ROLE OF STATE IN THE DEVELOPMENT OF VIETNAM’S AUTOMOBILE INDUSTRY FOR THE PERIOD 2011 - 2020

SOLVAY-BRUSSELS SCHOOL OF ECONOMICS AND MANAGEMENT NATIONAL ECONOMICS UNIVERSITY Vietnam – Belgium Master Programs MASTERS IN PUBLIC MANAGEMENT AND ECONOMICS FINAL PROJECTROLE OF STATE I

SOLVAY-BRUSSELS SCHOOL OF

ECONOMICS AND MANAGEMENT

NATIONAL ECONOMICS UNIVERSITY

Vietnam – Belgium Master Programs MASTERS IN PUBLIC MANAGEMENT AND ECONOMICS

FINAL PROJECTROLE OF STATE IN THE DEVELOPMENT OF VIETNAM’S AUTOMOBILE

INDUSTRY FOR THE PERIOD 2011 - 2020

Prepared by: Hoa Ngoc Tu Supervisor: Do Thi Hai Ha PhD

Hanoi 2011

me in all the time of research for and writing of this thesis.

I would like to sincerely thank to the Ministry of Industry and Trade fortheir kind support to help me accomplish this thesis The officials of this ministryhas shown their great assistance in providing me with the effective data

I am profoundly grateful to Prof Daniel Van Houtte , Dr Nguyen Thi ThanhHuong and many other professors of the Master course for their interesting andinsightful lectures

Especially, I would like to give my special thanks to my father – in –law, mywife and my daughters who were so kind to be by me all the time, helping me tocomplete this final project as well as all of my Master course

Ha noi, 24 March 2011

Hoa Ngoc Tu

TABLE OF CONTENTS

ACKNOWLEDGEMENT 1

TABLE OF CONTENTS 2

LIST OF ABBREVIATIONS 4

LIST OF TABLES & FIGURES 5

Chapter 1 INTRODUCTION 6

1.1 RATIONALE 6

1.2 RESEARCH OBJECTIVES 7

1.3 RESEARCH METHODOLOGY 7

1.3.1 Research methods 7

1.3.1.2 Main factors influencing Vietnamese automobile industry: 9

1.3.1.3 Assessment of role of the government: 10

1.3.1.4 Recommendations to improve the current situation: 11

1.3.2 Data collection 11

1.4 SCOPE OF RESEARCH 11

1.5 PROJECT STRUCTURE 12

Chapter 2 OVERVIEW OF VIETNAM’S AUTOMOBILE INDUSTRY 13

2.1 THE FORMATION AND DEVELOPMENT OF VIETNAM’S AUTOMOBILE INDUSTRY 13

2.1.1 Development of car assembly joint venture enterprises 13

2.1.2 Development of domestic automobile manufacture/assembly enterprises 16 2.1.3 Vietnam’s domestic automobile market 17

