the international trade between vietnam and japan

7/21/2019 The International Trade between Vietnam and Japan

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VIETNAM NATIONAL UNIVERSITY –HO CHI MINH CITY

THE INTERNATIONAL UNIVERSITY

SCHOOL OF INTERNATIONAL BUSINESS

THE INTERNATIONAL TRADE BETWEEN VIETNAM -

JAPAN AND ITS IMPACT ON VIETNAM’S ECONOMIC

GROWTH

Advisor: Phd. Ho Nhut Quang

Student’s name: Vu Huy Hoang (BA070307)



INTERNATIONAL TRADE BETWEEN VIETNAM AND JAPAN

AND

IMPACTS ON VIETNAM’S ECONOMIC GROWTH

APPROVED BY Advisor

Hồ Nhựt Quang, Ph.D

APPROVED BY Committee

Nguyễn Quỳnh Mai, Ph.D, Chairman

Hồ Nhựt Quang, Ph.D

Hà Nam Khánh Giao, Ph.D.

Lê Đình Minh Trí, MBA.

Tr ần Tiến Khoa, MBA.

THESIS COMMITTEE



ACKNOWLEDGEMENT

First and foremost, I would like to show my sincere gratitude to my

advisor Mr. Ho Nhut Quang (Ph.D) for the continuous support of my research, for his

patience, motivation, enthusiasm, and knowledge. His guidance helped me in all the

time of research of this thesis.

Then it is pleasure to say thank to the Japanese Embassy in Vietnam as

well as Vietnam Bureau of Statistic and Customs, which has offered me provided very

important data to my thesis.. It is also the premise for me to approach this research

topic. And I would like to say thank to Mr Yasuaki Tanizaki, Japanese Ambassador in

Vietnam, has kindly guided me to finish my thesis.

Not forgotten to my family and friends for providing everything, such as

encouragement when I feel tired, disheartened. Besides that, this thesis would not

have been possible unless the support comes from internet, books, computers which

are sources to complete this thesis.



TABLE OF CONTENTS

LIST OF TABLES

LIST OF FIGURES

1. INTRODUCTION . ...................................................................................................... 1

1.1. Rationale . .............................................................................................................. 1

1.2. Problem statement .................................................................................................. 2

1.3. Objectives .............................................................................................................. 2

1.4. Implication of the study ........................................................................................ 3

1.5. Scope of the thesis ................................................................................................ 3

1.6. Method of study .................................................................................................... 3

2. LITERATURE REVIEW ............................................................................................. 4

2.1. Comparative advantage model and Heckscher Ohlin model ................................ 4

2.2. Keynes’ AD-AS model ......................................................................................... 8

2.3. Theoretical model on impacts of international trade between Vietnam and

Japan on economic growth ............................................................................................. 12

3. METHODOLOGY, RESULT AND DISCUSSION .................................................. 15

3.1. The international trade between Vietnam and Japan in the period 1988-2010 .. .153.1.1. The international commerce situation between Vietnam and Japan in general

from 1986 to 2010 ........................................................................................................... 16

3.1.2. Imports and exports between two countries by commodities .......................... 26

3.1.3. Current issues and advantages in trade between two countries ........................ 37

3.2. Main finding of the thesis: the impact of international trade between Vietnam

and Japan on the Vietnam’s economic growth rate ....................................................... 44

IV. CONCLUSION AND RECOMMENDATION ...................................................... 54

4.1. Conclusion ........................................................................................................... 54

4.2 Recommendation .................................................................................................. 54

4.2.1. The investment in the country .......................................................................... 55

4.2.2. The expenditure from the Government ........................................................... 58

4.2.3. Import and Export between two countries – how to improve it? ..................... 59

4.2.4. Economic growth development for promoting trade ....................................... 66

REFERENCES

APPENDIX



LIST OF TABLES

Table 1.1: Annual GDP’s growth rate in Vietnam ..................................................... 12

Table 3.1: Export-Import of Vietnam with Japan since 1988 to 2010 ...................... 17

Table 3.2: Trade balance between Vietnam and Japan, and Vietnam with other

countries from 1988 to 2010 .......................................................................................... 21

Table 3.3: Proportion of Export-Import between Vietnam and Japan in the Export-

Import turnover of Vietnam ........................................................................................... 23

Table 4.1: Capital investment and development focus for 2006-2010 ....................... 57



LIST OF FIGURES

Figure 1.1: Aggregate demand and aggregate supply ................................................. 9

Figure 1.2: The formation of the economic growth when AD curve shifts to the

right ................................................................................................................................ 11

Figure 1.3: The proportion of trade value between Vietnam and Japan compared

with trade value between Vietnam and other countries over the total trade turnover

value of Vietnam from 1988 to 2010 .............................................................................. 13

Figure 3.1: The international trade between Vietnam and Japan from 1988 to 2010..

........................................................................................................................................ 19

Figure 3.2: Trade balance between Vietnam and Japan compared with total trade

balance among Vietnam and other countries from 1988 to 2010 ................................... 20

Figure 3.3: the growth rate of trade of Vietnam-Japan compared with the growth

rate of Vietnam’ GDP by statistics ................................................................................. 25

Figure 3.4: The export proportion from Vietnam to Japan over total export turnover

of Vietnam since 1988 to 2010 ....................................................................................... 27

Figure 3.5: The change of some high value export goods to Japan in the period of

2007-2010 ...................................................................................................................... 28Figure 3.6: Proportion of six high value exported products to Japan in 2007 and

2008 ................................................................................................................................ 29

Figure 3.7: Export proportion of important commodities of Vietnam to Japanese

market in 2009 and 2010 ................................................................................................ 31

Figure 3.8: Import proportion over total import turnover of Vietnam ....................... 33

Figure 3.9: The change of Vietnam’s imported goods from Japan in period of 2007-

2010 ................................................................................................................................ 34

Figure 3.10: Proportion of Vietnam’s high imported goods value over the total

import turnover in 2007 and 2010 .................................................................................. 35

Figure 4.1: Total export turnover of Vietnam to Japan in the first four months in

2010 and 2011 ................................................................................................................. 61



CHAPTER I

INTRODUCTION

1.1. RATIONALE:

In the process of global economic integration, Vietnam is increasingly

asserted its importance to the world economy. Annual economic growth of Vietnam

increases steadily with 5.32% every year from 1994 to 2010 (according to thestatistics of Bureaus of Statistics based on constant 1994 price). In which as proved

the international trade plays an important role in the growth of economic. Vietnam has

traded with many countries and territories stretching from mysterious Asia to distant

America and gradually has met the global needs and global standard. In Asia, as

known the leader of economy after world-war II is Japan. The Japanese economy has

developed incredibly and strongly. From the past and until now, Vietnam who

traded with Japan has emerged from hundreds of years ago and seems to blind each

other.

As early as 16th

century, contact between Vietnam and Japan came in theform of trade. Along with Thailand and Malaysia, Japanese red seal ships frequented

Vietnamese ports. Vietnamese records show that when the port of Hoi An was opened

by Lord Nguyen Hoang in early 17th century, hundreds of Japanese traders were

already residing there. The two countries enjoy the firm degree of friendship. Shogun

Tokugawa Ieyasu exchanged amicable and gifts with Lord Nguyen. His son, Lord

Nguyen Phuc Nguyen would marry his daughter, Princess Ngoc Khoa to

AkariShutaro, an eminent Japanese trader. Traders from Japan often donated money

to the locals and were treated well. Many settled and assimilated into their new

surroundings.

When Japan entered a period of self-isolation, trade continued to flow,

either through the planning of permanent residents or through immediate Dutch

merchants. However, in 1685, the Tokugawa Shogunate became aware of nation’s

overexploited silver and copper mines, and a trade restriction was put in place. Due to

the importance of these metals, the new regulation dampened trade between Japan and

Vietnam, as well as much of South Asia. However, the economic and culture

exchange between two countries were difficult until 19th century.

To 20th century, the relationship between two countries was reconnected

again but full of political color. That was the time when Japan became a powerful



capitalist which promoted the movement of learning overseas and highly appreciated

Japan by Vietnamese patriots such as PhanChau Trinh, PhanBoiChau… It was also

the period that Japanese Fascist attacked Vietnam and many Asian countries in World

War II. This was a darkest time in relationship of both countries.

Since World War II to just before both countries signed the Agreement of

formal diplomatic relations foundation on 09/21/1973, slightly and slowly did the

relationship between Vietnam and Japan maintained. The main reason was that

unstable political causes of Cold war among two biggest systems: Capitalist versus

Socialist. Japan totally depended on the power of the US while North of Vietnam was

on behalf of Soviet Unions in the previous Vietnam’s war.

1.2. PROBLEM STATEMENT:

The Vietnam’s economy is on the first step of the way to integrate withglobal economy. It opens challenges and opportunities for Vietnamese enterprises tocompete with international companies. Parallel with this, the international trade is thekeyword for development of economy including the international trade betweenVietnam and Japan.

Over the evidence above, we can see the relation in commercial and political aspect as well as the importance of trade between two countries in thehistory. As a matter of fact, since Vietnam’s implementation of the renovation from1986 until now, there was an important turning point to Vietnam’s economy, that’seconomic integration and international trade has have opportunities to develop and

contribute substantial changes to agriculture and fishery, import and export, scienceand technology, healthcare and education, … and so, the question israised, with the development of international trade among Vietnam and the globe, atthe country level, does the international trade between Japanand Vietnam really contribute to the economic growth in Vietnam or not? This thesiswill prove and find out elements of the trade of both countries that impact on Vietnameconomic growth rate.

1.3. OBJECTIVES:

To answer the research question: “Does the international trade between

VN and Japan contribute to economic growth in Vietnam, my thesis’s objectives will be:

+ To summarize all theoretical points of international trade theories

and growth theories.

+ To review and analyze the current situation of international trade

between Vietnam and Japan in the period from 1988-2010

+ To construct an econometric model measuring impact of

international trade between Vietnam and Japan on economic growth the

country.

+ To suggest policy implications based on the model results.



1.4. IMPLICATION OF THE STUDY:

The purpose of this study is to improve the aspect of the importance of

international trade between Vietnam and Japan in the whole of Vietnam’s global trade

to the economic growth of Vietnam. This thesis may give the ideas and suggestions

for trading between two countries and tend to give supports to the macroeconomics of

Vietnam.

1.5. SCOPE OF THE THESIS:

Subject: International trade between Vietnam and Japan.

Period of time: from 1988 to 2010.

1.6. METHOD OF STUDY:

+ Quantitative Statistics: using regression equation to find evidence to

prove the contribution of both countries’ trade to GDP

+ Descriptive Statistic: using tables, figures and various expressions in

analyzing, comparing, summarizing the data.

+ Data collection: Secondary Data – Statistical data and others’ previous

study.



CHAPTER II

LITERATURE REVIEW

To explain the pattern of trade between Vietnam and Japan, these models

are used in the thesis:

- Comparative advantage model and Hecksher – Ohlin model:

+ Comparative advantage model: giving the absolute advantage of

each country, what is the strength in productivity, what kinds of goods have beentraded…

+ Hecksher – Ohlin model: giving the answer and relation of

Vietnam’s labor force and Japan’s capacity

- Keynes’ AD-AS model: explaining how economic growth happens and

what elements impact on this growth.

- Theoretical models on impacts of international trade between Vietnam

and Japan on Economic growth.

2.1. COMPARATIVE ADVANTAGE MODEL AND HECKSHER – OHLIN

MODEL:

The reason that comparative advantage and Hecksher – Ohlin model are

mentioned is that they give explanation about the trade between Vietnam and Japan. It

is a fact that Vietnam has strength in abundant of young labor force and rich natural

resources as well as Japan dominate the technological science and abundant of capital

flow. With the advantages of not far apart geographically and the development of air

transportation and shipping, both economies in two nations therefore seems to rely on

each other.

2.1.1. THE COMPARATIVE ADVANTAGE:

In economics, the law of comparative advantage says that two countries

(or other kinds of parties, such as individuals or firms) can both gain from trade if, in

the absence of trade, they have different relative costs for producing the same goods.

Even if one country is more efficient in the production of all goods (absolute

advantage), it can still gain by trading with a less-efficient country, as long as they

have different relative efficiencies.



Comparative advantage was first described by Robert Torrens in 1815 in

an essay on the Corn Laws. He concluded it was to England's advantage to trade

with Portugal in return for grain, even though it might be possible to produce that

grain more cheaply in England than Portugal.

However, the concept is usually attributed to David Ricardo who explained

it in his 1817 book On the Principles of Political Economy and Taxation in an

example involving England and Portugal. In Portugal it is possible to produce

both wine and cloth with less labor than it would take to produce the same quantities

in England. However the relative costs of producing those two goods are different in

the two countries. In England it is very hard to produce wine, and only moderately

difficult to produce cloth. In Portugal both are easy to produce. Therefore while it is

cheaper to produce cloth in Portugal than England, it is cheaper still for Portugal to

produce excess wine, and trade that for English cloth. Conversely England benefits

from this trade because its cost for producing cloth has not changed but it can now get

wine at a lower price, closer to the cost of cloth. The conclusion drawn is that each

country can gain by specializing in the good where it has comparative advantage, and

trading that good for the other.

