Production, Market, Export and FDI in Asian Motorcycle Industry in 2003

Asia-Pacific Ritsumeikan, FOB I type accounts for 93.6% of total Vietnamese garment enterprises, FOB II accounts for 6.4%, and FOB III is almost non-existent.

The fact that Vietnam mainly participates in CMT contracts shows that the actual benefits that Vietnam receives are far from the export value, because the shipments are mainly subcontracts for foreign partners. One of the publicly available information: in 2008, the localization rate of the textile and garment industry was only 37%. In 2009, the figures showed that the localization rate had increased to 5%, reaching about 42%. To put it simply, if the textile and garment export value in 2009 reached 9.1 billion USD, of which the import of raw materials and accessories was up to 5 billion USD. Figures from 3 years ago also show that the textile and garment industry had to spend 5.65 billion USD on imports, mainly fabric (52%), raw materials and accessories (31%), yarn (10%) and cotton fiber (4%). These items are mostly designated by foreign partners to be imported from China, Taiwan and ASEAN countries [ Review of Vietnam's Textile and Garment Industry Integration , 2007].

The above figures, on the one hand, show the modest position of SMEs in the garment industry value chain, on the other hand, show that enterprises from source stages such as cotton yarn production (mulberry cultivation, silkworm breeding, spinning) and weaving are still too weak, not providing much support to garment enterprises. The weaving stage is still the weakest stage in the textile chain: Yarn - Weaving - Garment. The equipment and technology used are still outdated, so textile products are still not competitive enough with imported goods in the domestic market in some items, especially in terms of price, quality and only partially meet the needs of export garments. The limitations in the weaving stage lead to the difficulty of connecting the two initial and final stages: garment and yarn.

However, in recent years, the production volume under FOB contracts has tended to increase. It must also be objectively commented that the localization situation in the textile and garment industry is quite positive compared to the electronics industry. According to the Vietnam Textile and Apparel Association, the inputs of the garment industry such as cotton have met 10% of domestic demand; fibers, yarns

Synthetic: 60%; yarn: 70%; fabric: 50%; accessories: 70%. Short staple fiber products have been able to replace imported goods and are 100% consumed domestically, but long staple fiber products still have to be imported. Currently, some SMEs have produced long staple fiber but the quantity is still small, so they still have to be mainly imported.

FOB III is considered the future development target of Vietnam's textile and garment industry, and the whole industry is aiming for this. However, the current situation is that the fashion design of enterprises is not yet developed. We have not really contributed much value to each garment product, have not built a brand and production efficiency is still low.

Thus, despite certain progress, the position of SMEs in MLSX still stops at processing. The weak capacity of the textile industry is still a limitation that prevents the entire textile and garment industry from moving further up the value chain. In addition, equipment is still rudimentary, design capacity is underdeveloped, marketing capacity is poor and especially SMEs in the textile and garment industry have not really connected to have a specific and consistent development strategy. These are points that need to be overcome because the potential of the textile and garment industry is huge.

2.2.3. In the motorcycle industry

Industries such as textiles, footwear, furniture, electronics or automobiles all have in common the dominance of buyers in developing a global production network to serve the markets of developed industrial countries. In which, leading companies help local suppliers access the markets where they already have a foothold, and require local companies to strictly comply with standards on quality, technology, safety, environment and even labor. The motorcycle industry, on the contrary, focuses mainly on exploiting the market in developing countries with leading companies being large motorcycle companies such as Honda, Suzuki, Yamaha.

The motorcycle industry is known as Asia's industry: 95% of the world's motorcycle production is concentrated in this continent. Notably, the total output of China, Vietnam, Thailand and Indonesia increased from 4.04 million in 1991 to 25.71 million in 2003 (an increase of 536%); the total output of Vietnam, Thailand and Indonesia increased from 1.12 million in 1991 to 5.94 million in 2003 (an increase of 430%). Thus, Southeast Asian countries have become the main dominant countries in the development of the global motorcycle market.