2.2 CONTRIBUTION OF VIETNAM’S AUTOMOBILE INDUSTRY 18

2.2.1 Contribution to economic development through investment 18

2.2.2 Contribution to state budget 19

2.2.3 Creating jobs 20

2.2.4 Technology transfer 20

2.3 FACTORS AFFECTING THE DEVELOPMENT OF VIETNAM’S AUTOMOBILE INDUSTRY 21

2.3.1 Internal factors 21

2.3.2 External factors 22

Chapter 3: ROLE OF STATE IN THE DEVELOPMENT OF VIETNAM’S AUTOMOBILE INDUSTRY 25

3.1 STATE’S ORIENTATION ON THE DEVELOPMENT OF VIETNAM’S AUTOMOBILE INDUSTRY 25

3.2 DEVELOPMENT OF STRATEGY FOR THE AUTOMOBILE INDUSTRY 26

3.3 INCENTIVE POLICIES 26

3.4 SUPERVISION ON REGISTRATION AND QUALITY CONTROL 27

3.4.1 Government apparatus 27

3.4.2 Assessment of coordination among government apparatus 29

3.5 OVERALL ASSESSMENT OF STATE’S REGULATIONS ON THE DEVELOPMENT OF VIETNAM’S AUTOMOBILE INDUSTRY 30

3.5.1 Achievement 30

3.5.2 Shortcomings 31

3.5.3 Reasons for shortcomings 31

3.5.3.1 Internal factors 31

3.5.3.2 External factors 32

Chapter 4: RECOMMENDATIONS FOR IMPROVING STATE’S REGULATION ON THE DEVELOPMENT OF VIETNAM’S AUTOMOBILE INDUSTRY FOR THE PERIOD 2011 – 2020 33

4.1 FORECASTING THE TREND OF DEVELOPMENT OF VIETNAM’S AUTOMOBILE INDUSTRY IN THE PERIOD 2011-2020 33

4.1.1 Three main trend for global automobile industry: 33

4.1.2 Development orientation by government in other countries for development of automobile industry 34

4.2 DEVELOPMENT ORIENTATION FOR VIETNAM’S AUTOMOBILE INDUSTRY 35

4.3 RECOMMENDATIONS FOR IMPROVING STATE’S REGULATION ON THE DEVELOPMENT OF VIETNAM’S AUTOMOBILE INDUSTRY FOR THE PERIOD 2011 – 2020 36

REFERENCES 43

LIST OF ABBREVIATIONS

ASEAN: The Association of Southeast Asian NationsCP: Government

GDP: Gross Domestic Product

R&D: Research and Development

SUV: Sport Utility Vehicle

VAMA: Vietnam Automobile Manufacturer AssociationWTO: World Trade Organization

2.5: Engine capacity of 2.5 liter

LIST OF TABLES & FIGURES

Table 2.1 Establishment of car assembly joint venture companies in Vietnam 13Table 2.2 The sale of cars of VAMA’s members in 2010 17Table 2.3 Comparing prices between domestic cars and foreign cars(brand new cars) .18Table 2.4 Investment capital of some VAMA’s members 19Table 2.5 Contribution to state budget from car manufacture joint venture enterprises 19Table 2.6 Number of employees working in car manufacture joint venture enterprises 20Table 2.7 Comparing income of employees in Vietnam and in other countries 21Table 2.8 Number of annual exported cars 23

ANNEX 1 Establishment of car assembly joint venture companies in Vietnam 38ANNEX 2 Comparative automobile tariff cuts – WTO, CEPT and VN-Japan FTA 42

Chapter 1 INTRODUCTION 1.1 RATIONALE

According to Decision No 177/2004/QD-TTg dated October 05th, 2004,promulgated by The Prime Minister, approving the planning on development ofVietnam’s automobile industry till 2010, with a vision to 2020, Vietnam has to achievethe goal of developing Vietnam’s automobile industry by acquiring and applyingworld’s advanced technologies By exploiting and gradually improving existingtechnologies and equipment, Vietnam’s automobile industry, at first, has to meet most

of the requirements of domestic automobile market, and then, moving toward exportingautomobile and accessory Specific goals need to be achieved:

- Popular automobiles: meet 40-50% of the domestic demand in terms of quantityand get a localization rate of 40% by 2005; meet above 80% of the domestic demand interms of quantity and get a localization rate of 60% by 2010 (For engines, thelocalization rate shall reach 50% by 2010, and for gearbox, it shall reach 90% by 2010)

- For special-use automobiles: meet 30% of the domestic demand in terms ofquantity and get a localization rate of 40% by 2005; meet 60% of the domestic demand

in terms of quantity and get a localization rate of 60% by 2010

- For high-class automobiles: Tourist cars manufactured by joint ventures mustreach the localization rate of 20-25% by 2005, and 40-45% by 2010 For high-classbuses, the localization rate shall reach 20% by 2005 and 35- 40% by 2010, meeting 80%

of the domestic requirement

Although specific goals were set, almost all of the goals have not been met tillnow For instance localization rate just reaches 12% and the prices are too highcompared to the income of Vietnamese It could probably be caused by many differentreasons, among of which the main reason is we did not foresee the difficulties andcomplexity of automobile industry For example, Thailand, a leading country in EastAsia in automobile manufacture with production of 1.2 million vehicles/year, does nothave its own brand name cars It does not mean that Thailand automobile industry isunderdeveloped because it has 700 car components manufactures and 1000 auxiliarymanufacturers, turning Thailand into a reliable supplier to most of car manufacturers inthe world