Link to the thesis, basing on the Comparative advantage model, it can be

explained the pattern of trade between Vietnam and Japan throughout importing and

exporting goods and services that each country has its own advantage. For example:

Vietnam has a strong advantage in growing rice because of the tropical climate and

traditional perennial agriculture while Japan is not strong in this term but those

companies in Japan are better than that in Vietnam in producing semi-conducts chips.

Hence, Vietnam will focus on its advantage and tends to import semi-conducts chips

while Japan import rice for their market needs.

2.1.2. THE HECKSCHER OHLIN MODEL: is a general equilibrium mathematical

model of international trade, developed by Eli Heckscher and Bertil Ohlin at

the Stockholm School of Economics. It builds on David Ricardo's theory

of comparative advantage by predicting patterns of commerce and production basedon the factor endowments of a trading region. The model essentially says that

countries will export products that use their abundant and cheap factor(s) of

production and import products that use the countries' scarce factor(s).

Relative endowments of the factors of production (land, labor, and capital)

determine a country's comparative advantage. Countries have comparative advantages

in those goods for which the required factors of production are relatively abundant

locally. This is because the profitability of goods is determined by input costs. Goods

that require inputs that are locally abundant will be cheaper to produce than those

goods that require inputs that are locally scarce.



The 2×2×2 model

The original H-O model assumed that the only difference between

countries was the relative abundances of labor and capital. The original Heckscher–

Ohlin model contained two countries, and had two commodities that could be

produced. Since there are two (homogeneous) factors of production this model is

sometimes called the "2×2×2 model".

The model has variable factor proportions between countries: Highly

developed countries have a comparatively high ratio of capital to labor in relation

to developing countries. This makes the developed country capital-abundant relative

to the developing nation, and the developing nation labor-abundant in relation to the

developed country.

With this single difference, Ohlin was able to discuss the new mechanismof comparative advantage, using just two goods and two technologies to produce

them. (One technology would be a capital intensive industry, the other a labor

intensive business - see "assumptions" below).

Labor mobility within countries

Within countries, capital and labor can be reinvested and re-employed to

produce different outputs. Like the comparative advantage argument of Ricardo, this

is assumed to happen costlessly.

If the two production technologies are the arable industry and the fishing

industry it is assumed that farmers can shift to work as fishermen with no cost, and

vice versa.

Capital mobility within countries

It is further assumed that capital can shift easily into either technology, so

that the industrial mix can change without adjustment costs between the two types of

production.

For instance, if the two industries are farming and fishing it is assumedthat farms can be sold to pay for the construction of fishing boats with no transaction

costs.

Capital immobility between countries

The basic Heckscher–Ohlin model depends upon the relative availability

of capital and labor differing internationally, but if capital can be freely invested

anywhere competition (for investment) will make relative abundances identical

throughout the world. (Essentially, Free Trade in capital would provide a single

worldwide investment pool.)



Differences in labor abundance would not produce a difference

in relative factor abundance (in relation to mobile capital) because the labor/capital

ratio would be identical everywhere. (A large country would receive twice as much

investment as a small one, for instance, maximizing capitalist's return on investment).

As capital controls are reduced, the modern world has begun to look a lot

less like the world modeled by Heckscher and Ohlin. It has been argued that capital

mobility undermines the case for Free Trade itself, Capital is mobile when:

There are limited exchange controls

Foreign Direct Investment (FDI) is permitted between countries, or

foreigners are permitted to invest in the commercial operations of a

country through a stock or corporate bond market

Labor immobility between countries

Like capital, labor movements are not permitted in the Heckscher-Ohlin

world, since this would drive an equalization of relative abundances of the two

production factors, just as in the case of capital immobility above. This condition is

more defensible as a description of the modern world than the assumption that capital

is confined to a single country.

Link to the thesis, H-O model explains the relationship between Vietnam’s

labor force and Japan’s technology and capacity. In Vietnam, for many years,

unskilled workers constituted large proportion of labor force and they have worked

for jobs unrequired much skill and knowledge in information technology. Hence it has

found specific economic patterns like jobs required a lot of labors such as farmers,

construction workers, workers in factories of chemicals, leathers, garments, roads and

bridges, mining workers, cargo handling… The labor force in Vietnam is abundant

and even though excesses. While Japan with the advantage of high technology and

capitals but low number of young labors tends to produce the high-tech products and

services required less labor. Besides, nowadays Japan is considered the aging

population country and they really need more labors for the industry.

More importantly, Vietnam with the vision to become a new industrial

country needs more and more investments of capitals and technology into the industry

as well as using up excess human resources. Similarly, Japan has abundant capitals

and they want to invest these capitals for earning profits and outsourcing in other

country for competing in global market. Moreover, the Japan’s industry needs more

common labors to solve the serious problem of labor shortages. Therefore Vietnam

and Japan have chances to exchange labors, capitals, and technology to each other.

Excess labors problem can be solved by sending them to work in Japan while the



abundant capitals and technology come to Vietnam for developing the domestic

industry as well as profits turning back to foreigner. Hence both sides mutually get

benefit.

2.2. KEYNES’ AD-AS MODEL:

The AD-AS or Aggregate Demand-Aggregate Supply model is

a macroeconomic model that explains price level and output through the relationship

of aggregate demand and aggregate supply. In addition, the AD-AS model will

explain how the GDP growth rate happens and show what element will affect that

growth on GDP.

The AD/AS model is used to illustrate the Keynesian model of

the business cycle. Movements of the two curves can be used to predict the effects

that various exogenous events will have on two variables: real GDP and the price

level. Furthermore, the model can be incorporated as a component in any of a variety

of dynamic models (models of how variables like the price level and others evolve

over time). The AD-AS model can be related to the Phillips curve model of wage or

price inflation and unemployment.

Figure 1.1: Aggregate demand and aggregate supply

Aggregate demand curve

The AD curve is defined by the IS-LM equilibrium income at different

potential price levels. The equation for the AD curve in general terms is:



where Y is real GDP, M is the nominal money supply, G is

real government spending, T is an exogenous component of real taxes levied, P is

the price level, and Z1 is a vector of other exogenous variables that affect the location

of the IS curve (exogenous influences on any component of spending) or the LM

curve (exogenous influences on money demand). The real money supply has a

positive effect on aggregate demand, as does real government spending (meaning that

when the independent variable changes in one direction, aggregate demand changes in

the same direction); the exogenous component of taxes has a negative effect on it.

Aggregate supply curve

The aggregate supply curve may reflect either labor market disequilibrium

or labor market equilibrium. In either case, it shows how much output is supplied by

firms at various potential price levels.

The equation for the aggregate supply curve in general terms for the case

of excess supply in the labor market, called the short-run aggregate supply curve, is

Where W is the nominal wage rate (exogenous due to stickiness in the

short run), Pe is the anticipated (expected) price level, and Z2 is a vector of exogenous

variables that can affect the position of the labor demand curve (the capital stock or

the current state of technological knowledge). The real wage has a negative effect on

firms' employment of labor and hence on aggregate supply. The price level relative to

its expected level has a positive effect on aggregate supply because of firms' mistakes

in production plans due to mistakes in prediction of prices.

Shifts of aggregate demand and aggregate supply:

The following summarizes the exogenous events that could shift theaggregate supply or aggregate demand curve to the right. Of course, exogenous events

happening in the opposite direction would shift the relevant curve in the opposite

direction.

Shifts of aggregate demand

The following exogenous events would shift the aggregate demand curve

to the right. As a result, the price level would go up. In addition if the time frame of

analysis is the short run, so the aggregate supply curve is upward sloping rather than

vertical, real output would go up; but in the long run with aggregate supply vertical atfull employment, real output would remain unchanged.



Shifts of aggregate supply

The following exogenous events would shift the short-run aggregate

supply curve to the right. As a result, the price level would drop and real GDP would

increase.

An exogenous decrease in the wage rate

An increase in the physical capital stock

Technological progress — improvements in our knowledge of

how to transform capital and labor into output

The following events would shift the long-run aggregate supply curve

to the right:

An increase in population

An increase in the physical capital stock

Technological progress

Figure 1.2: The formation of the economic growth when AD curve shifts to the right.

Link to the thesis, as is shown in the figure 1.2, the shift of AD curve tothe right will make an increase in GDP, and Keynes’ theory asserts that AD curveincludes following factors that make the change: Consumption C, Investment I,Government expenditure G, Import IM and Export EM.

AD = C + I + G + (IM-EX)



In that, (IM-EX) is the trade surplus or trade deficit. Therefore, AD can bea function that is affected by the following factors:

AD = f(C, I, G, (IM + EX))

In which, (IM + EX) is the country’s value of international trade.

Moreover, the international trade of Vietnam includes two more factors:trade of Vietnam and Japan, which is denoted VNJP, and trade of Vietnam and othercountries, which is denoted VNOT:

GDP growth rate = f(AD) = f(C, I, G, VNJP, VNOT)

The increase or decrease of one to all of factors will give contribution tothe shift of AD curve or GDP growth rate. To more details, the following part will

raise the main purpose of this thesis by theory of AD-AS model.

2.3. THEORETICAL MODEL ON IMPACTS OF INTERNATIONAL TRADE

BETWEEN VIETNAM AND JAPAN ON ECONOMIC GROWTH:

Based on agreements signed over years such as the annual ODA loan

agreement or bilateral economic partnership agreement on 2008, it is clearly that

commercial association between Japan and Vietnam has been increasing. When

Aggregate demand curve shifts to right and we assume that Aggregate supply curve

keeps stable, it creates a growth in GDP. The AD curve shift describes the increase in

GDP year by year. As it shown in the table () below, GDP’s growth rate in Vietnamhas rose up annually from the year of 1998 to 2009, increasing about 6.9% in average

even though Asian economic crisis in early 1998 and financial global crisis in 2008.

Table 1.1: Annual GDP’s growth rate in Vietnam

Year 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Growthrateunder %

5.8 4.8 6.8 6.9 7.1 7.3 7.8 8.4 8.2 8.5 6.2 10.17 6.8

(Source: Bureau of Statistics)

The increase in GDP is the result of the increase in domestic consumption,

government expenditure, investment on physical capital, international trade, foreign

direct investment and some other factors. The change in economic patterns in 1986

had made open period for Vietnam’s economics, bring about the development offoreign trade that leads to the rising in many factors. For example: international trade



promoted spending from government to build better infrastructures, encouraged

investment in knowledge and technology, stimulated exchange, trade and

consumption of goods...In foreign trade, international trade between Vietnam and

Japan constitutes at least 5.2% to maximum 20,8% and every year average 14% in

general international trade of Vietnam (Figure 1.3). This is high proportion ofcontribution if it is said in aspect of trade numbers. However, international trade is an

important part to increase GDP every year and people wonder that how trade between

Vietnam and Japan contribute great to this increase or it is just a small part in

international trade and has no affects to the economics’ growth rate.


Figure 1.3: The proportion of trade value between Vietnam and Japan compared with

trade value between Vietnam and other countries over the total trade turnover value

of Vietnam from 1988 to 2010.

Based on AD-AS model, it should be made clear that with the growth rate

of international trade between Vietnam and Japan, does it impact on the change in

Vietnam economics’ growth rate in general and GDP in depth?

Therefore to make this point more clearly, the AD curve shift which

explains the change in economics’ growth rate includes following factors that should be considered in real GDP: international trade between Vietnam and Japan (VNJP),

international trade among Vietnam and other countries (VNOT), consumer spending

(C), government expenditure (G), foreign direct investment (F), investment (I) and

domestic productivity (GDP over employees) (P):

GDP = f(VNJP, VNOT, G, I, P, C, F)

Using regression approach, we can express GDP now as to be the dependent

variable which depends on the following independent variables:



GDP = a + b0 C + b1 I + b2 G+ b3 FDI + b4 P + b5 VNJP + b6 VNOT + c

Running Regression equation will give 6 necessary main tests in: T-test, F-

test, Dublin Watson index, R-squared, White Heteroskedasticity test and values of

Mean, Median, Kutoris, Jarque-Bera which mean that:

The T-test: is any statistical hypothesis test in which the test

statistic follows a Student's t distribution, if the null hypothesis is supported. It is most

commonly applied when the test statistic would follow a normal distribution if the

value of a scaling term in the test statistic were known. When the scaling term is

unknown and is replaced by an estimate based on the data, the test statistic (under

certain conditions) follows a Student's t distribution.

In this case, the T-test will prove the value of the variable in the equation

or individual coefficient in equation. If the T-test of independent variables is in

Student’s t distribution interval index, it can be said that this variable is no value instatistics. Or if the test of independent variable is negative with the function, this trend

of variable will go in opposite way of the function like GDP increases with the

reduction of government expenditure, and vice versa.

The F-test: is any statistical test in which the test statistic has an F-

distribution under the null hypothesis. It is most often used when comparing statistical

models that have been fit to a data set, in order to identify the model that best fits

the population from which the data were sampled. The F-test measures the statistical

significance of the entire regression equation rather than of each the individual

coefficient. Therefore this test explains the value of whole equation with the critical

F-value of degrees of freedom should be higher than the critical F-value in F

distribution table.

