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Vietnam - Japan economic and trade relations in the international context. Current situation and solutions - 1

FOREIGN TRADE UNIVERSITY

FACULTY OF FOREIGN TRADE ECONOMICS MAJOR: FOREIGN TRADE ECONOMICS

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Vietnam - Japan economic and trade relations in the international context. Current situation and solutions - 1

GRADUATION THESIS

VIETNAM-JAPAN ECONOMIC-TRADE RELATIONS IN THE NEW INTERNATIONAL CONTEXT: CURRENT SITUATION AND SOLUTIONS


Instructor : Dr. BUI NGOC SON

Student : NGUYEN THI THU TRANG

Class : A9 - K41C - KTNT

FOREIGN TRADE UNIVERSITY

FACULTY OF FOREIGN TRADE ECONOMICS

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Topic:

GRADUATION THESIS

VIETNAM-JAPAN ECONOMIC-TRADE RELATIONS IN THE NEW INTERNATIONAL CONTEXT: CURRENT SITUATION AND SOLUTIONS


Instructor : Dr. BUI NGOC SON

Student : NGUYEN THI THU TRANG

Class : A9 - K41C - KTNT

Graduation thesis


PREFACE

Going back in history, we can see that Vietnam and Japan have had trade relations for hundreds of years. As early as the 16th century, many Japanese merchants came to do business in Vietnam. History books say that at its peak, there were more than 600 Japanese merchants settling in Vietnam and forming the "Japanese Quarter", building the Japanese Bridge in Hoi An. Nearly five centuries have passed, going through many wars, the relationship between the two countries has also had many ups and downs. Since the Vietnam - Japan diplomatic relations were officially established in September 1973, trade relations between the two countries have had favorable conditions to develop. Especially since Vietnam implemented the policy of renovation, opening the domestic market, developing a socialist-oriented market economy (in 1986), trade relations have been expanded to the investment sector. In 1991, Japan resumed aid to Vietnam, marking an important step forward in economic and trade relations between the two countries.

Vietnam's renovation with dynamic foreign economic development policies, in line with the development trend of the times and the interests of both Vietnam and Japan, plus a favorable international environment, are the most fundamental and important factors promoting the economic and trade relations between the two countries to develop more strongly, dynamically and more stably. Currently, Japan is Vietnam's second largest trading partner after the US with a total import-export turnover of 8,504 million USD in 2005, and is Vietnam's largest ODA supplier with a committed aid amount of 11 billion USD up to 2005, accounting for 30% of the total ODA volume that the international community has provided to Vietnam. In addition, Japan is also the third largest FDI investor in Vietnam after Singapore and Taiwan with a total registered investment capital of 6.8 billion USD as of August 2006, but ranked first with realized capital: 4.7 billion USD. Currently, Vietnam is waiting for the second largest investment wave from Japan. This time, it is from small and medium-sized companies operating in the field of assembly, equipment manufacturing, and supporting companies for large corporations that have been doing business successfully in Vietnam in the past. Official visit


Prime Minister Nguyen Tan Dung's visit to Japan from October 18-22, 2006 has raised the already good relationship between the two countries to a new level. Being the first head of state that the new Japanese Prime Minister, Shinzo Abe, welcomed in the land of cherry blossoms, being the only Prime Minister of the year invited to greet Emperor Akihito, and being the first Vietnamese Prime Minister to speak before the Japanese National Assembly has shown Japan's special interest in relations with Vietnam in general and in economic and trade relations in particular.

In the context of increasing globalization; the modern industrial economy has entered a mature stage to make way for a new economy - the knowledge economy; the process of regional integration is taking place strongly in East Asian countries with the emergence of bilateral and multilateral links with the central role of ASEAN, the rapid growth of China in all economic, political, scientific and technological fields is threatening the leading position in the "flying cranes" model of Japan; the successful future of the ASEAN Free Trade Area (AFTA), the economic and trade relations between the two countries cannot avoid certain influences. This is also the reason why I chose the topic "Vietnam - Japan economic and trade relations in the new international context: current situation and solutions" as the topic for my graduation thesis.

The purpose of the thesis is to apply the accumulated knowledge to analyze the current state of Vietnam-Japan economic-trade relations in recent times, thereby proposing solutions to promote that relationship in the context of economic and political fluctuations.

The subject and scope of the thesis research are mainly trade relations, direct investment and ODA from Japan to Vietnam in recent years.

Research method : The thesis is built by using a combination of research methods, mainly dialectical materialism and historical materialism, the state's perspective on trade,


Foreign direct investment in Vietnam & regulations on receiving, managing and using ODA. In addition, the author also uses synthetic research methods such as: synthesis analysis, statistics, comparison.

Structure of the thesis :

The thesis includes 3 main chapters.

Chapter I: The objective necessity of promoting Vietnam - Japan economic and trade relations in the new international context

Chapter II: Current status of Vietnam - Japan economic and trade relations in recent years

Chapter III: Solutions to promote Vietnam - Japan economic and trade relations in the coming years

I hope that this thesis will contribute to providing an overview of the Vietnam-Japan relationship in terms of trade, direct investment and ODA, accurately pointing out the causes leading to the fluctuations and at the same time proposing appropriate solutions to promote the economic relationship between the two countries. As a student about to graduate, I really hope that this thesis will be a research project that helps me complete the training program of the Foreign Trade University.