In China, automobile industry has been developed for 30 years and protected bythe government Till now, there are just few so-called “big manufacturers” out of 2500car manufacturers and car components manufacturers in China Annual turnover ofChina’s Automobile Industry is lower than car sales of a medium-sized carmanufacturer in Japan, USA or Europe

In India, the first car appeared in 1898 Since then, India has attached specialimportance to development of automobile industry However, due to its economiccharacteristics, cars manufactured in India serve middle class or lower classes only

India automobile industry is more and more developing and becomes a “power” inautomobile industry worldwide India is now the second biggest motorcyclemanufacturer in the world; ranks 11th in manufacturing tourist cars and ranks 13th inmanufacturing commercial cars India is now an ideal destination for many bigmanufacturers in the world and realizes its ambitions to be a leading center forautomobile manufacturing in 2016 with “Action Plan of Motors” Its goal is to reachproduction of 32 million vehicles in period of 2015-2016 with total investment of 35-40billion US dollars.

Above analyses help to produce the judgment that it takes many years to developour automobile industry, depending on the development of our economy and on relatedindustries Therefore, it is necessary to analyze development ability of Vietnam’sautomobile industry based on its current status, requirements and ability to satisfy therequirements

1.2 RESEARCH OBJECTIVES PROBLEMS

The objectives of the project is to access the role of Vietnam’s Government in thedevelopment of Vietnam’s automobile industry, then propose comprehensiveGovernment’s solution to develop Vietnam Automobile Industry for the period of 2011-

2020 This project focuses on indentifying the following issues: To get the goals set for

the period of 2011-2020, some research problems to be implemented are as follows:

1 Current status of Vietnam’sAutomobile automobile Industryindustry;

2 Requirements forFactors affecting the development of developing automobileindustry; and

3 Government’s role in developing automobile industryAbility to satisfy therequirements

Throughout this thesis, the roles played by the following actors and theinteractivity of these actors will be analysed carefully

The approaches undertaken have helped identify the following findings:

1.4.23.1.1 Actors involving in the Vietnamese automobile industry

Government: The government has played a significant role in Vietnamese

automobile industry Through the tax policies, protectionism policies, environmentrules, liberalisation of automobile sector (under its FTA negotiations) and infrastructuredevelopment, the ministries and agencies of Vietnamese government has createdsubstantial influence on the industry

Domestic car makers: The domestic car makers comprises mainly two groups.

They are joint venture companies between a Vietnamese partner and a FDI enterprise.These joint ventures companies in fact mainly assembled cars based on the supplies ofcar parts imported into Vietnam

Cars importers: They include two main groups as follows: importers of

Completely Built Units (CBU vehicles - - brand new cars), and importers of used cars.Currently, the car importers operating in Vietnam are mainly Vietnamese tradingcompanies, but there is a tendency showing that some domestic car makers areexpanding their business to importing CBU

Cars importers;

Association(VAMA)Accessory industry

CONSUMERS

Association: The Vietnam Automobile Manufacturing Association (VAMA) is

the only one association represeting the car makers and car importers By the end of

2010, VAMA had eighteen members This association is having a stronger voiceinfluencing the government’s policies Nonetheless, its recommendations about policies

to the government are mainly encouraging protectionism because the VAMA members,most of them are car makers, enjoy lots of benefits from protectionist policies

Accessories industry: Vietnam has a very premature accessories industry which

lack capital, advanced technologies, and skilled workers Most importantly, theaccessories industry of Vietnam fails to create a strong link with car makers, and at thesame time does not have a development strategy for itself