The R-squared:

In this case, R-squared values will imply how much proportion of all

independent variables may affect the change in function. A high R-squared (between

85 and 100) indicates the fund's performance patterns have been in line with the

index. A fund with a low R-squared (70 or less) doesn't act much like the index. For

example, if R-squared value equal 80%, it means that the increase or decrease of all

independent variables in equation explains 80% in change in GDP’s growth rate.

The Dublin Watson statistics: is a test statistic used to detect the

presence of autocorrelation (a relationship between values separated from each other

by a given time lag) in the residuals (prediction errors) from a regression analysis.

The White Heteroskedasticity test: to check the phenomenon of unequal

variances from the statistical significant of each independent variable tested.

Observing the values of Mean, Median, Kutoris, Jarque-Bera to testthe normal distribution of error of residuals from initial testing hypothesis –



independent variables do not impact on dependent variables, and multicollinearity

tested.

With the number of data collected from 1988 to 2009 by Bureau of

Statistics, it will turn to regression equation methodology concerned in next chapter.



CHAPTER III

METHODOLOGY, RESULT AND DISCUSSION

In this chapter, it will be discussed about the international trade between

Vietnam and Japan from 1988 – 2010, pros and cons as well as difficulties and

barriers, and results analysis of trade between two countries after running regression

equation.

3.1. THE INTERNATIONAL TRADE BETWEEN VIETNAM AND JAPAN IN

THE PERIOD 1988 – 2010

Introduction about Japan

Japan is a country which has a hundred of islands, surrounded by Pacific

ocean and neighboring countries with bordering the sea such as China, Russia or

Taiwan. It is cold climate in Japan, has many volcanoes and unstable geological

layers; Japan was considered as a country immensely rich in precious metals and

natural resources but strong in economics since the 1960s. The Japanese economy is

the third largest in the world after the United States and China but ahead of Germany

at 4th. In 2010, the total exports was estimated $765.2 billion while it was $636.8

billion in imports, hence Japan has got a great trade surplus. According to the

International Monetary Fund, the country’s per capita GDP was at $32,608 or the 23rd

highest in 2009. The main imports of Japan are machines, equipment, fuel, food

(especially beef), chemical, textile materials and resources for the domestic industry.

In general, the largest trading partner of Japan is China.

The banking service, insurance, real estates, retails, traffic transportation

and infrastructure, telecommunications are large industries in Japan. Japan has a greatcapacity in the industry, and this is a head-quarter of the most advanced technology

manufacturers in the world such as the company of motor vehicles, electronic

equipment, machine tools, irons, non-metal, ship industry, chemical, textile, processed

food. This is also the head-quarter of multinational companies and many commercial

products in the field of technology and machine. For a long time ago the construction

has become a largest industry in Japan as well as the traffic in Japan fast raised.

Japan is considered as the biggest bank agency in the world, Mitsubishi

UFJ financial group have the capital estimated over $1.7 thousand billion. Besides, it

is the second largest stock market exchange in the world – Tokyo stock market.



Moreover, Japan is world leader in the field of scientific research,

machinery technology, medicines research. Many important contributions in

technology of Japan are inventions in the field of electronics, vehicles, machines,

industrial robot, optical, chemicals, semi-conducts and metals in which Japan takes a

world leader in robot science.

3.1.1. THE INTERNATIONAL COMMERCE SITUATION BETWEEN

VIETNAM AND JAPAN IN GENERAL FROM 1986 TO 2010:

This part will give an overall situation to generalize the trade relation,

import and export turnover value, trade balance between two countries.

3.1.1.1. THE COMMERCIAL RELATION BETWEEN VIETNAM AND

JAPAN SINCE 1986:

Since 1986 until now, after Vietnam made the new economic policy to

change the orientation to the market economy and implemented opening policies, it

was an important turning point to Vietnam’s economic development for both internal

and external. The commercial relationship between Vietnam and Japan also entered a

new period with the strong increase in trade volumes and rising attention from

Japanese enterprises to Vietnamese market. Hence, in 1988, although it was the first

time to export crude oil, Vietnam exported it to Japan.

In October 1990, the first time in the history relationship of both countries,

it was a good dimension by a visit of Foreign minister and Deputy Prime minister

Nguyen Co Thach to Japan. This visit opened a new period in relation Vietnam –

Japan. In June 1991, Foreign minister Makayama came to our countries. These steps

of the both governments were the driving force of economic cooperation between two

countries and there were marked improvement in both trade and investment.

The relationship between Vietnam and Southeast Asia countries alsoimproved since Vietnam withdrew soldiers from Cambodia. Since 1992 there were

rising visits to each other among the Vietnamese government and ASEAN countries.

The day 22 in July 1992, Vietnam signed the Bali Conventions that opened for the

integration process of Vietnam into the Southeast Asian area and became the ASEAN

observer. Regions and world increasingly support the trade relations of Vietnam and

Japan. ASEAN countries now are friends of Vietnam, these factors set the stage for

Japan to widely increase trade cooperation relation with Vietnam.



In November 1992, Japanese government decided to aid Vietnam again,

ending 14 years interruption (1978-1992). The following was ODA, the Japanese

government declared to eliminate regulation “limited export in some high-tech goods,

strategic goods to Socialist countries including Vietnam”. From this time, Vietnam

could import machines, modern equipment from Japan to serve the cause of building

socialism in Vietnam. Generally, in many years from 1988 to 2010, the turnover

between two countries has steadily grown up in both import and export. The table 3.1

will show the international trade between Vietnam and Japan in general.

3.1.1.2. THE VIETNAM’S TOTAL EXPORT-IMPORT TURNOVER VALUE

WITH JAPAN FROM 1988 TO 2010:


Year

(Y)

Import Export Total

trade

Y/(Y-1)

(%)

Year

(Y)

Import Export Total

trade

Y/(Y-1)

(%)

1988 138.8 60.7 199.5 2000 2300.9 2575.2 4876.1 143.2

1989 105.6 261 366.6 183.8 2001 2183.1 2509.8 4692.9 96.2

1990 169 340.3 509.3 138.9 2002 2504.7 2437.0 4941.7 105.3

1991 157.7 719.3 877.0 172.2 2003 2982.1 2908.6 5890.7 119.2

1992 239.4 833.9 1073.3 122.4 2004 3552.6 3542.1 7094.7 120.4

1993 452.3 936.9 1389.2 129.4 2005 4074.1 4340.3 8414.4 118.6

1994 585.7 1179.3 1765.0 127.1 2006 4702.1 5240.1 9942.2 118.2

1995 915.7 1461.0 2376.7 134.7 2007 6188.9 6090.0 12278.9 123.5

1996 1260.3 1546.4 2806.7 118.1 2008 8240.3 8467.8 16708.1 136.1

1997 1509.3 1675.4 3184.7 113.5 2009 7468.1 6291.8 13759.9 82.4

1998 1481.7 1514.5 2996.2 94.1 2010 9016.1 7727.7 16743.8 121.7

1999 1618.3 1786.2 3404.5 113.6

Table 3.1: Export-Import of Vietnam with Japan since 1988 to 2010

The table shows the steady increase in import and export of Vietnam to the

Japanese market from 1988 to 2010. However, because of the Asian economic crisis



in 1988 and Global financial crisis in 2008 that impacted on the trade between two

countries, hence the total turnover of Vietnam and Japan decreased from the previous

year, particularly reducing about 200 million dollars in 1998 and 300 million dollars

in 2009. Besides, it was an important year 1992 that not only a turning point in

relation but also it was the remarked year that Vietnam became one of ten countries

which received bilateral ODA from Japan with 291.14 million dollars.

Beside the reasons of economic hardship on both countries, it was the lack

of the ability to approach and enter the market and the way to sale and introduce

goods to Japanese was difficult. Late delivery, insufficient numbers, difference among

samples and sales, and the lack of using language were the existing barriers.

The structure in import and export of Vietnam and Japan in the first

fourteen years from 1988 to 2002 were not much change. The main goods that

Vietnam exported to Japan in this period were: seafood, garments, crude oil, electrical

wires and cables. However, the following years, it was new trend in exporting sugar,

rice, peppers to Japanese market. Although the volume of these items was relatively

small, it would be a good signal for Vietnamese export if it could keep this stable

growth.

Japan has been one of the largest partners of Vietnam for many years and

has stayed in the leading trade with Vietnam since 1990. The total two-way trade

turnover reached 199.5 million dollars in 1988, 3404.5 million dollars in 1999 and

more than 16.7 billion dollars in 2010. This is an impressive number in the economic

relation of both countries, increasing 84 times from the near starting point 200 million

dollars for the period of 22 years.



3.1.1.3. TRADE BALANCE BETWEEN VIETNAM AND JAPAN FROM 1988

TO 2010:

(Source: Bureau of Statistics) (Unit: USD)

Figure 3.1: The international trade between Vietnam and Japan from 1988 to 2010

As is shown in the figure 3.1, the export turnover of Vietnam to Japan in

2008 increase 136%, the trade balance between two countries has been still titled

toward Vietnam and in 2008 Vietnam had trade surplus toward Japan with more than

200 million dollars. But Vietnam had trade deficit from Japanese export in 2002,

2003, 2004 and 2010 with about 67, 73.5, 10.5 and nearly 100 million dollars in that

order. Moreover, in two recent years 2009 and 2010, this trade deficit of Vietnam with

Japan dramatically increased, with 1176.3 and 1288.4 million dollars respectively. In

the starting point in 1998, the growth rate of importing was always higher than the

growth rate of exporting. The reason is that from this time, Vietnam started focusing

on importing modern machines and technologies to serve the modernization of the

country. In general, the export from Vietnam to Japan has been much more than

import until now.




Figure 3.2: Trade balance between Vietnam and Japan compared with total trade

balance among Vietnam and other countries from 1988 to 2010.

The growth rate of trade relation between Vietnam and Japan also

expressed in the proportion of export turnover and import turnover that accounted for

in the foreign trade turnover of Vietnam. The export and import turnover of Vietnam

and Japan rapidly increased, it has been shown the increase year over year from 1988

until now, excluding years 1998, 2001 and 2009 because of Asia economic crisis,

terrorist events to the WTO center and Pentagon in the USA, and Global financial

crisis. For recent 10 years since 2000 until 2010, the total export-import turnover of

both countries has increased 3.4 times from the starting point 4.8761 billion dollars to

the highest 16.7438 billion dollars (table 3.1). The trade balance between two

countries mainly trade surplus with large volumes, such as the trade surplus in 2001

was 326.1 million dollars while the trade balance of Vietnam in general mostly was in

trade deficit (figure 3.2).



(Unit: millions USD)

Year

Vietnam – Japan Vietnam and other countries

VNJP-IM VNJP-EX TRADE

BALANCE

VNOT-IM VNOT-EX TRADE

BALANCE

1988 138.8 60.7 -78.1 2617.9 977.5 -1640.4

1989 105.6 261 155.4 2460.2 1685 -775.2

1990 169 340.3 171.3 2583.4 2063.7 -519.7

1991 157.7 719.3 561.6 2180.4 1367.8 -812.6

1992 239.4 833.9 594.5 2301.3 1746.8 -554.5

1993 452.3 936.9 484.6 3471.7 2048.3 -1423.4

1994 585.7 1179.3 593.6 5240.1 2875 -2365.1

1995 915.7 1461.0 545.3 7239.7 3987.9 -3251.8

1996 1260.3 1546.4 286.058 9883.258 5709.5 -4173.758

1997 1509.3 1675.4 166.116 10083.02 7509.6 -2573.416

1998 1481.7 1514.5 32.837 10017.94 7845.8 -2172.137

1999 1618.3 1786.2 167.9 10123.8 9755.2 -368.6

2000 2300.9 2575.2 274.3 13335.6 11907.5 -1428.1

2001 2183.1 2509.8 326.701 14034.9 12519.4 -1515.501

2002 2504.7 2437.0 -67.7 17240.9 14269.1 -2971.8

2003 2982.1 2908.6 -73.5 22273.7 17240.7 -5033

2004 3552.6 3542.1 -10.5 28416.2 22942.9 -5473.3

2005 4074.1 4340.3 266.2 32687 28106.8 -4580.2

2006 4702.1 5240.1 538 40189 34586.1 -5602.9

2007 6188.9 6090.0 -98.9 56575.8 42471.4 -14104.4

2008 8240.3 8467.8 227.5 72473.5 54217.3 -18256.2

2009 7468.1 6291.8 -1176.3 62480.7 50804.5 -11676.2

2010 9016.1 7727.7 -1288.4 74983.9 63902.3 -11081.6

Table 3.2: Trade balance between Vietnam and Japan, and Vietnam with other

countries from 1988 to 2010. (Source: Bureau of Statistics)



Due to the economic development, Vietnam always was always in trade

deficit in general. As regard to the trade relation of Vietnam and Japan, it was a

different story, the trade balance of Vietnam almost has been in positive numbers in

15 years rather than negative numbers in 7 years. But these statistics are not really

meaningful because Vietnam is in the process to become a new industrial country.