Figure 2.3: Production, market, export and FDI of Asian motorcycle industry in 2003

Source: Mishima, Kohei 2005, p. 2

Although the Vietnamese motorcycle industry is quite young, it has brought Vietnam to the third position among the largest motorcycle manufacturers in Southeast Asia, after Indonesia and Thailand. Since the mid-1990s, foreign companies have entered the Vietnamese market and created fierce competition (Appendix 2). However, the massive penetration of cheap Chinese assembly parts into the

The 2000-2001 Chinese motorcycle boom led to the emergence of more than 50 domestic assemblers (often called the “China Shock”), which transformed the Vietnamese motorcycle industry. Chinese motorcycles assembled in Vietnam were copies or minor modifications of Japanese designs. Although of much lower quality, these motorcycles were sold at a price only 1/3 or 1/4 of that of Japanese companies, exploiting the low- and middle-income market segment – ​​a segment that Japanese and Taiwanese companies had neglected. The penetration of Chinese motorcycles created an incredible market expansion, creating opportunities for Vietnamese assembly enterprises, more than 85% of which were SMEs, to participate in the Southeast Asian MLSX.

Figure 2.4 shows the impact of the “China Shock”. Before that time, Japanese companies had no pressure to increase the localization rate, at least until 2001 when the government policy on localization rate came into effect. At that time, these companies imported almost all components from abroad (especially Japan and Thailand) or from their manufacturing plants in Vietnam. Accordingly, the Japanese production chain included very few local suppliers.

Figure 2.4: Value chain transformation in Vietnam's motorcycle industry

Source: Fujita, Mai 2007, p. 17

After the “China Shock” occurred, a MLSX led by local suppliers was formed. These local suppliers can be divided into many first, second, third tiers to supply assemblers. What we need to consider here is the position of small and medium enterprises in the motorcycle industry value chain.

First of all, although the structure of the supply system of Japanese companies has undergone some changes, the internal relationship of the system is still maintained in a closed form. For original components (related to machines), the leading companies only purchase from their subsidiaries or manufacture in-house. Small and medium-sized suppliers in Vietnam only participate in the supply of non-original components, and also have no influence on the design of these components. At present, Japanese companies only allow suppliers to participate more actively in changing technical standard requirements and selecting raw materials.

A noteworthy fact is that although the number of small and medium-sized Vietnamese component suppliers has increased significantly, product quality management technology has not been widely applied, and there is no sign of specialization in the production of specific components. Most companies produce many different types of components, rather than focusing on improving the quality of certain products [Fujita, Mai 2008, p.12]. Although domestic assemblers need to cooperate with local suppliers in designing components to meet market needs, local small and medium-sized suppliers have not shown signs of readiness, while domestic assemblers are not yet capable enough to help them. This is the reason why most Vietnamese assemblers still depend largely on Chinese component manufacturers.

However, the encouraging fact is that the localization rate of the motorbike industry is ranked among the highest in the industrial production sectors, over 70%. The emergence of domestic assemblers opens the gateway to penetrate the Southeast Asian MLSX for small and medium-sized Vietnamese component manufacturing companies. Although it is only in the initial stage and there is still a lot to do, we have the right to hope for the progress of SMEs in the motorbike component manufacturing industry to separate themselves from dependence on Chinese suppliers, bringing Vietnamese products, both components and complete motorbikes, into the regional and world markets.

2.3. General assessment of the ability of Vietnamese SMEs in the industrial production sector to participate in regional and international MLSX

2.3.1. Labor and management level

According to the 2007 Business Environment report, Vietnam is one of eight countries that have reformed labor policies, creating conditions for businesses to access labor resources and have reasonable policies for employees. However, the problem of accessing highly qualified human resources is still a difficulty for Vietnamese businesses in general and SMEs in the industrial production sector in particular. This is a barrier to

join regional and international MLSX, because without high-quality resources, the competitiveness, innovation capacity and strategic direction of SMEs cannot be upgraded to become part of the high-standard production system of foreign corporations.

According to data from the General Statistics Office, Vietnam's labor supply is abundant, with 45% of the population aged 15 to 34. However, the majority of this labor supply is unskilled labor. Although the rate of illiterate workers is very low, around 3.5%, the rate of untrained workers is high and the quality of labor is uneven across regions. Specifically, nearly 77% of working-age workers have not received vocational training, or have limited vocational skills; the quality of labor in urban areas is higher than in rural areas.