Consumers: The role of Vietnamese consumers in this respect are evolving rather

quickly They are moving from preference for cheap used cars to the choice of mediumpriced vehicles as their income get improved in the recent years However, besides theimproving purchase power, Vietnamese consumers have not yet had an influential voice

to protect themselves because of the limited role played by the Vietnamese ConsumersProtection Association

1.4.33.1.2 Main factors influencing Vietnamese automobile industry:

SWOT analysis, as described briefly in the table below, will go closely with alldetails of this thesis In particular, SWOT is conducted to analyze strengths, weaknesses,opportunities and threats of Vietnam’s automobile industry tThe factors reflecting theenvironment in whichinfluencing Vietnam’s the automobile industry operates are moreclearly seen through the SWOT analysis

STRENGTHS

Hardworking and cheap labour;

Strongly commited government;

WEAKNESSESlack of capital;

backward technology;

inadequate management skills;

under-developped accesory industry; OPPORTUNITIES

Improving incomes of people;

Huge market of 86 million people;

Potential exports of CBU and car parts

under existing and future FTAs;

THREATSInadequately coordinated/ even conflictinggovernment policies;

Substantial tariff cuts for CBU and carparts under Vietnam’s international tradeliberalisation commitments (WTO, CEPT,BTA, VJEPA)

Key factors affecting the development of Vietnam’s automobile industry are:

Government direct policies: The policies enacted by the government of Vietnam

create the strongest direct and indirect influence on the situation of the automobileindustry Strong protectionist policies on tariffs, mostly seen before 2007, the year whenVietnam officially joined the World Trade Organisation, and particularly before 2000induced the establishment of many domestic car makers Meanwhile, the tradeliberalisation policy of the government, which commenced with Vietnam’s WTOmembership in January 2007 and intensified with the signing of several FTAs (CEPTwith China and ASEAN, Vietnam-Japan FTA, FTA between Vietnam and Australia-New Zealand…), has resulted in the growing number of trading companies operating incars importation

Government indirect policies: The indirect policies of the government such as

stimulus measures applied by the government in 2009 and 2010 have shown significantincrease in the purchase of cars At the same time, pending policy on environment tax(which is under the discussion of the National Assembly in a draft Law onEnvironment) is believed to create discouragement to car users The government’sinvestment in construction of roads a bridges are certainly influencing the consumers’decision on buying cars

Technology and capital availability: This factor depends a lot on foreign

investors In fact, most of the technologies currently used by domestic car joint venturesare not advanced Model of cars assembled in Vietnam are often two years later thanthose made in foreign countries Regarding capital source, Vietnamese car assemblingjoint ventures depend a lot on foreign partners with as much as 70% of the capitalcontributed by foreign partners The under-developed accessories industry of Vietnam,which lacks both capital and technologies, is strong evidence for the weakness of theautomobile industry in this respect

Consumers’ habits and income: Vietnamese consumers’ income is improving

quickly from a GDP per capita worth USD331 in 1996 to more than USD1156 in 2009

As a result, more and more Vietnamese people can afford a car Importantly, becausethe number of people having cars in Vietnam presently is relatively low, thus thepotential of this market is huge The consumers’ habit has similar importance onbusiness decisions of car makers and importers

To determine the appropriate role of the government in developing the automobileindustry of Vietnam, the above factors should be taken into full consideration

1.43.4 1.3 Assessment of role of the government:

The gGovernment’s decision on supporting the development of Vietnam’sautomobile is legitimate and right given the important source of tax collection, jobs

creation, and the industrialisation and motorisation targets However, the policies taken

by the government are not well-coordinated and not visional The policies are evenconflicting and keep changing during different periods of time which are demonstratedthrough the changing import tariffs, special consumption taxes, and changingorientation of priortised types of vehicles Now time does not support the government ofVietnam especially since Vietnam signed a number of FTAs with foreign partners, inwhich bound rates for CBU cars of below 9 seaters are foreseen to be 60% in 2013 to0% in 2018 under the CEPT

