Developing industry and trade in Da Nang city

synchronization and completion of structure, increasing the pace and quality of trade growth, creating elements to ensure the sustainable development of trade activities, promoting socio

The research linked trade policy

(TP) and industrial policy (IP) in the management of state

(administration) of developing and coordinating policy

implementation

- About space: Researching the industrial and commercial

development in Da Nang, however, it is related to considering the factors to make effort in scope of Central- highland Area, East-West Economic Corridor as well as over the country

- About time: Evaluating the status of industrial and commercial development in Da Nang City in period of 2001- 2012, proposing orientation and solutions for development to 2020

- About field to do research: Goods Industry and Trade

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4 Research Methods of Dissertation

- Using document analysis method to collect information about theoretical basis, previous research, legal policies of the State and Da Nang City about Industry and Trade; actual situation of Industry and trade development of Da Nang City; experience about Industry and Trade Development of some provinces/cities in domestic and abroad

- Method of modeling , collecting, systematizing and generalizing

to analyze and evaluate the actual situation of industry and trade development of Da Nang City, making the comparison and contrast a number of indicators about industry and trade development of Da Nang with some provinces and cities, with the central- Highland area

as well as over the country

- Method of conducting Survey with research objects (enterprises

in industrial and commercial sector, consumers) to analyze and

evaluate the status of mechanisms and policies for Industry and trade development of Da Nang City

- Professional method used in evaluating the factors that have

influence, opportunities and challenges, building views, orientating and proposing solutions for industry and trade development of Da Nang City in the period to 2020

CHAPTER 1

OVERVIEW OF RESEARCH ON INDUSTRY AND TRADE

DEVELOPMENT IN PROVINCE/CITY

1.1 Research status in abroad

The role of Industry and Trade activities in socio- economic

development of the country has been confirmed in much research (Armand Dayan, HEC, 1973, 2001, 2005) The development of

Industry and Trade is driven by many different factors: Production conditions, transportation, management technology, laws and

regulations of the state, services providers and especially market conditions (M Benoun, 1993, 2006) Most of the researches in this field focus on the relationship between manufacturers and distributors (Didier Ferrier, 1997); legal prospect and its impact on Industry and Trade activities (Combe, Karin, 2000); fluctuations in the distribution

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form (R Mairicourt, 1999); role of the modern distribution in

economic development (Noronha Vaz, 1997) In general, the research

is conducted by depth analysis and verifying separate relations of each factor for the Industry and Trade development on the national level or scope of enterprise

Theory “Development Pole” assumes that the points having fast

and powerful growth or development have more advantages compared

to the whole region, often gather some industries serve as

"locomotives" which pull, make effects to spread for the development

of the whole region (Francois Perroux, 1950) The problem for

regional development planning based on the principle analysis of the development advantages and growth poles in the area (Jacques Raoul Boudeville, 1966).Space Link in regional development (John

Friedmann 1966) With the research approach about input- output, the backward linkages and forward linkages concepts are used to do research the sector and inter-branch relations (Hirschman, 1958).The theory of comparativeness advantage determining the benefits of trade

by demonstrating that exchange, with the specialization that it creates, will bring benefits for all the people talking to each other (David Ricardo, 1817) The determinant factors of national competitiveness advantage: The production factors; demand conditions; supporting industries (SI) and relevant sector; company strategy, structure and domestic competition (Michael E.Porter, 1990).Research on rationale for Industry Policy (Chang, Ha - Joon, 1994) The policy issues of international trade and commodity (Bijit Bora, Peter J.Lloyd, Mari Pangestu, 2000).Industry Policy with meaning of the purposeful intervention, consistent with the international principles and practices

of government (Lluis Navarro, 2003) Research on the success of Industry Policy of Singapore (K.Ali Akkemik, 2009)

1.2 Research status in Vietnam

The followings are a number of significant researches: Associate Professor Dr Pham Vu Luan (2001), some basic theoretical issues of administration of Trade in our country in the current period, the State-

level topic Institute of Central Economic Management (2002),

Strengthening coordination between state administration agencies for service Sector Dr Phung Tan Viet (2003), Innovation activities of agencies at the local administration of Trade at Locality in period to

2010, ministerial-level topic Le Huu Doc (2003) , Da Nang City Industry - Situation and Solutions for Development, economic

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doctoral dissertation Tran Van Thang (2004), State’s Administration

of Trade in current stage in our country, economic doctoral

dissertation Nguyen Van Thuong, Kenichi Ohno (2005), Completing Industry Development Strategy and Technology in Vietnam Peter Naray (Team Leader), David Luff (legal professionals), Paul Baker (economic expert) (2007), Evaluating support needs relating to trade

in 2007 Nguyen Manh Hoang (2008), Completing content of State’s administration of goods trade in Hanoi to 2020, PhD Economic