According to a survey of 966 Japanese enterprises on the labor market in ASEAN by the Japan External Trade Organization (JETRO) in Vietnam in 2006, although Vietnam has great potential for cheap labor due to its large proportion of young population, up to 59% of the enterprises interviewed said they had many difficulties in finding middle-level management personnel. According to this report, this is the highest rate in the ASEAN bloc. In other countries, this rate is much lower, for example, in Thailand it is 43.2%, in countries such as Indonesia, Malaysia, and the Philippines it is from 36% to 38%. The fields in which Japanese enterprises are in need of qualified technical staff are mechanics (58.5% of the enterprises surveyed) and electricity/electronics (41.5% of the enterprises surveyed). However, more than half of the surveyed enterprises complained that finding qualified engineers to meet their needs is extremely difficult. Not only the demand for senior and middle management positions but also the demand for skilled technical workers has increased while the supply cannot meet it. According to the results of a survey by the Ministry of Labor, War Invalids and Social Affairs in 2004, the rate of technical workers in all regions of Vietnam is very low (Table 2.7).

Table 2.7: Proportion of workers with technical expertise by region (%)

Region

From elementary level or vocational certificate or higher	Skilled worker art and above
Northwest	11.3	8.5
Red River Delta	31.9	15.1
Southeast	31.8	14.2
Mekong Delta	14.3	6.0
Nationwide	25.5	11.0