During the process of carrying out this topic, I have received the enthusiastic guidance and instruction of Professor Dr. Bui Ngoc Son, along with the valuable help of the staff of the Information Center of the Ministry of Trade and the Institute of Japan and Northeast Asia Studies. I would like to sincerely express my gratitude to the Professor, and to the individuals, organizations, and those who have helped me complete this thesis.


Student Nguyen Thi Thu Trang


CHAPTER I‌‌

THE OBJECTIVE NECESSITY OF PROMOTING VIETNAM-JAPAN ECONOMIC AND TRADE RELATIONS IN THE NEW INTERNATIONAL CONTEXT

I. TRENDS OF TRADE LIBERALIZATION, REGIONALIZATION AND ECONOMIC GLOBALIZATION PROMOTE THE DEVELOPMENT OF ECONOMIC AND TRADE RELATIONS BETWEEN COUNTRIES

1.1 Trade liberalization, regionalization, and globalization are inevitable objective trends of world economic development.

Throughout thousands of years of history, human society has lived in poverty and backwardness. But in just a few hundred years, the development of the market economy has reversed the production methods and lifestyles of many nations, bringing about unprecedented economic growth and scientific and technological development.

During that historical process, the world witnessed two important turning points in economic relations: the emergence and development of market economy in some countries leading to the formation of international economic relations in certain regions and the second turning point took place in the 70s and 80s of the 20th century with two revolutions: the new scientific and technological revolution and the third industrial revolution. The converging power of these two revolutions has transformed the industrial economy into a knowledge economy, transforming the internationalization process into the globalization process. This strong development, objectively, has raised the requirement to expand the market to a new level, by new methods. From there, the concept of "economic globalization" appeared. It can be said that Mac was the first to discover this objective process when he wrote: "Large-scale industry has created a world market, replacing the previous isolated state of

Localities and ethnic groups are still self-sufficient, we see the development of common relationships and common dependence between ethnic groups" 1

Economic globalization is understood as a process of gradually eliminating the closed and isolated state between economies, leading to the unification of the international environment, in which each country has a certain position in the process of forming and establishing relationships, community behavior, criteria and laws, mechanisms and community order.


1 Dang Thuy Duong (2006), Economic globalization: approaches, opportunities and challenges, Journal of Industrial Policy Strategy - No. 5/2006., p. 36


Economic globalization appears with the development of commodity economy, domestic markets of many countries are expanded and unified. Production forces are constantly developing, labor productivity is improved, capital accumulation is large, science and technology are constantly improving, modern means of transportation and communication are increasingly developed, the need to expand production and find markets is increasingly greater. Therefore, economic globalization increases as an inevitable objective result.

Basic manifestations of economic globalization trend:

- Global production activities: To develop a national economy, a country needs four basic economic factors: natural conditions, labor, capital and science and technology. No country in the world has all four of the above factors, so to develop the economy, countries need to exploit external advantages to overcome internal economic limitations. This requires countries to participate in the division of labor and international exchange. The division of labor and international cooperation are becoming increasingly deeper and closer, the labor force of each country becomes an indispensable link in the international division of labor system. If in the past a country only focused on producing one or several products in which it had a comparative advantage, today many countries participate in producing a product. According to the OECD report, 90% of products of countries today have the participation of two or more countries. Indeed, rice is produced by Vietnamese farmers, but fertilizers are imported from Indonesia, China, and pesticides from Thailand. More typically, to produce a Boeing aircraft, the participation of 650 companies located in more than 30 countries is required. The division of labor in recent years has many new characteristics: from the traditional division of labor based on natural resources in countries to a global division based on modern technology. The mechanism for forming the division of labor has also changed from a division determined by the market to a division determined by multinational companies, regional economic links, and trade agreements signed between parties. The development of international division of labor has formed a global production network, each country becomes a part of that production, this helps to promote the comparative advantages of each country, save social labor, production factors are allocated reasonably, thereby improving social production efficiency at the national and world scale.


- The increasing interdependence between economies: along with the process of economic globalization is the rapid increase in investment and trade activities between countries, thus creating a situation of intertwined interests between countries. A small fluctuation in a country can affect the global economic system. The extent of the impact depends on how deeply the country is integrated into the world economy. The oil crisis in the 70s, the 1997-1998 financial and monetary crisis in East Asian countries, and the constant fluctuations in oil prices in recent years are vivid and typical examples of the interdependence between economies. The domestic market of a country exists as both an input market and an output market of the global economy, and in turn, the global economy is the place to provide input factors and consume output factors for the national market.

- Trade activities between countries are increasing: if in 1994 the total world trade turnover was 8090 billion USD (the first year the world's import-export turnover exceeded 8000 billion USD), then according to the WTO report, by 2006 this figure had increased to 10,000 billion USD. Most countries in the world, especially developing and underdeveloped countries, also advocate taking the world market as the foundation for planning economic development strategies. According to WTO statistics (2000), nearly 20% of products manufactured in countries are brought to the world market.

- Investment activities have developed globally: In recent years, direct investment has grown rapidly in scale and attracted all countries in the world. International investment activities aim to exploit the advantages of countries in investment while fighting against trade protection barriers. The phenomenon of mutual investment between developed industrial countries, between developed industrial countries and developing countries, and between developing countries is increasing. Liberalization of international investment has become the goal of the growth investment policies of countries. International investment has developed rapidly. The stock markets of developed and developing countries attract billions of USD each year and this is considered an effective indirect investment method. Thanks to the achievements that the internet brings, payments between markets are carried out quickly.

- The expansion of multinational corporations. In recent years, multinational corporations have increased in size and number. These companies are increasingly

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