The government is now facing a big question: (i) continuing its support to

domestic car makers, so that Vietnam may have a car brand Made in Vietnam in future;

(ii) and/or developing a strong accessories industry to become part of the regionalsupply chain of car parts It is crucially important to have a secure and visional answer

to this question sooner rather than later The analysis, as presented later in this thesis,has proved that the policies taken by the government of Vietnam so far are inconsistentand partially unsuccessful

1.4.53.1.4 Recommendations to improve the current situation:

The government of Vietnam should review the development strategy forautomobile industry in a practical manner and well-connected with its macrodevelopment policies Priorities should be given to development of accessories industrywhere Vietnam can reap considerable benefits from its participation in the regionalsupply chain of car parts At the same time, the government should maintain aconsistent support to two types of vehicles affordable to and mostly used by Vietnamesepeople They are: (i) the first type of car recommended in this thesis is five-seaterssedan below 1 litre engine This type of cars is friendly to environment, cheap price, andnot subject to any commitment of FTAs liberalisation; (ii) the second type of vehicles/cars is bus of 30 seaters, which can be used more efficiently in future given the demand

of public means of transport

1.3.2 Data collection

The data for this project is collected from two main sources: primary data andsecondary data

 Primary data is collected through in-depth interview with government officers,

car makers and consumers

 Secondary data is gathered from official reports, company profiles, website,

annual business reports, magazines, etc

1.54 SCOPE OF RESEARCH

Research objectives:

Research objectives of this thesis are problems related to Vietnam’s automobile

industry including manufacturing sector, supporting industries, sale and import,supporting policies of the state.

The research focuses on the elements of Vietnam's automobile industry On thebasis, appropriate and feasible solutions to develop are proposed

1.5 PROJECT STRUCTURE

The thesis consists of 04 main chapters:

1 Chapter 1: INTRODUCTION

2 Chapter 2: OVERVIEW OF VIETNAM’S AUTOMOBILE INDUSTRY

3 Chapter 3: ROLE OF STATE IN THE DEVELOPMENT OF VIETNAM’S

AUTOMOBILE INDUSTRY

4 Chapter 4: RECOMMENDATIONS FOR IMPROVING STATE’S

REGULATION ON THE DEVELOPMENT OF VIETNAM’S AUTOMOBILEINDUSTRY FOR THE PERIOD 2011 – 2020

5 Conclusions

Chapter 2 OVERVIEW OF VIETNAM’S AUTOMOBILE INDUSTRY

2.1 THE FORMATION AND DEVELOPMENT OF VIETNAM’S AUTOMOBILE

Until now, there are 18 automobile enterprises nationwide joining in VietnamAutomobile Manufacturer Association (VAMA), not including some other automobilemanufacturers such as 1/5 motor factory, JRD motor factory, Cuu Long motor factory,etc

It can be said that the formation of joint venture enterprises which specialize inmanufacturing, assembling cars in Vietnam recognizes Vietnam as a potentialautomobile market

2.1.1 Development of car assembly joint venture enterprises

Table 2.1 Establishment of car assembly joint venture companies in Vietnam

No Car makers/ status of capital Status of Operation

1 Mekong auto company:

- JV between Vietnam, Japan, and

2 Vietnam Motor Corporation (VMC):

- JV between Phillipines and Vietnam;

- Operation started in 1992

- Operation continues;

- Type of Business: car assembling;

3 Vietnam - GM Deawoo (VIDAMCO):

- JV between Vietnam and South Korea;

- Operation started in 1996;

- Operation continues;

- Type of business: Car asembling;

4 Vina Star Motors Corporation:

JV between Vietnam, Malaysia and

5 Mercedes Benz Vietnam:

JV between Vietnam, Germany,

6 Daihatsu Vietindo (Vindaco):

JV between Indonesia and Vietnam

JV between Vietnam and Singapore

- License withdrawn;