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• Pre-tax Profit of Bidv Tien Giang in the Period 2011-2015 zt2i3t4l5ee zt2a3gsnon-credit services, joint stock commercial bank zt2a3ge zc2o3n4t5e6n7ts At that time, the Branch had to set aside a provision for credit risks, which reduced the Branch's income. Chart 2.2. Pre-tax profit of BIDV Tien Giang in the period 2011-2015 Unit: Billion VND 140 120 100 80 60 40 20 0 63.3 80.34 89.29 110.08 131.99 2011 2012 2013 2014 2015 Profit before tax (Source: Report on the implementation of the annual business plan of the General Planning Department of BIDV Tien Giang [24]) However, through chart 2.2, it can be seen that BIDV Tien Giang's profit is still increasing continuously, and its operating efficiency is currently leaking. This is a contribution of non-credit services, and this service segment will be increasingly focused on growth by BIDV Tien Giang to ensure the highest profit safety because credit activities have many potential risks. At the same time, focusing on developing non-credit services is consistent with one of the contents of restructuring the financial activities of credit institutions in the project "Restructuring the system of credit institutions in the period 2011-2015" approved by the Prime Minister in Decision No. 254/QD-TTg dated March 1, 2012 [14]: "Gradually shifting the business model of commercial banks towards reducing dependence on credit activities and increasing income from non-credit services". 2.2. Current status of non-credit service development at BIDV Tien Giang. 2.2.1. BIDV Tien Giang has deployed the development of non-credit services in recent times. Along with the development of the Head Office, BIDV Tien Giang's products and services are constantly improved and deployed in a diverse manner to ensure provision for many different customer groups in the area: individual customers, corporate customers, and financial institutions. Typical services are as follows: Payment services, treasury services, guarantee services, card services, trade finance, other services: Western Union, insurance commissions, consulting services, foreign exchange derivatives trading, e-banking services,... 2.2.1.1. Payment services: In accordance with the Prime Minister's Project to promote non-cash payments in Vietnam [15], banks in Tien Giang province have continuously developed payment services to reduce customers' cash usage habits through card services and electronic banking services such as: salary payment through accounts, focusing on developing card acceptance points, developing multi-purpose cards, paying social insurance by transfer, paying bills through banks, etc. Chart 2.3. Net income from payment services in the period 2011-2015 Unit: Million VND 6000 5000 4000 3000 2000 1000 0 3922 4065 4720 5084 5324 2011 2012 2013 2014 2015 Net income from payment services (Source: Report on the implementation of the annual business plan of the General Planning Department of BIDV Tien Giang [24]) Along with the technological development of the entire system, BIDV Tien Giang has a payment system with a fairly stable transaction processing speed, bringing many conveniences to customers. The results of observing chart 2.3 show that the income from payment services that the Branch has achieved has grown over the years but the speed is not high and the products are not outstanding compared to other banks. Domestic payment products such as: Online bill payment, electricity bills, water bills, insurance premiums, cable TV bills, telecommunications fees, airline tickets, etc. bring many conveniences to customers. Regarding international payment, this is an indispensable activity for foreign economic activities, BIDV Tien Giang is providing international payment methods for small enterprises producing agriculture, aquatic food and seafood that have credit relationships with banks in industrial parks in Tien Giang province such as: money transfer, collection, L/C payment. 2.2.1.2. Treasury services: BIDV Tien Giang always focuses on ensuring treasury safety and currency security, always complies with legal regulations, and minimizes risks in operations such as: counting and collecting money from customers, receiving and delivering internal transactions, collecting from the State Bank (SBV) or other credit institutions, receiving ATM funds, bundling money, etc. BIDV Tien Giang's treasury service management department is always fully equipped with modern machinery and equipment such as: money transport vehicles, fire prevention tools, money counters, money detectors, magnifying glasses, etc. to ensure absolute safety in treasury operations, immediately identifying real and fake money and other risks that may affect people and assets of the bank and customers. In addition, implementing regulation 2480/QC dated October 28, 2008 between the State Bank of Tien Giang province and the Provincial Police on coordination in the fight against counterfeit money, in the 3-year review of implementation, BIDV Tien Giang discovered, seized and submitted to the State Bank of Tien Giang province 475 banknotes of various denominations and was commended by the Provincial Police and the State Bank of Tien Giang province [17]. Chart 2.4. Net income from treasury services in the period 2011-2015 Unit: Million VND 350 300 250 200 150 100 50 0 105 122 309 289 279 2011 2012 2013 2014 2015 Net income from treasury services (Source: Report on the implementation of the annual business plan of the General Planning Department of BIDV Tien Giang [24]) However, as shown in Figure 2.4, income from treasury operations is not high and fluctuates. Specifically, in the period 2011-2013, net income increased and increased most sharply in 2013, then in the period 2013-2015, there was a downward trend. This fluctuation is due to the fact that fees collected from treasury services are often very low and can even be waived to attract customers to use other services. 2.2.1.3. Guarantee and trade finance services: BIDV Tien Giang, thanks to the advantages of the province and the favorable location of the Branch, has continuously focused on developing income from guarantee services and trade finance. Chart 2.5. Net income from guarantee and trade finance services in the period 2011-2015 Unit: Million VND 14000 12000 10000 8000 6000 4000 2000 0 5193 5695 2742 3420 8889 3992 11604 12206 5143 5312 2011 2012 2013 2014 2015 Net income from guarantee services Net income from Trade Finance (Source: Report on the implementation of the annual business plan of the General Planning Department of BIDV Tien Giang [24]) Through chart 2.5, we can see that BIDV Tien Giang's income from guarantee services and trade finance has grown over the years. The reason is: Among BIDV Tien Giang's corporate customers, the construction industry is the industry with the highest proportion of customers after the trading industry, this is a group of customers with potential to develop guarantee services. The second group of customers is corporate customers in the fields of agricultural production, livestock and seafood processing with high import and export turnover in the area. are the target of trade finance development. In addition, BIDV Tien Giang also focuses on continuously developing these customer groups to increase revenue for many other products and services in the future. 