Hence Vietnam potentially imports more and more goods such as heavy industrial

machines and equipment for serve the vision of the country. Japan is the country of

technology and science, so Vietnam needs to learn and imports scientific technology

and innovative products from Japan then the trade balance of Vietnam and Japan will

tend to trade deficit to Vietnam. However, Vietnam can reduce the trade deficit to the

maximum by developing more and more in the agriculture and light industry that

Japan had left.

3.1.1.4. PROPORTION OF VIETNAM’ EXPORT-IMPORT TO JAPAN FROM

1988 TO 2010:

As is shown in table 3.3, exporting to Japan reached the impressive

number from 1991 to 1996 when it constituted a large proportion in export of

Vietnam in general, accounting for the highest 34.6% in 1991 and at least 21.31% in

1996. However, the proportion of Vietnamese export to Japan in total export of

Vietnam in general has slightly reduced.

From 1997 to 2010, the reduced rate of contribution in average is 0.75 per

year despite there were negligible increase in years 2000 and 2008, decreasing from

18.24% in 1997 to 10.79% in 2010. The contribution proportion of trade between

Vietnam and Japan to the trade of Vietnam in general is also at the same reduced rate

with export situation in spite of the import and export indexes of Vietnam and Japan

increased year by year. That means Vietnam not only developed the connection to

Japanese market but also integrated to the global trade.



(Source: Bureau of Statistics) (Unit: millions USD)

Year

IMPORT EXPORT Proportion

VNJPTRADE

over

TOTAL

TRADE

VNJP-IM Total IM Proportion VNJP-EX Total EX Proportion

1988 138.8 2756.7 5.04 60.7 1038.2 5.85 5.26

1989 105.6 2565.8 4.12 261 1946 13.41 8.13

1990 169 2752.4 6.14 340.3 2404 14.16 9.88

1991 157.7 2338.1 6.74 719.3 2087.1 34.46 19.82

1992 239.4 2540.7 9.42 833.9 2580.7 32.31 20.96

1993 452.3 3924 11.53 936.9 2985.2 31.38 20.11

1994 585.7 5825.8 10.05 1179.3 4054.3 29.09 17.86

1995 915.7 8155.4 11.23 1461.0 5448.9 26.81 17.47

1996 1260.3 11143.6 11.31 1546.4 7255.9 21.31 15.25

1997 1509.3 11592.3 13.02 1675.4 9185.0 18.24 15.33

1998 1481.7 11499.6 12.88 1514.5 9360.3 16.18 14.36

1999 1618.3 11742.1 13.78 1786.2 11541.4 15.48 14.62

2000 2300.9 15636.5 14.71 2575.2 14482.7 17.78 16.19

2001 2183.1 16218.0 13.46 2509.8 15029.2 16.70 15.02

2002 2504.7 19745.6 12.68 2437.0 16706.1 14.59 13.56

2003 2982.1 25255.8 11.81 2908.6 20149.3 14.44 12.97

2004 3552.6 31968.8 11.11 3542.1 26485.0 13.37 12.14

2005 4074.1 36761.1 11.08 4340.3 32447.1 13.38 13.98

2006 4702.1 44891.1 10.47 5240.1 39826.2 13.16 11.74

2007 6188.9 62764.7 9.86 6090.0 48561.4 12.54 11.03



2008 8240.3 80713.8 10.21 8467.8 62685.1 13.51 11.65

2009 7468.1 69948.8 10.68 6291.8 57096.3 11.02 10.83

2010 9016.1 84000.0 10.73 7727.7 71630.0 10.79 10.76

Table 3.3: Proportion of Export-Import between Vietnam and Japan in the Export-

Import turnover of Vietnam

The structure import of our country from Japan in 2010 is still favorite

traditional goods such as: machines, equipment, computers and computer accessories,

types of steel and iron, automobile and motorbike under types of CKD, SKD, CBU.

This commodity group accounted for 60% of total import values. In addition, in 2010

Vietnam has tried to reduce the goods that can be produced domestically, and

increasingly export such as garments, agricultural products, seafood, mechanical products and small tools, crude oil, raw materials which are main advantages to Japan.

However, Vietnam has met the hard competition from China that led to

difficulty in increasing export goods. The first reason is high requirement from the

quality of the products from Japanese. On the other hand, it is the improvement of

quality, design and especially suitable price that affects Japanese tastes. Therefore, the

trade of both countries has not corresponded with the existing capabilities of both

sides. The main point emphasized here is that agricultural products such as fruit

juices, vegetables, rice, wheat …etc… deeply cannot enter the Japanese market.

In general, this poses for both sides is the need to have practical solutions

and more efficient if we desire to promote trade relations of both countries. It is

clearly that stronger growth into the Japanese market is the right strategy and vision,

but to transform ideas and opportunities into reality is a challenge for the Vietnamese

enterprises now and in the future.



3.1.1.5. THE RELATION BETWEEN THE GROWTH RATE OF THE TRADE

BETWEEN VIETNAM-JAPAN AND THE GROWTH RATE OF VIETNAM’

GDP BY STATISTICS.


Figure 3.3: the growth rate of trade of Vietnam-Japan compared with the growth rate

of Vietnam’ GDP by statistics.

Generally, as is shown in the figure above, the increase over the previous

year of trade between Vietnam and Japan has not been really stable, there were many

years with high increasing rate however those were following year strongly went

down. Although the change in trade rapidly reduced compared to the year 1989, but

the volume of trading and export and import turnover dramatically increase over 83

times. While change in GDP compared to previous year tent to be more stable from at

least 5% to the highest 10.17% in 2009.

Especially, in year 2009, although the trade between two countries reached

the highest reduction, meeting the lowest point of -20%, it means that trade of both

countries in 2009 was not good and it had been reduced 20% over the trade in year

2008. That could be the financial crisis influence which had remarkably affected the

economy of Japan and demands from both countries. At that time most of the

Japanese had to cut off any cost to save for their life. But it is quite amazing when the

change in growth rate of Vietnam reached the highest point over the period of 20



years, reaching the peak of 10.17% while the strongest reduction in trade of Vietnam

and Japan in that year. It considers that the attempt of the government as well as

enterprises to keep the domestic manufactures and services was successful and got the

unexpected well-done result for Vietnamese economy.

In general, through the statistics was shown by the figure, the trade

between Vietnam and Japan has come up or down with the GDP growth rate but this

is just the first indentify that we have not yet give final conclusion. The following part

will clearly explain and analyze the trade between two countries to deeply understand

the trade pattern of both countries over 20-year period.

3.1.2. IMPORTS AND EXPORTS BETWEEN TWO COUNTRIES BY

COMMODITIES:

Throughout over 20 years, the exports of Vietnam to Japanese market have

been still frozen seafood, electrical wires and cables, garments, handicraft products

and raw material such as crude oil, iron ore and metals. However, the structure of

exports as well as the one of imports has been had remarkable improvement. It can be

proved from changing in importing many scientific technological products and

machines to manufacturing, packing and exporting back to Japanese market also as

other markets like the Europe, USA, South Africa… The following analysis will

indicate changes in the structure of trade between two countries for near several years.



3.1.2.1. VIETNAM’S COMMODITIES WITH HIGH EXPORT VALUE TO

JAPANESE MARKET:


Figure 3.4: The export proportion from Vietnam to Japan over total export turnover

of Vietnam since 1988 to 2010

From 1988 to early 20th century, traditional items that traded by two

countries such as garments, seafood, woods and wooden products, plastic products,

coffee, coal,… have constituted large proportion in exports of Vietnam. Thanked to

the special feature of low labor cost as well as abundant raw materials and stable

climate, Vietnam had got trade surplus and accepted by Japanese market with good

comments of quality, sophisticated design with suitable price and competition.

Garments

The garments is found to develop stable and sustainable from constituting

11 to 15% in total exports to Japan and growing about 17% per year.

Crude oil

The crude oil that exporting to Japan has got high proportion (25% in

2008), except the one in 2009 just getting 7.2% because of predicted fluctuation in oil

situation and finance situation in the world. With the appearance of Dung Quat

refinery plant, Vietnam specially tend to export refinery oil to Japan and world’s

demands. It cannot forget to wooden products and coffee that contributed high export

values in many years.



It is good news when the export of crude oil has been reducing since Dung

Quat refinery plant was used to decrease the number of exporting crude oil to Japan. It

does not need to export crude oil to Japan for refining there and then imports back to

Vietnam. Costly it makes the price of domestic oil and petrol increases. The export of

crude oil reduced from 2.9 million tons with values at 2.17 billion dollars in 2008 to

340 thousand tons with values at 214 million dollars in 2010. Therefore, crude oil

would not be main exports to Japan anymore, but it would be products from light

industry, garments, seafood, vegetables and fruits, machinery and computers.


Figure 3.5: The change of some high value export goods to Japan in the period of

2007-2010

Woods and Wooden products



Woods commodities are always highly respected by Japanese market.

Vietnam has advantage of the tropical country with many rivers and forests so woods

are abundant and natural. In addition, wooden products are well designed, durable,

sophisticated and competitive price compared to other ones from Malaysia with lower

quality. The contribution of this item rose from about 300 million dollars in 2007 to

more than 450 million dollars in 2010. The largest corporations such as Hoang Anh

Gia Lai or Chi Lai are reliable partners and they are the bridge for the wooden

products to Japanese market.

Coffee

Coffee is also such an important field. In 2007, the amount of coffee

exported to Japan was over 46 thousand tons with values more than 76 million dollars

and in 2010 that was 53 thousand tons with more than 85 million dollars. But the yearof 2008 was the remarkable time that 59 thousand of coffee was exported to this

market, reaching 127.4 million dollars and constituting 6.04% of total coffee’s exports

of Vietnam. So the market’s consumption of Vietnam’s coffee in Japan played an

important role and it should be expanded and developed because it is nearly same

taste of coffee in Asia.

(Source: Bureau of Vietnam customs)



Figure 3.6: Proportion of six high value exported products to Japan in 2007 and

2008.

More importantly, nowadays especially from 2007, many export products

have jumped up in exports of Vietnam such as foot-wares, machinery, equipment,

tools and accessories, computers and computer accessories have accounted for large

proportion export to Japanese market.

Foot-wares

In 2007, the number of exporting foot-wares to Japan was very small, but

in three years later, the value of exporting this item superiorly contributed with more

than 137 million dollars in 2008, 122 million dollars in 2009 and 172 million dollars

in 2010. Especially in the first two months in 2011, the export values of this item

equaled 1/3 of total foot-wares exports to Japan. It can be said that the foot-wares is

very potential to develop in Japanese market.

Computer items and its accessories

Beside that we should regard to computer items and its accessories,

machinery, equipment, tools and accessories. If as in previous years, these items had

not yet reached high export values, by the development of light industrial manufacture

as well as scientific technology, nowadays Vietnam has been more confident to export

these items, meeting the need of using high-tech products for industrial fields of the

world in general and Japan in particular. Just in 2010, the total values of computers

and computer accessories had reached 410 million dollars, increasing 7.83% over the previous year and constituting proportion of 5.32% in total exports of Vietnam.



Machinery, equipment, tools and accessories

To the items of machinery, equipment, tools and accessories, many nations

such as China, Japan or USA had quitted these fields of producing small tools and

accessories and they has focused on machinery production and heavy industry. This issuch an opportunity for Vietnam’s enterprises as well as industrial fields to promote a

light industry and simple production. We have not had enough capacity, technology,

science and experience so it is hard to compete with large industries in the world.

However, this is also the motivation and vision for Vietnam’s industry, as a good

opportunity for Vietnam to learn more and more experience in manufacturing as well

as labor’s skills, then pushing up and developing the labor force to be well trained and

skillful in major jobs.




Figure 3.7: Export proportion of important commodities of Vietnam to Japanese

market in 2009 and 2010.

“Seafood, electrical wires and cables are still stable and high values of turnover in

exports. In the last 3 years, the average contribution values over total export turnover

of each item above oscillated at level of 10-12% while growth rate was not stable.”

Seafood

In the case of exporting seafood, in 2008 the growth rate reached 10.16%

over the year 2007, but in 2009, it reduced 8.36% over the year 2008. But it was a

different story in 2010, the growth rate has returned and reached more than 17.5%

over the year 2009 with the total export values was 894 million dollars.

Electrical wires and cables

However, the growth of exporting electrical wires and cables in 2010 has

dramatically changed with 43% compared to the year 2009, approaching over 900

million dollars. It is considered that including seafood and garments, these types of

export items always occupy the leading position in Vietnam’s exports, having high

and stable growth rate.



3.1.2.2. Important Vietnam’s import commodities from Japan:

(Source from Bureau of Statistics)

Figure 3.8: Import proportion over total import turnover of Vietnam

The exports from Japan to Vietnam besides traditional items also have

positive changes and bring benefits to Vietnam’s economy. In nowadays, petroleum

types is no longer a priority imports of Vietnam. The values of importing this item

had been reducing from 200 thousand tons in 2007 to just 62 thousand tons in 2010.

Hence with the decreasing exporting crude oil to Japan, Vietnam could produce

petroleum types by themselves to meet the domestic demands.