Thesis Associate professor, Dr Le The Gioi(2009), Some solutions to develop supported industries in the area of Da Nang City, ministerial-level topic People's Committee of Da Nang City (2009), Development and Planning of wholesale and retail network in the city to 2020, planning and development of service sector in Da Nang City to 2020, planning and development of industry of Da Nang City to 2020,

People’s Committee of Da Nang City (2010), Planning of overall socio-economic development of Da Nang City to 2020 Dr Do Ngoc

My (Head of topic) Dr Ho Ky Minh, Master Tran Thi Hoa (2010) and colleagues, Developing Trade in Da Nang City to 2020, city –level topic Nguyen Ngoc Dung (2011), Developing Industrial Zones

uniformly over Hanoi Economic doctoral dissertation Phan Thi Thu

Hien (2012) , Linking trade policy and industry policy in the context of international economic integration, economic doctoral dissertation However, above research only mention particular angles that

dissertation is interested in; there is the research mentioning industry and trade activity in general and briefly, there is the one focusing on one specific angle, specific for each business line, for one task of Industry and trade Until now, there has not had any research about Industry and trade development in Da Nang city in the inter-regional relations and over the country

CHAPTER 2

SOME MAJOR SCIENTIFIC BASIS ON INDUSTRY AND

TRADE DEVELOPMENT IN THE PROVINCE / CITY

2.1 The position, role and necessity of industry and trade

development

2.1.1 Indentifying some definitions relating to the

development, industry and trade development of the province/city 2.1.1.1 Development and sustainable development

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Sustainable development (SD) is a development process that has

a tight, logical and harmonious combination among three sides of development These are: economic development, social justice and environmental protection

2.1.1.2 Industry and Trade Development

Industry development represents the change process of the

industry at this stage compared with earlier stages and often achieves higher levels of both quantity and quality

Trade Development is constantly expanding in size, and

synchronization and completion of structure, increasing the pace and quality of trade growth, creating elements to ensure the sustainable development of trade activities, promoting socio-economic

development of the province /city and country

2.1.2 Role of Industry and Trade in socio-economic

development of the province/city and country

Firstly, Industry and trade are the integral part of the economic

structure of the province / city and have a large proportion of that structure Secondly, trade is the bridge between production and

consumption Thirdly, the industry and trade development is decisive factor to make the process of industrialization - modernization of the entire national economy

2.1.3 Role of Industry and Trade in socio-economic

development of the province/city

In the development of socio-economic of the province/city,

Industry and trade play important role which is shown on the following key aspects: contribution to GDP growth, market expansion, creating jobs and income for residents and serving consumers as well as

ensuring social security

2.1.4 The objective necessity of Industry and Trade

development in the province/ city

Firstly, due to the location and role of Industry and trade is

considered as the leading industry, accounting for a large share of GDP and economic structure of the country Secondly, due to the requirements of industrialization - modernization of the province/city which requires the Industry and trade development to fulfill the

mission of our country in 2020 that Vietnam will become an industrial

2.2.1 Theory “Development pole” and its application on

industry development of the province/city

Theory “Development Pole” (Francois Perroux, 1950) can be

applied to the study and proposing solutions to form development pole

as the focused territories in industry and trade development of a

province/city This is entirely consistent with the Provincial/City limited resources such as capital, technology, high- quality human resources, market, etc of poor and developing countries which in need

of appealing investment capital

2.2.2 Theory about development advantages, competitive

advantages and its application on the industry and trade

development of the province / city

Economic Geography Advantage Theory

Economic Geography is the science studying geographical features affecting the process of economic development of a region consisting

of many different countries, a country, a region, a sub-region or a city Applying the economic geography theory on the industry and trade development strategy planning of the province/city to identify, assess the economic- geography advantages of the province/ city in

developing industry and trade

Theory of national competitive advantages of Michael Porter

(1990) According to Michael Porter, there are four elements

of a nation in forming diamond model: The production factors;

demand conditions; supported technology sector and related industries

; company strategy , structure and domestic competition He argues that companies in a nation will be successful in the field that the elements of this diamond shape are favorable This theory can be applied to the study and proposing solutions to create competiveness advantages in Industry and trade development of a province/city, for example; the city’s government can make the strong impact on the elements of this diamond model to improve and upgrade the

competitiveness advantages of industry and trade sector; supporting for industry and trade, improve trade and manufacturing technology and related conditions

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Theory of Competitiveness advantages of Cities and region