13 Hino Motors Vietnam:

JV between Vietnam and Japan

- Operation started in 1996;

- Operation continues;

- Type of business: Car asembling and CBU import;

14 Nissan TCM Vietnam Co., Ltd:

JV between Vietnam, Denmark and

18 Truong Hai Motor:

100% invested by Vietnamese private

Source: Ministry of Planning and Investment

We find that most of the world’s leading car manufacturers from three automobilecenters of USA, Europe and Japan are present here in Vietnam Total investment capital

is over 700 million USD, total legal capital is over 400 million USD and total designedcapacity is about 200,000 cars/year Joint venture enterprises play a key role inautomobile industry They turn Vietnam’s Automobile Industry from zero into fulfillingdomestic automobile demand

State-owned enterprises such as Transinco, Veam also contribute to development

of Vietnam’s automobile industry although their contribution is still small We havenow 52 domestic enterprises involving in assembling vehicles but the production is stilllow and the technology is still underdeveloped Therefore, referring to Vietnam'sautomobile industry, most people only talk about the operation of 11 automobilemanufacture/assembly joint-venture enterprises

On the other hand, production and assembly of automotive joint venturecompanies in Vietnam has not shown modernity in automobile manufacturing Astandard car factory must have at least four basic processes, including stamping,welding, painting and assembly, whereas the automobile joint ventures in Vietnam(except for Toyota which has stamping process) have only 3 last processes (welding,painting and assembly) All these 3 processes do not require high technology, thus notimprove the localization rate of products

After this period, the joint ventures develop more car styles, pay attention toimporting cars (e.g., Mercedes, Toyota) Besides, there are some motorcyclemanufacturing joint ventures investing in automobile production They are VMEP andHONDA These joint venture companies have created a quite busy automotive market

in our country

2.1.2 Development of domestic automobile manufacture/assembly enterprises

After the appearance of the car manufacturing joint venture enterprises, domesticautomobile factories have gradually formed and developed as Truong Hai, Vinaxuki,Cuu Long, Veam, etc

In domestic car assembly enterprises, they focus primarily on light trucksproviding mainly for domestic market and avoiding competition with other brands ofjoint venture enterprises such as Truong Hai with Proto, Force; Xuan Kien withVinaxuki; Cuu Long with TMT Afterwards, some domestic factories have begun toassemble individual cars (sedans) with little-known and low price brands such as XuanKien with Chinese brands, Truong Hai with Kia, Hyundai (Korea) and more recently,Mazda (Japan)

Overall, the domestic automobile factories are less developed, they only specialize

in car assembly, and they do not have private car brand because of weak financialresources and automotive technology

Currently, Vietnam’s automotive industry specializes in assembly only, includingthe following types:

- SKD (Semi Knocked Down): cars to be assembled from components, cluster,imported unconnected details

- CKD (Completely Knocked Down): is a complete kit needed to assemble aproduct There are two forms of this type: CKD1 and CKD2

- IKD (Inteopally Knocked Down) cars to be assembled from components,cluster, unconnected details Unconnected details can be imported or made in Vietnam.Body and chassis are made in Vietnam.

While some regional countries like Thailand, Indonesia is focusing in depth on thetype of IKD, both 11 automobile joint ventures in Vietnam have recently moved fromsimple assembly (SKD) to detailed assembly (CKD)

2.1.3 Vietnam’s domestic automobile market

In December, 2010, turnover of members of VAMA got 12,485 vehicles, 17%decrease compared to that of December, 2009 In which, sale of multi-purpose vehiclesfell 19%, cars 21% and commercial vehicles 13%

Output of entire sales in 2010 reached 112,224 vehicles, 6% decrease over thesame period last year with decrease of commercial vehicles of 4%, cars of 3% andmultipurpose vehicles of 13% (See summary table below)