It is significant to mention to raw material items such as steels and irons,

fabric types, machinery and equipment, computers and high tech products imported

into Vietnam. Specifically because Vietnam is a developing country and it needs more

capitals as well as raw materials and scientific technological machineries to push up

the domestic industry, it is reasonably necessary for Vietnam to import these items.

These products always constituted large proportion in total imports from Japan. As

particular regard to machinery items, their values always account for more than ¼

total imports from Japan, rising from 1.9 billion dollars in 2007 to much more 2.5

billion dollars in 2010.

Steel and iron materials

Steel and iron materials imported to the domestic market remarkably

increased, especially in 2008 (1 billion dollar), going up 59% compared with the year

2007 (655 billion dollars) and in 2010 (1.2 billion dollars) increasing with the

proportion of 47% over the year 2009 (839 million dollars). In the last 3 years, steels

and irons always have been high proportion which is from 10 to 13% of total importsfrom Japan.



(Source: Bureau of Vietnam customs) (Unit: USD)

Figure 3.9: The change of Vietnam’s imported goods from Japan in period of 2007-

2010

Computer and its accessories

Mentioning to the computer and its accessories which also have made up

high percentage in imports, the price of these products has become cheaper and

cheaper mainly because of fast technological development. It is consistent with the

affordability of the rising youth as well as technological developing situation in

Vietnam. That explains why more and more people can own the computer and use the

internet. According to the statistics in 2010, there was more than 60% family owing

desktop and laptop at home, much more than that number using the internet and

mainly concentrating in the big cities. In 2010, Vietnam imported from Japan over 1

billion dollars at the values of these items.

Fabric types

To the traditional trading items like fabrics for the period of 20 years, it

continuously has contributed to the total imports of Vietnam from Japan with more

than 300 million dollars in each of the last 3 years. It is such a stable and relatively

more imported item to Vietnam.




Figure 3.10: Proportion of Vietnam’s high imported goods value over the total import

turnover in 2007 and 2010.

“The figure shows that the change in import from Japan has not been changed so

much for recent years. It was still traditional commodities for the last ten years.”

Automotive components and accessories



Beside that automotive components and accessories imports significantly

increased. In 2007, it was approximately estimated 200 million dollars but to the year

2010 it nearly reached values of 400 million dollars for these items. Particularly

peaked at 55 million dollars it did for imports in the first 2 months of 2011. Thus it

shows the big importing change in these items. It is a fact that there are a dramatic

rising number of people using automotive vehicles, in addition of the development of

transportation services, cars and vehicles assembled in Vietnam become more

attractive to the general taste with the high quality.

Many large corporations such as Honda, Toyota, Mitsubishi, Isuzu or even

though Truong Hai auto had establish the domestic brand related to the mother

company and have imported more components and accessories from many countries

including Japan into Vietnam for assembling, selling domestically as well as export

competiveness.

BRIEFT CONCLUSION: Japan is a very large market with more than 130 million

people and purchasing power of this market is quite high, specially expressed by

increasing imports, reaching $501.6 billion in 2009 and $636.8 billion in 2010. And

the structure of import-export has been changing a few but importantly. Traditional

trading goods have steadily increased year by year in both quality and quantity, but

there was decrease in exporting crude oil to Japan and it was replaced by exporting

goods with highly professional characters and high-tech parts such as electric

equipment, computers and accessories, electrical wires and cables, small machinery

and tools for industry.

Moreover, since 2007 mechanical equipment and tools have been

importantly focused mainly because China and Japan had left this behind and they set

the target to strengthen the heavy industry. This is considered as an opportunity for

Vietnam to develop in this field to receive experiences in manufacturing and compete

with other light industry countries.

In the future, Vietnamese enterprises should focus on these commoditiessuch as processing foods, vegetables, fresh fruits, mechanical household goods,

plastic household goods, ceramics, precious stones, even though shipping building. As

a matter of fact, it is necessary to pay attention in promoting agricultural products to

export to Japan when Vietnam’s population mostly are the farmer and fisher but it has

not yet shown the power of the agricultural country. It should be mentioned to the

standard of personally Japanese market for the agricultural products that will suggest

in the next chapters.

For general view with high purchasing power, the Japanese nowadays donot require all goods necessarily with long durability anymore. Hence, goods with



short life circle but ensured quality, beautiful designs, utilities will become Japanese

favorite options. Through the exporting situation above, we partly have found the

explanation for trade pattern between Vietnam and Japan.

Vietnam with the strong point at low labor costs then it tends to producesmall commodities in large quantities and focuses on the production only required

common knowledge and basis skill. While Japan has a power of capacity and

scientific technology, they need labor force for operation of industrial manufacture as

well as investment for expanding the business and focusing on heavy industry.

In general, the economy of both countries is less of conflict and

competitiveness, but it supports and complements to each other.

3.1.3. CURRENT ISSUES AND ADVANTAGES IN TRADE BETWEEN TWO

COUNTRIES:

The reasons that export turnover of Vietnam to Japan are still modest

because Vietnamese enterprises have not fully grasped the advantages and overcome

difficulties when entering this market.

3.1.3.1. CURRENT ISSUES:

a. Japanese features in doing business:

The Japanese companies highly appreciate the prestige in doing business

with other partners. They respect to their partners and strictly implement any

agreements signed in the contract.

Moreover, those enterprises have careful process to find potential partners

before doing business with them in long term, even though sometimes orders are not

large volumes.

Japanese have high requirement in standard, durability, reliability,

usability of the product and they are willing to pay much higher for those good products. This requirement even includes warranty and guaranty services such as the

timely distribution of manufacturer when a product’s malfunction, ability and time to

repair that product. Minor scratches, cuts only remaining on textile products, packing

buckets deviation, etc… small errors by inadvertently during transport, or the stage of

finishing products may lead to hard-sell shipment, impact on long term production

plan.

b. Important priority requirements and barriers from Japanese market to

Vietnamese enterprises:



Quality, cost and delivery requirement

Japanese market have high requirement in the quality of the product,

therefore it is necessary for domestic companies to invest in promotion in many fields

such as design, technique, preservation, transportation, quality management. TheJapanese appreciate the quality factor, price and delivery on time (QCD – Quality,

cost and delivery). Thus all goods exported to Japan should be approximately at the

same quality. With that, the price of the product is also important because the

Japanese always expect goods which tend to reduce the price. And then the

requirement to manufacturers is correctly meet the need of the market as well as offer

the product with reliable price.

Food hygiene and safety requirements

Since May 29th 2006, Japan has implemented Law on Food Hygiene and

Safety amendments to all imported food shipment in Japan, tightens regulations and

the number of additional residues are not allowed in the food and continue to raise the

limit of chemical residues. The Japanese are highly aware of protecting the

environment. The business goods should mainly compliance the eco factor. Today,

the quality and safety of many goods are not guaranteed because of using too much

dangerous chemicals or toxics. Japan considers the situation to stop importing

unguaranteed products. Hence, it is difficult to any enterprise which wants to get into

this market without ensuring the good quality. All the commodities to Japan have to pass these five required factors from the Japanese standards: clean, refinery,

unnecessary parts cut, pure environment and orderliness.

For example, Shrimp and Squid exports of Vietnam have been checked for

quality control and food safety 100%. This affected the prestige of the field of

processing and exporting seafood of Vietnam, increasing the cost and decreasing

competition ability of goods. The reason was that in about 200 companies exporting

seafood to Japan included 30 companies violated the Japanese law and regulation in

2007.

Market and culture understanding

Many small and average Vietnamese enterprises have not enough

information about Japanese market and experiences to do business with Japanese. The

difficult is that the conducts of survey and market access in Japan quite expensive for

these small and average companies, even though it brings problems to large

companies to compete with domestic enterprises because of the high cost that may

lead to the high price of products. More importantly, Vietnamese companies have not

been understood thorough the culture and business practices of Japan. This is quite



important if Vietnamese companies want to sell their products without understanding

what market’s needs and how market’s operation.

Technology requirement in manufacturing the product

Some more specifically, technological and technical barriers to agricultural products and seafood are quite serious problems in exports such as Food hygiene and

safety. To vegetables, Plant protection Law of Japan has fallen Vietnam to its list of

the fruit-fly epidemics, hence Vietnam has not been allowed to export some fresh

fruits like dragon fruit, mango, papaya, cucumber, tomato… to Japan. This is not

good news for the farmers when Vietnam is good at planting these fruits, the abundant

production fully supplies to domestic market and exports.

Difference in product quality standards

Other problem is what technical standards and product quality should be.The Japanese industrial standards (JIS) and Japanese agricultural standards (JAS) are

different from the international standard organization (ISO), while most of

Vietnamese enterprises follow the ISO.

For example, JIS specifies the height of the spark plug from the gasket or

tapered seat of the sparkplug to the top of the terminal nut (or thread terminal) as

53mm. The ISO standard for sparkplug height is 2.5mm shorter than the JIS standard

at 50.5mm. While the small difference in height will not affect most vehicles (ISO

and JIS types can often be interchanged), some vehicles (particularly with the direct

fine ignition or specially fitted plug caps) must use the correct plug standard or a badcontact between plug and cap may be result. Common ISO type plugs are NGK, BKR,

Denso K or IK and Champion C or RC. Common JIS types are NGK BCP, Denso Q

or IQ. ..

The JAS are the basic for Japanese consumers to choose processed foods.

The list of foods adjusted by JAS including: beverages, processed foods, cooking oil,

cooking fat, processed agro-forestry products.

Strict distribution system and high cost in touching market’s needs

More difficulties for Vietnamese enterprises are the cost management and

distribution system in Japan. The products imported into Japan through many various

test and distribution channels before coming to the final customer. So it leads to the

situation of high prices compared with import prices.

Moreover, Japan is one of the most expensive countries in the world,

hence it takes high cost to conduct marketing research for Vietnamese small and

average enterprises to touch the market needs. It is the fact that Japanese lifestyle is so

expensive then costly to the small and average Vietnamese companies.

c. Intrinsic difficulties on Vietnam site:



Lack of information about Japanese market

Notable present many Vietnamese enterprises still do not know much

about the business practices of Japanese enterprises, they are lack of information

about Japanese market as long as importers, distributors in Japan.In addition, to do market research for Japan, case by case depending on

business depth, difficulty to obtain the data, the cost is still quite high because most of

Vietnamese enterprises are small and average ones so they do not have enough funds

to do this. It means that if one Vietnamese company could be successful in doing

market research in Japan, they also faced the increase in their product price that led to

the less competition with other products from other countries such as China or

Malaysia. From this reason, most of companies from Vietnam have to do business by

the prediction in Japanese demands, export goods based on subjective conception ormainly “instinct”. Many of them failed. But it is good example for other companies

and even though themselves to learn knowledge, get experience and be mature in this

market section.

Passive mind in doing business

According to opinions from Japanese companies reflected that Vietnamese

enterprises were lack of objective spirit in doing business with Japanese partners.

They hope Vietnamese companies need to have practical and specific strategy, rasie

the sense of initiative so on it will be supported and incorporated at the Japanese site.

Low performance in doing business

All the Japanese companies highly respect the prestige in business, but

many Vietnamese companies still cannot perform well. Lots of contracts signed

between both sides but slowly delivered goods were or wrong design, incorrect

quality to the Japanese partner.

Lack of business communication to Japanese partners

Working and transacting manners of Japanese enterprises are quite formal,

ritual, mutual respect. While working to each other, Japanese require the partner to be

formal and strict to every gesture, action, dressing, ritual greeting…

In the Japanese cultural communication, there are 4 main things that

Vietnamese enterprises should respect them, those are ritual greeting, being on time,

overtime working and especially business cards. It will be difficult for partners to do

business if one of 4 factors is forgotten for any reason, especially forgetting the

business card. The Japanese would think that their partners did not highly respect

them or they find difficulty to put the trust in the partner without clear information or



Vietnam officially became a member of WTO, committing to cut the

import tariff from the current average 17.4% to 13.4% in the 5-7 year period, this is

the opportunity for Vietnamese enterprises to make useful of these conferences to

import materials and technologies from Japan to produce products with increasing

values, high technology content to serve the domestic consumption and export.

Since the Comprehensive Partnership Agreement had been signed, there

were more than 1/3 Vietnamese goods to Japan which get benefits from the

agreement, especially taxation area. There are still 95% industrial products from

Vietnam to Japan that they will have the reduction in the tax rate to 0% (reducing on

roadmap). Many commodities such as shoes, wooden products, chemical products,

farming goods will be also decreased in tax rate. With the power of the economy of

both countries, the goods from two different economies are implementing and

supporting to each other because of different level and grade goods.

Chance for labors to work in the healthcare system in Japan

According to ministry of industry and trade, ministers of both countries

negotiate to receive about 400,000 Vietnamese labors working in health system field.

This is the chance for Vietnamese labors to develop their skills in this service market

and solves the problem of unemployment happening in Vietnam then supply the labor

force for Japanese market. Therefore, Vietnamese people or labors should express

their capabilities as well as shows the honesty and diligence in work so that theJapanese enterprises may put more trust in Vietnamese workers then they potentially

put high appreciation in supply of labors from Vietnam. This will become an

advantage for Vietnam when we are trust by the reliable market then we may compete

with other labor force supply countries.