By factors in “diamond shape” Michael Porter has explained the reason why the city or region can develop Industry sector better than other places Applying this theory into Industry and Trade

Development of a province/city under the direction: City’s

Government needs to have mechanism to create the particular

production element (having supported industries development

assistance, training labors with high quality and investing on Industry and trade infrastructure)

From presenting briefly some theories as above, we can get

conclusion as follows: Firstly, to have a rapid growth, we need to select the area , region or locality to be growth pole and the rapid growth of the pole will push and pull the overall growth Secondly, to become the economic center of the region or the Industry and trade

center of the country, it is necessary to strengthen and enhance the role

of government, local government with opener and ready mechanisms and policies Thirdly, basing on the competitiveness advantages due to economic geography factors, stable political environment and high ranking business environment, we can choose one industry sector or trade field which has development advantages to become the industry and trade center of the region and country Fourthly, it is necessary to build and develop companies with good business strategies, highly competitiveness, attractiveness and large expansion Fifthly, high-quality human resource is critical factor, which ensure conditions for development to become the center of Industry and trade Sixthly, it is needed to show the central role of the motivation city, creating

attractiveness and expansion, engaging other localities in the region to co-develop

2.3 Content, evaluation criteria and the factors affecting the

industry and trade development in the province /city

2.3.1 Main Content of Industry and Trade Development in

the Province/ city

Content of Industry Development: 1) Industrial Growth: The

value of industrial production and development index of industrial production value; quantity, yield of Industrial products and quantity of Labor s working in Industrial Sector; growth in the quantity and scale

of industrial production bases, industrial zones, high-tech industrial zones, export processing zones and industrial clusters (ICs); 2) The

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quality of industrial growth: Contribution of total factor productivity (TFP) has to be high; growth to ensure enhanced economic efficiency

and competitiveness of the economy, along with environmentally sustainable development

Content of Trade Development: 1) Domestic Trade Development: Establishing and developing infrastructure for industrial goods

development; specialized developing trade activities; engaging

environmental protection to Trade development; diversifying the types

of Trade activities and trade modernization; Trading activities to make contribution on orientation; creation and development of human

resources for commercial sector; developing the link of trade-

economic; 2) Import Export Development: Developing market,

business partners, goods sources, direct distribution system of

commodity of province/ city in overseas markets, promoting the trade and circulation channels of imported goods

2.3.2 Evaluating Criteria of the Industry and Trade

Development in the province / City

Scale and growth speed

Evaluating criteria: 1)Industry: Industrial production value;

proportion of industrial production value in the province / city in the region and the country; added value of industry sector; number of Labors working in Industry Sector; number of industrial enterprises and scale of industrial enterprises; 2) Trade: Total retail sales of goods and services revenue and total wholesale; proportion of total retail sale of goods and services revenue of the province / city in

comparison with the region and the country; Added value of industry sector; number of labors working in Commercial sector; number of commercial enterprises and scale of commercial enterprises; total import and export turn-over of goods in the province/city; developing

distribution systems

Growth Quality and Development Level

Evaluating criteria: 1) Industry: Contribution of TFP in Industry

Growth; Proportion of Added value of Industry Sector in comparison with Industrial production Value; Proportion of trained labors in

Industry Sector; productivity of labors in Industry Sector; industry investment performance; competitiveness of industrial enterprises and industrial products of the province / city; industrial production value structure and restructuring; 2) Trade: The contribution of TFP in

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Trade growth; proportion of added value of domestic commerce in comparison with total retail sales of goods and services revenue of the province/city; structure of import and export commodities;

productivity of labors working in Trade Sector, proportion of trained labors in Trade Sector; Trade investment efficiency; competitiveness

of the trade enterprise and exporting goods of the province/city;

structure of total retail sales of goods and services revenue, wholesale trading and movement of structure between them, trade structure of province/city; average clearance time for export and import goods through the border gate of the city / province

Conditions to assure the sustainable Industry and Trade

Development

The assessment criteria: 1) The market development of industrial product and goods; 2) The synchronization and modernization level of infrastructure systems; 3) The capacity of the Industry and Trade Connection of province/ city with outside by transportation systems, logistics networks and investment support service; 4) Quality of policy

and its effect; 5) Link of Trade Policy and Industry Policy in State’s Management in coordinating the establishing and implementing

policy; 6) Protect the ecological environment

2.3.3 Factors affecting the development of Industry and Trade

in province/ city

The economic geography, political environment–law, development

of infrastructure systems, science and technology innovation, human resource of industry and trade development; management policies and mechanisms and other factors