Table 2.2 The sale of cars of VAMA’s members in 2010

- First, Vietnam's market is too relatively small compared with the car industry,per capita income, although is improving, is still low According to calculations byeconomists, a country must achieve GDP per capita of about $ 1,000 per year to create alarge enough market for the automotive industry with stable profit and over $ 3,000 peryear to ensure a rapidly-developed automobile industry WhereasBy the end of 2010,Vietnam has achieved GDP of approximately U.S $ 800-1105600 per year per person

- Second, massive import of old cars, which are cheaper than cars manufactured

by automobile joint ventures, reduces market share of automobile joint ventures in

Vietnam Massive import of new cars with equivalent price also affects the market share

in the same way in one hand and in the other influences to demand side

- Third, the price of cars produced and assembled in Vietnam is much higher thanthe price in the region and in the world The reason is that most of the parts andcomponents are imported

One important reason is that the automobile industry of Vietnam is very young,only developed in about 10 years so most plants are new with high capital investmentand long period of depreciation These should lead to high cost and lowcompetitiveness

Table 2.3 Comparing prices between domestic cars and foreign cars(brand new cars)

Car Makers Model Prices in Vietnam Prices in USA Difference(%)

Source: The planning on development of Vietnam’s automobile industry till 2010

2.2 CONTRIBUTION OF VIETNAM’S AUTOMOBILE INDUSTRY

Being a young industry in Vietnam, Vietnam’s automobile industry has certaincontribution to Vietnam economy, as follows:

2.2.1 Contribution to economic development through investment

Vietnam’s automobile industry contributed a very big amount of investmentcapital to the economy For joint venture enterprises, till June, 2001, total investmentcapital was 326,813 million USD, making up 2.39% of total foreign investment capital.This amount of capital is equivalent to total capital of Vietnam’s mechanical industryafter 40 years of establishment This is a very high rate, initially confirmed the role ofthe automotive industry for the economic development of Vietnam

According to VAMA, investment capital of several members of VAMA is as follows:

Table 2.4 Investment capital of some VAMA’s members

No Name Total investment capital (USD) Legal capital (USD)

2.2.2 Contribution to state budget

In the early 2000s, the automobile production joint ventures have contributedsignificantly to the state budget The total contribution of joint ventures to the statebudget by the end date of 30/06/2001 is 154,323,000 Dollars If calculated by themethod of simple averages, the average contribution rate in the period 1996-2000 is $30,864,600 per year

In 2000, the vehicle sale is increased sharply; the joint ventures have contributed

to state budget with a record amount of $ 45,467,846

Table 2.5 Contribution to state budget from car manufacture joint venture enterprises

Source: Ministry of Industry

According to VAMA, only 18 members of VAMA for 6 years from 2000 to 2006have contributed $ 1.2 billion in taxes to the state, creating stable jobs for 8,500employees in the automotive sector in particular and about 35,000 workers insupporting industries

Some domestic automobile enterprises are successful in making their ownautomotive brands such as Samco Vietnam, Truong Hai Auto, Vinaxuki…Theirproducts are more or less known to the domestic market These enterprises play an

important part in economic development Their products involve in the public sector,agriculture, industry and services.

2.2.3 Creating jobs

Table 2.6 Number of employees working in car manufacture joint venture enterprises

No Name Total employees till 30/6/2002

Source: Ministry of Industry.

For Truong Hai Company, till 2010, number of employees was up to 1,500 persons

2.2.4 Technology transfer

Most production lines contributed by the foreign partners of the joint ventureenterprises were made in the early of the 90s in leading industrialized countries.Therefore, these lines are still in good condition with high performance and enable theproduction of modern products However 100% of these production lines are only forassembly form of CKD2 (some components have not been assembled into the frame),IKD1 (localization ratio below 10%) will not stimulate the production of parts andaccessories in Vietnam, but mainly develop assembly technology In addition, all theR& D are conducted in foreign firms, not Vietnam, so Vietnamese engineers just followall the instructions from the foreign side and they do not have condition to develop theirprofessional ability

2.3 FACTORS AFFECTING THE DEVELOPMENT OF VIETNAM’S