New chance for mechanical products in light industry and information technology

industry

Japan has high demand on importing low level of technology mechanical

products. In the past, 50% of these kind of mechanical products were imported from

China, but nowadays China does not want to corporate with Japan in this field, in

addition the operation cost increases and especially does not China belong to one

market target. So Japan needs to import from other countries such as Vietnam with

frame buildings, the types of trolleys, conveyor… It considers a niche market for

Vietnamese enterprises to get into because the goods do not require high technology

and the cost is quite competitive in Vietnam.



Beside that Japan used to import software from India or China, but today

Vietnam is more concentrated because of the low labor cost and un-high investment

cost.

High demand for processing foods and agricultural products by Japanese households

The trend in importing farming and agricultural products has been

changed, Japan used to import these kinds of goods from China, but with the pressure

in price increase, they turn to corporate with Vietnamese farming suppliers. In recent

time, Japan has reinvested the fruit-fly epidemics treatment machinery on the dragon

fruit and allows enterprises to import this fruit from Vietnam.

Today the Japanese youth have been westernized more and more, the

women in this country tend to increasingly work to help their families, so the demand

of using fast food and processed food is increased. This is also a potential market for

Vietnamese food processing enterprises to strongly join in.

Japan’s production orientation to the Southeast Asia

One more advantage for Vietnamese companies to enter the Japanese

market is that the Japan is changing the commercial and economic policy. The Japan’

vision is no longer to focus on domestic production and domestic market but widen to

connect to the global production and consumption. In that, the increase in import and

export goods orientates to the South-East Asia, hence there are many bilingual

agreements with each country in ASEAN (7 agreements, including Vietnam) and one

general agreement with whole ASEAN staff, simultaneously for GSP preferential

tariff treatment for some countries.

According to Mr Vo Thanh Ha, deputy head of North East Asia – The

Asian market – Pacific, after the global financial crisis, the Japanese economy has

strongly been affected then it changes consumption habits of Japanese civilians.

Therefore the market of cheap goods becomes popular and they appear more and

more in the supermarket system as well as distribution system.

3.2. MAIN FINDING OF THE THESIS: THE IMPACT OF INTERNATIONAL

TRADE BETWEEN VIETNAM AND JAPAN ON THE VIETNAM’S

ECONOMIC GROWTH RATE:

From the theory of AD-AS model, the economic growth rate is defined by

variable factors: international trade between Vietnam and Japan (VNJP), international

trade among Vietnam and other countries (VNOT), consumer spending (C),



government expenditure (G), foreign direct investment (F), investment (I) and

domestic productivity (GDP over employees) (P) are expressed through equation:

GDP = a + b0 Consumption + b1 Investment + b2 Government

Expenditure + b3 FDI + b4 Productivity + b5 Trade VN-JP + b6

Trade VN – Others + c

To test the point that this thesis tends to do, the regression should be used.

Regression Equation:

A statistical technique used to explain or predict the behavior of a

dependent variable. Generally, a regression equation takes the form of Y= a + bx + c,

where Y is the dependent variable that the equation tries to predict, X is the

independent variable that is being used to predict Y, a is the Y-intercept of the line,

and c is a value called the regression residual. The values of a and b are selected sothat the square of the regression residuals is minimized.

To give more exactly in calculation, the equation should be in logarithm.

log(GDP) = a + b0 log(VNJP) + b1 log(VNOT) + b2 log(I) + b3(GX)

log(FDI) + b4 log+ b5 log(P) + b6 log(C) + c

Where GDP = Gross domestic product

C = Consumption.

I = Investment.

GX = Government Expenditure.

FDI = Foreign direct investment.

P = Productivity per employment.

VNJP = Trade between Japan and Vietnam.

VNOT = Trade among Vietnam and other countries.

The data collected from 1988 to 2009 by the Bureau of Statistics.



3.2.1. RUNNING REGRESSION EQUATION:

Thanks to the development of scientific technology, easily is the regression

equation calculated by the software such as E-view or SPSS. The software was usedin this thesis is E-view version 5. After running regression equation, the result was

found below:

log(GDP) = a + b0 log(VNJP) + b1 log(VNOT) + b2 log(I) + b3

log(GX) + b4 log(FDI) + b5 log(P) + b6 log(C)

The equation is:

GDP = 9.081031 – 0.162779 (VNJP) + 0.054792 (VNOT) – 0.003099 (I)

+ 0.037509 (GX) + 0.020008 (FDI) + 1.325951 (P) + 0.0084794 (C)

Unluckily, it was found unexpected result. All variables led to the case of

negative index which means that independent variables reverse function, the growth

rate of GDP is the result of the decrease of international trade between two countries,

that sounds unreliable; Or most of variables except trade of both countries and

productivity have no meaning under the T-test in spite of passing F-test and R-

squared. More particularly, with the number of degrees of freedom is n-k-1, we have

22-7-1 or 14 degrees of freedom. Turning to the T-table shown below, we see that the

critical t-value at the .05 level of significance or 1.761 using a one-tail test and 2.145

using two-tail test. As the result shown, it is easy to see that most of variables could



not meet the requirement compared to the critical T-value or they get smaller value

than critical T-value.

This seems to be suffered from the multi-collinearity. The multi-

collinearity explains the relationship among different variables, one or more

independent variable are factors that may affect the other variables but not directly to

the function, hence the function will not meet the optimist result. Therefore, whether

it can pass the Durbin Watson test, it is still invalid.

3.2.2. TESTING THE COMBINATION OF VARIABLES AND REJECTION:

- To find the equation to prove the international trade of both countries into

the economics’ growth rate, the regression equation was run with each variable, one

by one variable would be step by step increased and rationally replaced position in the

function (this action will be done for all tests below). However it cannot be found the

positive result (Appendix A)

With the hypothesis of the wide gap between points and the line, variable

AR(1) was put into the equation. Almost the result received is negative but I got two

optimistic ones that will discuss in the next part. (Appendix B)

- For more evidence, the work was continued with the delta equation under

regression equation, it would be explained under the performance of economics’

growth rate year by year.

d(GDP) = a + b0 d(VNJP) + b1 d(VNOT) + b2 d(I) + b3 d(GX) + b4 d(FDI) + b5 d(P) + b6 d(C)

First the equation was run without variable AR(1) but we cannot find the

right answer because all of the result cannot pass the T-test with lower index than the

critical T-value at .05 level of significance or 1.734 using one-tail test. (Appendix C)

With the hypothesis of the wide gap between points and the line, variable

AR(1) was put into the equation. But the result is still negative and they cannot pass

the first priority requirement from T-test. (Appendix D)

-

I also separated the variable VNJP as well as VNOT into Import and

Export variables to check, hence the equation for running regression now is:

log(GDP) = a + b0 log(VNJP- Import) + b1 log(VNJP- Export) + b2

log(VNOT- Import) + b3 log(VNOT- Export) + b4 log(I) + b5(GX)

log(FDI) + b6 log+ b7 log(P) + b8 log(C) + c

After running regression equations, the normal result as well as result with

AR(1) variable are negative, which means that there are no proves for trade of two

countries’ impacts on the economic growth rate.

3.2.3. RESULT: RUNNING REGRESSION EQUATION WITH TWOVARIABLES



When testing the combination of variables, we get two possible normal

equations (including variable AR(1)) with two variables in each, first with variables

VNJP and Investment (I) or (IV), the second with variables VNJP and Government

expenditure (GX). Now we look for more checked:

The result:

The equation of two variables VNJP (trade of Vietnam and Japan) and IV

(Investment)



The equation of two variables VNJP and GX (Government expenditure)

The T-test: With n=21, k=2 so the degree of freedom equal n-k-1 or 18,

both equations have T-test statistic over the critical T-value at .05 level of significance

or 1.734 using one-tail test.

The R-squared value which equals 0.988021 and 0.989965 respectively

passes the requirement of at least 80%.

The F-test: F-value of both equations is at high values: 467.3972 and

559.0212 in that order.

The Durbin Watson test: test statistic d equals 1.744746 and 1.912174

respectively.

+ To test for positive autocorrelation at significance α , the test

statistic d is compared to lower and upper critical values (d L,α and d U,α):

We have n=21, k=2 so the dl=1.13 and du=1.54

d > du there is statistical evidence that the error terms are not positively

autocorrelated.



+ To test for negative autocorrelation at significance α , the test

statistic d is compared to lower and upper critical values (d L,α and d U,α):

We have n=21, k=2 so the dl=1.13 and du=1.54.

d > 4-du there is statistical evidence that the error terms are notnegatively autocorrelated.

The White Heteroskedasticity test: with the hypothesis that there is no

phenomena change in the variance of error. Under the test by Eview 5 program, we

got equation results:


(Investment) (1)



And the equation of two variables VNJP and GX (Government expenditure) (2)

In this test, we have to check the Obs*R-squared and compare it to the Chi-squared

critical value to find the result of the hypothesis. In two equations above:

- Equation (1) Obs*R-squared = 7.494343

- Equation (2) Obs*R-squared = 6.671818

-

Number of degree of freedom equal number of independent Z-

variables = 4

So we have

- Chi-squared critical value (df= 4, 95%) = 9.49 > eq.(1) Obs*R-squared

= 7.494343

And

- Chi-squared critical value (df= 4, 95%) = 9.49 > eq.(2) Obs*R-squared

= 6.671818

As the result is shown above, the hypothesis is accepted and there is no phenomena

change in the variable of error.



Observing the values of Mean, Median, Kutoris, Jarque-Bera: observing the

below results, both equation have passed this test.


(Investment)

And the equation of two variables VNJP and GX (Government expenditure)



Two results above have passed all tests we need, the conclusion therefore

can be said that both equations can present to prove and demonstrate the growth rate

of economics through increase in GDP. The equation is:

GDP = 8.408126+ 0.318864 (VNJP) + 0.123354 (I) + 0.643613 AR(1)

Or

GDP = 8.1369 + 0.29641 (VNJP) + 0.164015 (GX) + 0.595694 AR(1)

Over regression equations run above, the results are unexpected, but quite

a fair objective. It still has evidences that indicate the contribution of international

trade between Vietnam and Japan to the economics’ growth by two equation found

above.

In conclusion, the formal equation did not bring exactly views about the

real situation of economics but by the results of the random error. Final equations

found illustrate and demonstrate how much as well as how far the trade between

Vietnam and Japan can contribute to the Vietnam’s economics in spite of the

influence from the multi-collinearity and error. With the government expenditure’s

increase that leads to economics’ growth, effectively and reliably should the

government spend more money to the education, health, transportation, infrastructure,

especially agricultural and industrial fields then support to the international trade

between two countries in particular.



CHAPTER IV

CONCLUSION AND RECOMMENDATION

4.1. CONCLUSION

The thesis has met the objectives that mentioned in the earliest chapter.

Firstly, the thesis has summarized all the theoretical points of international trade

theories and growth theories (on chapter 2). Mainly, those are the Comparative

advantage model and Heckscher-Ohlin model which explains the trade pattern

between Vietnam and Japan, Keynes’ model which describes how economic growth

happens and what elements impact on that growth.

Secondly, the thesis has also reviewed and analyzed the current situation

of international trade between Vietnam and Japan in the period 1988-2010 (Chapter

3). Based on the data collected by Bureau of Statistics generalized changes in kind of

import-export goods over the 20-year period and showed the near future trend of

trading goods between two countries.

Thirdly, the thesis constructed an econometric model measuring impact of

international trade between Vietnam and Japan on economic growth of the country by

using the Regression equation (Chapter 3). It proves the contribution of trade between

two countries through 2 found equations after tests. Those are: (1) equation with

variables Trade between Vietnam-Japan (VNJP) and the Investment (I or IV); and (2)

equation with variables Trade between Vietnam-Japan (VNJP) and the Government

expenditure (GX).

The equations are:

GDP = 8.408126+ 0.318864 (VNJP) + 0.123354 (I) + 0.643613 AR(1)

and

GDP = 8.1369 + 0.29641 (VNJP) + 0.164015 (GX) + 0.595694 AR(1)

Through the result found in the chapter 3, it proves that the international

trade between Vietnam and Japan has contributed to the economic growth in Vietnam.

The next part will give the suggestion to develop trade of both countries to increasethe economic growth.



4.2. RECOMMENDATION:

Through the analysis above we can see that the international between

Vietnam and Japan has contributed to the increase of economic growth. With the

factor trade between Vietnam and Japan, the factor Investment as well as Government

expenditure also impacts on the economic growth. Therefore to increase GDP or

economic growth rate, besides developing the international trade between two

countries, it should be improved in some fields.

4.2.1. THE INVESTMENT IN THE COUNTRY

Infrastructure development to increase the foreign investment

For the investment in the country, the development of industrial machines

is quite necessary because it can modernize the domestic manufacture and reduce the

time as well as promote the product quality to be much more exactly andsophisticated. This process of development needs support from the government to

issue policies to reduce the taxation to help the enterprise can cut cost then encourage

them to import machines.

Besides, the infrastructure of some main cities and provinces which are

mainly concentrated in the industry, service and tourist fields. The local officer of

these areas should find prestige companies to build up the road system on time and

avoid the delay by the strict penalty. It is necessary to develop the infrastructure

system because it will attract foreign investors.