2.2.1.4. Card and POS services: As a service that BIDV Tien Giang has recently developed strongly, it can be said that this is a very potential market and has the ability to develop even more strongly in the future. Card services with outstanding advantages such as fast payment time, wide payment range, quite safe, effective and suitable for the integration trend and the Project to promote non-cash payments in Vietnam. Cards have become a modern and popular payment tool. BIDV Tien Giang early identified that developing card services is to expand the market to people in society, create capital mobilized from card-opened accounts, contribute to diversifying banking activities, enhance the image of the bank, bring the BIDV Tien Giang brand to people as quickly and easily as possible. BIDV Tien Giang is currently providing card types such as: credit cards (BIDV MasterCard Platinum, BIDV Visa Gold Precious, BIDV Visa Manchester United, BIDV Visa Classic), international debit cards (BIDV Ready Card, BIDV Manu Debit Card), domestic debit cards (BIDV Harmony Card, BIDV eTrans Card, BIDV Moving Card, BIDV-Lingo Co-branded Card, BIDV-Co.opmart Co-branded Card). These cards can be paid via POS/EDC or on the ATM system. In addition, with debit cards, customers can not only withdraw money via ATMs but also perform utilities such as mobile top-up, online payment, money transfer,... through electronic banking services. In order to attract customers with card services, BIDV Tien Giang has continuously increased the installation of ATMs. As of December 31, 2015, BIDV Tien Giang has 23 ATMs combined with 7 ATMs in the same system of BIDV My Tho, so the number of ATMs is quite large, especially in the center of My Tho City, but is not yet fully present in the districts. Basic services on ATMs such as withdrawing money, checking balances, printing short statements,... BIDV ATMs accept cards from banks in the system. Banknetvn and Smartlink, cards branded by international card organizations Union Pay (CUP), VISA, MasterCard and cards of banks in the Asian Payment Network. From here, cardholders can make bill payments for themselves or others at ATMs, by simply entering the subscriber number or customer code, booking code that service providers notify and make bill payments. Chart 2.6. Net income from card services in the period 2011-2015 Unit: Million VND 3500 3000 2500 2000 1500 1000 500 0 687 1023 1547 2267 3104 2011 2012 2013 2014 2015 Net income from card services (Source: Report on the implementation of the annual business plan of the General Planning Department of BIDV Tien Giang [24]) Through chart 2.6, it can be seen that BIDV Tien Giang's card service income is constantly growing because the Branch focuses on developing businesses operating in industrial parks, which are the source of customers for salary payment products, ATMs, BSMS. Specifically, there are companies such as Freeview, Quang Viet, Dai Thanh, which are businesses with a large number of card openings at the Branch, contributing to the increase in card service fees [25]. Table 2.6. Number of ATMs and POS machines in 2015 of some banks in Tien Giang area. Unit: Machine STT Bank name Number of ATMs Cumulative number of ATM cards POS machine 1 BIDV Tien Giang 23 97,095 22 2 BIDV My Tho 7 21,325 0 3 Agribank Tien Giang 29 115,743 77 4 Vietinbank Tien Giang 16 100,052 54 5 Dong A Tien Giang 26 97,536 11 6 Sacombank Tien Giang 24 88,513 27 7 Vietcombank Tien Giang 15 61,607 96 8 Vietinbank - Tay Tien Giang Branch 6 46,042 38 (Source: 2015 Banking Activity Data Report of the General and Internal Control Department of the Provincial State Bank [21]) Through table 2.6, the author finds that the number of ATMs of BIDV Tien Giang is not much, ranking fourth after Agribank Tien Giang, Dong A Tien Giang, Sacombank Tien Giang. The number of POS machines of BIDV Tien Giang is very small, only higher than Dong A Tien Giang and BIDV My Tho in the initial stages of merging the BIDV system. Besides, BIDV Tien Giang has a high number of cards increasing over the years (table 2.7) but the cumulative number of cards issued up to December 31, 2015 is still relatively low compared to Agribank, Vietcombank, Dong A (table 2.6). div.maincontent .content_head3 { color: black; font-family:"Times New Roman", serif; font-style: normal; font-weight: bold; text-decoration: none; font-size: 14pt; } div.maincontent .p { color: black; font-family:"Times New Roman", serif; font-style: normal; font-weight: normal; text-decoration: none; font-size: 14pt; margin:0pt; } div.maincontent p { color: black; font-family:"Times New Roman", serif; font-style: normal; font-weight: normal; text-decoration: none; font-size: 14pt; margin:0pt; } div.maincontent .s1 { color: black; font-family:"Courier New", monospace; font-style: normal; font-weight: normal; text-decoration: none; font-size: 14pt; } div.maincontent .s2 { color: black; font-family:"Times New Roman", serif; font-style: italic; font-weight: normal; 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Source: Do Duc Binh (2007)

In the manufacturing industry, according to the survey, in Ho Chi Minh City, the scale of university training is as follows: Information Technology is 5,660 people; Electronics is

3,400 people; mechanics is 1,330 people. Meanwhile, according to forecasts, by 2010, the total expected number of workers in the information technology - electronics industry is more than 30,000 workers with university and college degrees.

Thus, the serious shortage of human resources, especially high-quality human resources, is not only happening in the SMEs sector. In addition, SMEs face many difficulties in accessing skilled human resources due to limitations in the use of internal and external financial resources, are not provided with training and education opportunities in business and technology skills, are not allowed to participate in business networks, and face negative impacts from an unfavorable legal environment.

2.3.2. Technology and technical level

Science and technology are always the core issues of a business, including SMEs. The conditions of technological equipment will determine productivity and product quality, helping businesses improve their competitiveness in the market and participate in the global value chain.

According to the Central Institute for Economic Management, most of our enterprises are using technology that is 3 to 4 generations behind the world average. Many SMEs are still using old equipment that state-owned enterprises have discarded, with up to 76% of the machines being outdated.