. Uchida pointed out, the last hundred years called the 20th century brought us a very
good living thanks to mass production of new materials, mass consumption of energy, andve lostthe advancement of computerization. In exchange of better life, however, we’something — something that makes us human. You can name it the integrity of human soul.
In a broader picture, science and technology in the last century made our lives convenient,but the other side of coin was mass destruction of nature and human life in which Vietnam
was one of the biggest victims. We should not forget about widening of the income gap.
Many speakers today mentioned poverty. Poverty is not an intrinsic issue of poor countries;
rather, expanding income disparities entail it.
We have a full line of issues. The issue of war — how we can abolish or reduce it — isalways discussed in the international community through multinational organizations like
United Nations. And after the Environmental Summit in Rio 1993, environment and poverty
concerns became a very serious challenge for UNEP, UN Conference on the Human
Environment, and other world organizations.
Speaking of my country, fortunately 90% of Japanese people identified themselves as a
middle-class person 30 years ago. Those days were a happy age — we bought as many
natural resources as we could afford and discarded them without hesitation. Our 90%
happiness relied upon the extravagance of resources and the damage to the environment.
We then took on antipollution and environmental measures to solve these issues. This is abackground of the auto industry’s efforts as mentioned today. Sentiments of all otherindustries in Japan also are inclined for 3R’
s — Reduce, Recycle, Reuse. We all promoterationalization and efficiency in the production process with less raw materials, energy, andwastes. Similar trends can be found all around the world.

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There were two different stories of scooters. First, I felt the LPG-gasoline bi-fuel motorcycle
which Professor Ga from Danang University of Technology introduced to us would be ahighly innovative product once it comes onto the market. Although technical details are not
to my knowledge, this bi-fuel engine is quite something: This is a good example of local
adaptation of technology that our discussions since this morning suggest; that is, it suits
the regional economic situation and expertise in Vietnam. Probably this topic alone
deserves several or more hours of discussion.
Secondly, Honda engineers from Japan introduced an advanced motorcycle that runs onhydrogen energy. We have seen they have tried various options and reached a fuelinjection system with the highest combustion efficiency that can produce the best mileage.
The last section was about a wastewater treatment system in the coating and galvanizing
plants. The treatment of vast quantities of wastewater has been also a longstanding
problem for Japanese companies, especially small manufacturers. Academic-industrial
alliance teams were formed. They are overcoming it through the reduction of pollution load,
for example, by using a smaller amount of water, recycling and reusing wastewater. As thecoating industry must use nickel and chrome, the alliance teams then developed anenvironmentally benign technology not discarding the waste of used nickel and chrome
outside the plant. Currently used in many sites in the world, as I hear, this technology
becomes a new export item from Japan.
When asked what they expect in the 21st century in various surveys, most of the Japanese
respondents name three things: Suppression of environmental catastrophe, avoidance ofenergy crisis, and personal health. These are not Japan-specific but universal concerns in
the modern world. All the four lectures in the last session were about such universal
concerns, and I learned a lot from the insights of the experts. Although my summary may
be rough and insufficient, I am proud being here to have shared these wonderful
discussions with you. Thank you.

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