+ First, the foreign investors as well as foreign construction companies

participate in bidding for work in Vietnam. It is quite good because the competition

will happen among domestic companies and foreign companies then the construction

quality would be improved. By dividing each areas for each company which is

prestige and strong, it can be observed their work capacity through work process and

time limit, work quality after completion.

+ Second, foreign manufacture and service companies will invest their

work in Vietnam when they see the development of Vietnam in infrastructure and

transportation which is improved and convenient. By their investment, gradually they bring technology and production method into Vietnam then through it, an attempt to

bring Vietnam to become industrial country. Parallel with that is to carefully solve the

supply drainage and wastewater treatment system, avoiding polluting into the rivers,

sea areas and living land and natural regions that affects to the health and daily live of

civilians and other creatures.

Information technology system in State to promote the Government administration

system

One more important thing is that to build up the governmentadministration system by information technology system which is stable, safe and



effective. Although information technology project 112 has partly not yet succeeded

and met many difficulties, but developing information system in government work is

quite significant. This will promote the management quality, improve administrative

procedures as well as reduce the time and opportunity cost of enterprises and

civilians. This reform will push up the confidence of enterprises to join into business,decrease maximum costs which are unnecessarily springed then reduce the product

price to closely approach the customer’s purchase.

In addition, good administrative system will attract more foreign

investment into our countries because the foreign investors feel safe and comfortable

in the business environment of Vietnam.

Promoting school facilities to improve teaching quality

The government should develop the educational facilities, improve the

media education, set up multi-function rooms, install computer rooms with projectorsfor teaching by electronic textbooks… The government should make conditions for

local social organizations to do small projects to build and increase the chance in

study for children and youth in difficult circumstances. The development of education

to ethnic groups to improve schools’ facilities in villages and areas that may help

them to reach the basis knowledge then approach higher level of college and

university to keep stable material life, spirit to learn, maintain and keep improving the

quality of compulsory education. It contributes training resources agents for these

areas, ensuring equity in education. Thereby, it makes conditions to push up basis

knowledge for local agency staff, workers to join their careers in local industrialmanufacture, agricultural work and service. Deeply developing new economic areas,

avoiding to focus on so much in big cities which will make the big gap in economy

and education among areas whole the country.

Learning education methods from developed countries

Besides, learning the education method from developed countries is

important to have wide and long vision in the future. We should gradually apply and

change the method depending on each particular educational situation of the country

to supply the new young staff of knowledge based on the real condition and situationof social development.

More importantly, the health care system must be improved. The facility,

ability of the staff and healthcare quality in Vietnam need to be more and more

developed through building health infrastructure and technological facilities.

Investment in building infrastructure and equipment for the hospital to meet the

growing needs and diversity of people, reduce overcrowding front, improving

people's health quality. Developing the healthcare field will avoid the diseases spread

out, then it makes motivation for people to contribute the youth and do business.



Investment in healthcare system to protect civilians from disease and stabilizing

daily life to serve the wealthy of the country and attract foreign direct investments

Importantly when the healthcare sector becomes key industry, same like

other industries it will attract the investment from foreigners to create the competition

among healthcare service supply companies thereby they will bring better caring

services to the civilians or customers. To public hospitals, the government should

focus more on improvement because they will meet the competition from other

private ones. The table below shows the capital of the government for health sector in

several years from 2006 to 2010.

Table 4.1: Capital investment and development focus for 2006-2010 is VND 7,132

billion:

(Unit: VND million)

Year 2006 2007 2008 2009 2010

Total 1,191,200 1,513,200 1,390,000 1,462,000 1,576,000

Domestic 685,000 890,000 763,000 896,000 980,000

Foreign 506,200 623,200 623,200 560,000 590,000

Prepare to invest 3,800 6,000 6,000

I Ministry of Health 760,200 932,200 811,200 856,000 1,054,000

Domestic 410,000 528,000 510,000 521,000 614,000

Foreign 350,200 404,200 301,200 335,000 440,000

II Others 431,000 581,000 575,000 600,000 516,000

Domestic 275,000 362,000 253,000 375,000 366,000

Foreign 156,000 219,000 322,000 225,000 150,000

(Source from Ministry of health)

The health service always is attached special importance, accounting for

proportion from ½ to 2/3 of total investment capitals of the government into the

investment and development focus. Compared with previous years, the investment in

health system in 2010 made up the highest proportion of government’s investment,

thereby it is shown the attention from the government to this field, depositing in

modern machines, medical equipment and improving the living standard of the whole

health staff as well as the service quality to the patient in recent years. Health bonds

also significantly increase. More particularly, total government bonds which have

been issued reach 9,150 billion VND, including 3,750 billion VND in 2008, 3,000 billion VND in 2009 and 2,400 billion VND in 2010; approaching 65.4% against



plan. The remaining is 4,850 billion VND, and the plan for 2011 is to distribute about

1,500 billion VND.

4.2.2. THE GOVERNMENT EXPENDITURE:

Stop impossible projects to socio-economic efficiency, inadequate capital and lessurgent needs

For the government expenditure, the main problem is the increase of the

inflation rate. Therefore the government should estimate, classify remaining projects

and in that the important effective socio-economic criteria is the only measure way to

confidently stop impossible projects to socio-economic efficiency, inadequate capital

and less urgent needs. Other projects can be changed the classification of the

investment structure of 100% the government’s budget to the form of BT, BOT,

BO…

Especially the government expenditure for festivals, important days and

anniversaries should be completely and carefully controlled to approach the target

project. And it should be rejected constructions, activities which bring flaunt and

formalism.

Reforming the administrative procedures to make ease for business and attract the

FDI

Other aspect from the role of the government is to help the enterprise to

cut off the cost of production through administrative procedures reforms. Accordingto the data statistic collected by Mr Nguyen Xuan Phuc, the Ministry – Chairman of

Government Office, shows that if 256 administrative procedures in about total 5,000

ones were cut-off, the government would save about 6,000 billion VND.

Avoiding monopoly from government in industry of electricity, gas, coal… to

increase competition

On the other side, with the State monopoly or exclusive advantages of

scale, some manufacturing industries such as electricity, gas, coal… should be

controlled production costs and profit margin to keep the average level, not happens

to monopoly situation that leads to the exclusive benefit.

Transparency in auditing in enterprises and state corporations

In addition, the audit of the State Auditor has only touched the legitimacy

and reasonableness of the expenses of enterprises, state corporations, not yet analyzed

the reasonableness of the financial and technical views of the clause costs in price.

This issue should be clarified in the future because of the fact that gasoline prices are

increasing despite fluctuations in the world prices is two-dimensional fluctuations.

Transparency in pricing oil



Moreover, we have the Dung Quat oil refinery, which is 100% dependent

external price is difficult to understand. Many hydropower plants, electricity and gas

used by the Government and the gas composition and economic investors are frantic.

But the discussion about the price of buying electricity of the Electricity of Vietnam

(EVN) to investors outside the power sector has always been tensioned in thedirection of the rising of electricity prices but not seeing the signal of the reduced

prices thanks to the advantages of scale.

In general, there is relation between the Government expenditure and the

inflation, that impact on the GDP growth rate. If the budget deficit from the

government is high, it leads to the increase of the inflation. Especially if the budget

deficit is fixed by issuing more currency into the market, it may lead to the inflation

also.

More importantly, when the Government expenditure increases to

stimulate the consumption and demand, it also stimulates the development investment

then by the increase of the development investment, it will lead to the high increase of

the GDP growth rate. However, if increased expenditures exceed the permitted level,

reaching the budget deficit as too high and to offset this deficit that must borrow huge

debt burden, it will lead to debt. The result is taken to stimulate consumption

(excessive stimulus) in the following cycle that will lead to the inflation, but the

inflation reduces the development investment then leads to reduction of economic

growth rate. Therefore here is the actual amount required by State budget spending

levels at the permitting level to push up the development investment and the next is to

climb the economic growth that does not lead to higher inflation.

4.2.3. INTERNATIONAL TRADE BETWEEN VIETNAM AND JAPAN

With the current state of trade, the issues raised for Vietnam is to solve the

existing problem and overcome obstacles to push up the trade relation between

Vietnam and Japan to commensurately develop with the potential economy of both

countries. To take action, Vietnam should give following practical solutions:

4.2.3.1. EXPORT

Issuing constructive policies to encourage Japanese enterprises invest technology

and produce goods for export in Vietnam

At the macroeconomic view, the government should give constructive

policies, encouraging the corporation of Japanese enterprises in the production of

export goods in Vietnam. It means that Vietnam needs to attract more capitals and

investment from Japan in the domestic industry and manufacture. In that, bounding

the export of raw materials and unprocessed foods to Japan is necessary and it has

been good trend when Vietnam has reduced these commodities in recent years such as

crude oil, steels and irons in raw (as is shown in chapter 3).



Developing processing industry to highly export

In addition, it should be positive policies to give attraction to Japanese

investors to join in processing industry, especially seafood field. It is quite important

and potential chance because with the Japanese owners or investors they will bring

capitals, technology to promote the processing industry as well as improve the quality

of goods and replicate business format from Japan to Vietnam while production of

seafood in Vietnam is abundant and diverse. From this, seafood commodity will

closely enter the Japanese market with the Japanese quality requirement. Other thing

is to establish and improve, widen reputed trade promotion offices, parallel to

organize propaganda ad activities, conferences to extend domestic products and

import commodities.

Master plans in manufacturing export goods

At the microeconomic view, it should be master plan, professionally tomanufacture export goods, choosing main commodities step by step and toward

important and potential brand-name.

The product quality should gradually be promoted, preventing the

psychology that ignore the quality of export commodity from Vietnam popularly

exists in Japanese spirit to keep the business with the partner. In that, importantly

maintaining credibility with consumers is the key point of export programs.

Creating and learning kinds of advertising, packing and preserving goods

from developed countries, choosing packaging options, packing form depends on thetaste of consumers.

Overall, a satisfactory way to solve the benefit of export departments, the

most importance is price. It also necessary to change the structure of export from

exporting raw materials or unprocessed foods to processed goods to exploit the power

and competitive advantage of the country.

Suggestion for exports to the current situation in the Japan after disaster in

March 2011

To the current happening in the Japan, double disaster earthquake and

tsunami devastated the Northeast Japan. It made people believe that the Japanese will

tighten their belts for reconstruction, so the export to this market will be difficult.

However, the fact nearly two months proves a contrary. Japan is in the process

overcoming the consequences of the disaster and rebuilding the country step by step

therefore the demand for consumer goods as well as materials and equipment have

increased rapidly. Not only increased in volume, because of the urgent need for life

and the reconstruction of the country, many Japanese companies are willing to accept

the unit price increased 10% to the found soon and in time to meet the domestic

demand. The increase exports to Japanese market as not only practical supports to



Japan’s reconstruction and stability to people’s lives but also an opportunity to

increase export turnover of Vietnamese enterprises.

(Source from the Bureau of Statistics) (Unit: USD)

Figure 4.1: Total export turnover of Vietnam to Japan in the first four months in 2010

and 2011.

Firstly, about consumer goods, because the earthquake had strongly

destroyed nuclear reactors at the Fukushima nuclear power plant so the risk of

radioactive contamination in food, vegetables, ground water, and large sea creatures isquite great. Therefore the demand for vegetables, seafood consumption in Japan

increased sharply because they feared contaminated and do not dare to use food,

seafood, fruits and vegetables domestically.

Every year, Japan imported about 3.5 million tons of seafood and Vietnam

exported about $900 million to Japan and this is the 2nd market for seafood field in

Vietnam. Seafood is very popular to the Japanese hence to meet today’s consumer,

import companies continuously requires Vietnamese partners to bring goods on time,

even though earlier than deadline.

On the other hand, Japanese partners also proposal to sign other contracts

to supply new offers even though the old contract is not fulfilled. Beside that various

kinds of rice vermicelli and rice, textiles, foot-wares, furniture… are also in great

demand from Japan. At Cat Lai port, everyday value exported to Japan reached an

average value of $1 million. At Phuoc Long, Tan Cang ports, exported goods also

more and more increase. Japan’s housing was built of wood and uses a lot of

wood furniture, hence promoting the import of timber and furniture will be

definitely happened. This is a good opportunity for Vietnam’s wood business.

Through statistics about the first four months exports in 2011 from the CustomsDepartment, the export growth rate of marine products, agricultural products and



wood products has increased significantly over the same period last year , namely:

seafood 6%, fruits and vegetables 20.67%, pepper 59%, cashews 50%, rubber 94%,

steel products 30.94%, machinery and equipment 23%... This proves that the demand

from Japan does not decrease but grows well at recent time.

About materials and equipment, earthquake and tsunami devastated the

Northeast Japan, which is house of many automotive, electronic manufacturing

facilities of Japan. To restore production, the demand for raw materials and equipment

are huge, especially raw materials for production of spare parts to serve the needs of

automobile assembly, machinery in the world. So when Japanese move into

reconstruction phase, the demand of these above commodities is very large.