2.4 Experience of some provinces and cities about industry and

trade development and the lessons learned

Dissertations about domestic and abroad industry and trade

development have the similar features with Da Nang (Dong Nai, Shenzhen, Shanghai, Singapore, Ho Chi Minh City) Therefore, 10 lessons learned can be applied for Da Nang City

CHAPTER 3

REAL SITUATION OF INDUSTRIAL AND COMMERCIAL

DEVELOPMENT IN DA NANG CITY

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3.1 General information of the status of socio-economic

development in Da Nang in the past time

3.1.1 Real situation of economic development

Economic growth scope and speed: Average speed of economic

growth of Da Nang city achieved 11,45% / year (contributed by 5,52%

of capital, 4,18% of Labor and 1,78% of TFP), much higher than the whole nation’s statistic data (6,96%/ year) in 2011- 2012 However, economic growth pattern of the city is still growing in breadth

Structure transfer (Finger 3.4)

Source: Annual Statistics of Da Nang city in 2004, 2008, 2012

Figure 3.4 Economic structure, Investment structure and labor

structure of Industrial and trading branches

3.1.2 Some social issues

Every year, Da Nang city creates jobs for about 33 thousands of

labors rate of poverty decreased to 0.4% in 2012 Income per capita in

2012 was 47.54 million dong (6.08 times higher in comparison with

2001 and 1.41 times higher in comparison with the whole country’s one), contributing 10,911,000 billion dong to the State Budget in 2012 (1,64 times higher than it in 2007 and 0.94 times higher than 2010) 3.2 Analyzing the status of industrial and commercial

development of Da Nang city from 2001 to now

3.2.1 Analyzing the status of industrial development of Da

Nang city

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Scope and growth speed

1) Value of industrial production (comparative price) Giá trị

SXCN (giá so sánh) in the area of Da Nang city has been continuously increasing with average speed of 12.61% /year

2) Proportion of industrial production of the city in comparison

with it of the local area and the whole country tends to decrease In

2011, Da Nang city contributed 1.40% into the whole country’s

industrial production, following Ho Chi Minh city and Ha Noi This rate ranks the 4th in the local area (12.14 %)

3) Growth value of industrial branches rapidly increased in tẻm of absolute value, reaching to 5,039,925 billion dong in 2012 (4,5 times

higher in comparison with 2001; 2,22 times and 1,22 times higher than those in 2005 and 2010), the average growth was 14,85%/ year

Growth value of industrial branches increased in period of 2001- 2005, but decreased in 2006-2012

4) The number of labors of industrial branches has been

increasing year by year, achieved 103,149 persons in 2012 (accounted for 22.09% of labor structure of the whole city) with the average growth rate of 5.87 %/year

Growth Quality and Development Level

1) Contribution of TFP in Industrial growth: Industrial growth of

Da Nang mainly based on Labor factor (64.88%) and capital factor (20.67%) Low contribution of TFP (14.45%) confirmed industrial growing pattern of the city remaining in breadth

2) Rate of industrial growth value and industrial production value tends to increase in period of 2001- 2012 ( increasing from 27.60% in

2001 to 36.73% in 2012), 1.5 times higher than that of the whole country’s statistic in 2011

3) Average Labor productivity of industrial branches (real price) achieved 68.10 million dong/ capita/ year, the highest value of

branches in the area and 1,38 times higher than social labor

productivity of the city

4) Rate of trained labors of industrial branches reached about

55% (in 2012), the highest rate in Da Nang city and 1,4 times higher than that of the whole country’s statistic data (40% in 2012)

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5) Efficiency of using capital of industrial sector: Production

capacity of investment capital is rapidly decreasing (ICOR: 2.48 in

3.2.2 Analyzing the status of trading development of Da Nang

city

Scope and growth speed

1) Total retail sales & service revenue and total wholesales in Da

Nang tends to increase in period of 2001-2012 However, total retail sales and service revenue has had higher average growth rate than

wholesales (23.88% compared with 12.14% per year)

2) Ratio of total retail sales and service revenue of Da Nang city

in comparison with those of the whole country and the Central and

Central Highlands areas in 2011 were 2.23% and 11.15% and had no significant fluctuation in 2001-2011 This rate is the highest in the area but follows Ho Chi Minh city :22.96%, Ha Noi: 14.7% , Dong Nai

3.58% and Binh Duong 2.92%

3) Contribution of growth value of trading sector of the city

rapidly decreased (from 10.62% in 2001 to 4.98% in 2012), reflecting reduction of the role of trading in economic growth

4) The number of labors of trading sector continously increased

year by year, and achieved 92,768 labors in 2012 (accounting for 34.27%

of labor structure of service sector and 19.87% labor structure of the