Vietnamese enterprises should grasp and take advantage of this opportunity to

increase export turnover. In which, items of machinery and equipment, electric cables

and wires can be highly increased the turnover.

4.2.3.2. IMPORT:

Timely and continuously importing the category and number of goods : it is quite

important to estimate goods that the country needs importing to make export plan and

find the partner as well as the customer to avoid capital waste.

Restraining the import of consuming goods especially luxury goods such as luxury

cars, cigarettes, precious metals… Imports based on reasonable protection of domestic

production.

Necessary attempts to limit and eliminate the smuggling of consuming goods:Importantly that comes from the government’s attempts to limit and eliminate the

smuggling of consuming goods. It is necessary for the government to highly increase

solutions to promote the effect, performance of management agencies in import and

export goods. But at first, the law system should be completed and considered as a

legal basis for anti-smuggling and anti-corrupt agencies’ activities.

4.2.3.3. ENTERING INTO THE JAPANESE MARKET THROUGH

ADVERTISING ACTIVITIES

Almost the enterprises who organize the export of goods or servicesoverseas do not know how to make the foreign consumer understand and believe in

their products. In other words, the small and average enterprises do not have

experience and knowledge in the foreign market. It is explained by 3 following

reasons:

Firstly, as we know most of the Vietnamese companies are small and

average enterprises hence they do not have high financial condition to make

advertising in foreign countries because of high cost, especially Tokyo in Japan is

considered the most expensive place in the world. Therefore, this is the barrier for

Vietnamese enterprises to enter Japanese market. High costs may push the price of



goods increase then it makes difficulties to compete with domestic products and cheap

ones from China or Indonesia.

Secondly, small and average companies do not have experienced staffs in

exporting field to Japanese market and even though experience in doing business with

Japanese. Therefore, it needs to professionally train agent by sending them to learn in

the Japan so that they would have more knowledge in this market and distribution

system as well as law and customs.

Thirdly, many companies do not realize an importance of branding. Some

companies are successful in domestic market and even though foreign markets such as

Cambodia or Laos. These markets are easy because do not require so much from the

products. Almost they need are low price and acceptable taste. The distribution

system easily connects to the customer and product quality is at average level. But

that is different story in the Japanese market when this country needs more than that.

These companies who succeed in easy markets have met difficulties when exporting

to Japan. We cannot enter this market with unclear brand-name and the product

quality as well as taste based on other markets. The Japanese often put the trust in the

brand-name that they used to have experience with the products. Therefore, it is

important for Vietnamese enterprises to develop and improve their brand-name.

Advertising and putting the brand knowledge into the Japanese customer’s minds are

necessary through asserting the product quality and prestige of the company. In this

era, branding is key point to entering any market. Hence Vietnamese enterprises

should be aware of the importance of their brand and make it widely to the market.

Therefore, to push up exporting goods and services to Japan, the important

thing is to change the view of enterprises to the advertising. The company may

promote advertising activities through these formats below:

- The enterprise should have the fund to establish professional advertising

department about this field, training their agencies and empowering responsibility to

them.

- The enterprise should attend commercial exhibitions in Japan to

introduce their products to the Japanese so that they will have awareness of our products. There are many advertising centers that Vietnamese companies may consult

such as: Area of International trade fairs Harumi in Tokyo, Kobe International

exhibition building, Western Japan General exhibition building…

- Through the radio or television communication, Vietnamese companies

may widely advertise because this is a country where television was widely used, the

number of hours of television is quite high track. But if doing on this way may lead to

high costs for the companies, so it needs to weigh the pros and cons of advertisement

for important businesses. However, today we can advertise our products through the

internet. All companies can establish or make a website then put their products on thewebsite and introduce them to the Japanese customers. But more effectively is to have



the general forums for both Vietnamese and Japanese enterprises to know each other,

discuss and introduce goods as well as understand the market taste or cultural business

to each other. With the development of the internet, this is the economical way for all

enterprises of both countries to reduce the cost and make a first strong impression to

each partner. We also have some enterprise forums for trade between two countriessuch as Kobe forum, thongtinnhatban.net, … these forums will be the bridge to

connect enterprises together.

Besides, advertising by issuing proposals, labeling panels, posters at the

public places such as railway stations, tube stations, bus stops… these actions are

good ways to supply information of our goods to Japanese customers.

When doing advertisement, enterprises should strongly emphasize the

advantages of our products. For example, advertising for silk commodity needs to

differently distinguished between silk products woven by hands of our country and

woven by machine with other countries, strongly stressing a point of sophistication.

As is really shown, there are many ways for the enterprise to self-advertise with

acceptable costs. In general trend, the advertising increasingly needs to be invested

properly when the difference in quality of the products is increasingly narrow.

Although imperfectly solve the problem is shown, but partly contribute it

does to push up the export goods from Vietnam to Japanese market. It is hoped that

these above solutions may be worthy for the enterprises then they could improved for

the commercial management to reach the potential power of both countries.

4.2.3.4. PRODUCT QUALITY DEVELOPMENT NOT HARM TO PEOPLE’

HEALTHY

Besides reaching the credit of International standard organization, the

enterprise who export goods to Japan should also have reach the specific standard

requirement from Japanese market, those are Japanese industrial standards (JIS) and

Japanese agricultural standards (JAS). Therefore, to get these standards the company

needs getting information about these credits, reinvest in production and packaging as

well as choosing the materials and processing products clear-closed production. We

have to make our products fresh, hygienic and reduce toxic chemicals in the productthat under the Japanese standard allowance. The Japanese will boycott any product

that harms their health.

It is good example for Vietnam by the case of milk powder from China

that contained melamine toxic over the allowance of W.H.O, specifically Japan

standard that today Japanese has been boycott most of the milk powder come from

Chinese enterprises. Therefore improving the product quality will become survival

factor for any company who want to be successful in the Japanese market.

4.2.3.5. UPDATING THE INFORMATION OF JAPANESE MARKET AND

UNDERSTANDING BUSINESS CULTURE



This era is the era of information technology so on it is just a little delay

that may lead an important and precious signal which may bring benefits to the

enterprises becomes worthless. Hence, when joining into the global market, especially

competitive markets such as Japan, requires the enterprise continuously update

information related to their export activities.

There are many ways for enterprises to update the market information that

they need through the internet, TVs, daily newspapers, or doing market research and

closely associating in the field of foreign trade in Japan as well as Vietnam. These

organizations take a responsibility to supply the necessary information, changes in the

Japanese market situation to help Vietnamese enterprises to catch the demand of this

market and supply ability of Vietnam.

In Vietnam, the company can contact to the Japan External Trade

Organization (JETRO), Investment and Commercial Trading Center (ICTC), Japan

International Cooperation Agency (JICA). In Japan, enterprises can ask for the help

from Vietnam embassies or Asian - Pacific Trading Center (APTC) located in Osaka.

4.2.3.6. PROFESSIONAL TRAINING FOR STAFF IN THE EXPORT

DEPARTMENT

It is quite important to have strong staff that has ability to deal with

changing situations whole the world’s market. They also have to catch the exactly

information about changes in the demand, price in whole market and the reason that

make these changes as well as political, military, financial situation and policies

issued by the government. That is the only way to help the leader of the enterprises

timely to solve the problem before it spins out of the business control.

To corporate with the difficult and experienced country like Japan, it is

necessary to have professional staff in Japanese views because the Japanese have

historically known as the keen market expertise.

Fluently understanding Japanese language in particular or foreign language

in general not only help companies avoid regrettable mistakes while negotiating

contract, but also favorable condition to learn about the Japan as well as

understanding the needs of people in this market, making market access becomes

easier. The company also needs experts of information technology to exploit and

analyze the information collected or design advertising programs to make the product

more attractive on TVs, magazines or in the internet.

The important thing is that the agency staffs of the company have to put

the benefits of the whole company over their own personal interests. Moreover, they

should have good habits in routine record, following, researching and analyzing the

related information to the work and the product of their company. Understanding

general price situation, demand and supply happenings whole the world.



Generally, improving the qualifications of the working staff is as an

important essential requirement because the human is always a decisive factor in all

circumstances.

4.2.4. ECONOMIC GROWTH DEVELOPMENT:

At the macroeconomic, to push up the contribution to the increase of the

economic growth from the development of international trade between Vietnam and

Japan, economic growth as the increase of GDP itself has to rise up, support,

implement as well as supply basic factors for the trade relation. When GDP grows up,

it means that the productivity in producing domestic goods has been promoted. There

are four factors to determine the domestic productivity. And the improvement of these

factors may affect the increase of the productivity. Those are physical capital, human

capital, natural resources and technological knowledge. The following comments to

make factors above increase that will be explained in depth.

4.2.4.1. PHYSICAL CAPITAL is the stock of equipment and structures that are used

to product goods and services. And workers are more productive if they have tools

with which to work.

Improve and modernize working machines and tools to increase worker productivity

and cutting cost

More tools allow work to done more quickly and more accurately. With

the same knowledge and skill, a worker with only basic hand tools can make less

finished product per hour than a worker who works with sophisticated and specializedequipment. It therefore should be improved and modernized the working machine or

tools and replaced the out of date or less effective ones to raise the standard of product

and service quality as well as productivity of the worker. In depth, the modern new

machines or tools will help to decrease the time for production of one item and partly

avoid the error when producing then make the production process more accurately. It

also reduces the cost of the product because of less error so that the product will easily

reach the consumer with the cheaper price. This is an advantage for the enterprise to

compete with others by cutting cost.

Improve product quality to push the brand value up

Moreover, the good attracts the consumer when it accurately made will

increase the product brand value for the company. If the customer recognizes the

positive change of products, they easily feel the attention from the enterprise to the

customer’s needs and trust then they are loyal to the company’s products. This will

spread to the community and push the brand value up.

Logically working equipments and tools distributed to cut cost and avoid waste

Equipments and tools have to be logically allocated to the worker toeffectively use the full capability of the worker and make use of full capacity of these



devices. The working tool could not be given to the worker that without training them.

It wastes the money to invest in the machine but nobody professionally knows how to

use it.

Timely in value chains and avoiding loss by sooner reporting the problem

In addition, some inputs used to produce goods and services are produced

factor of production, which means that capital is an input into the production process

that in the past was an output from the production process. This considers the

continuous production chain thus the capital, which is the input of the next production

process should be finished on time to avoid the production delay. When any enterprise

meets the difficulty in physical capitals, as soon as possible they should notice to the

partner to find the solution or make a timely decision then they can prevent the loss

and bad situations.

4.2.4.2. HUMAN CAPITAL is the economist’s term for the knowledge and skillsthat workers acquire through education, training, and experience.

Human capital improved by developing education techniques

Human capital includes the skills accumulated in early childhood

programs, grade school, high school, college, and on the job training for adults in the

labor force. Therefore the government should create favorable conditions for

developing education system such as changing teaching programs to reach the

international standard academy, encouraging foreign investors or even though

domestic investors to foundation schools with strict international standards that aresuitable to Vietnam education system.

Human capital improved by working and getting experience in the enterprise

Besides, companies should make good conditions for employees to

improve their skills and promote knowledge through frequent short-term business

training courses so that they can update the information and innovation flowing

throughout the world. More importantly, companies should pay attention to the future

potential labor force such as students. They should help the student early approach the

work and get experiences then the student themselves can orient their future careerwhich cannot be well done by the school. And I think students who have longer vision

and orientation in the future will work better than the other ones who are unclear

about their careers.

Increase the living standard of public teaching staffs as well as teaching programs

and school facilities to increase teaching quality

Also like physical capital, human capital is a produced factor of

production. Producing human capital requires inputs in the form of teachers, libraries,

and student time. Hence to increase the quality of the human capital, it should be anincrease of teaching, training and learning. With the Vietnamese situation about



treatments to public school teachers, it seems unfair salary and less support to the

public school teaching staffs from the government while they directly bring

knowledge to the future labor force.

The salary of public school teachers are same as manual labors’ one at the

basis while the teacher has used time and attempts to improve their knowledge. So the

government should raise the standard of living of the teacher by rising up their salary

as the higher speed of inflation certainly happened in our developing country. In the

future if the condition to the teacher unchanged, it would be brain drain process from

the public schools to private schools. This sounds good if one day the government

does not want to have public schools anymore and it is full of private ones then that

will be great completion among private schools to affirm the quality and

responsibility in teaching. Like that, learning conditions should be changed also.

Rural areas need more attention from the government to build the

education system as well as local economy to implement knowledge for the local

people and encourage them to go to school by convincing them that studying is the

best way to overcome the poverty and get the better life.

4.2.4.3. NATURAL RESOURCES are inputs into production that are provided by

nature, such as land, rivers, and mineral deposits. There are two forms: renewable and

nonrenewable.

Renewable natural resource

To the renewable natural resource, we should take advantage of lands and power of river. Cause the world population increase day by day, so each government

has to prepare for the master plan to build houses and building to serve the daily

operation of human without harming to the environment of ourselves and other

species. The government has to have specific planning in residential areas, industrial

areas, mining areas, real estate service areas. What land is suitable for people to live,

which is good for agricultural activities, which we use to store the machine for

manufacture, which are used to exploit and supply raw materials for human

production activities such as rare soil, coals, oils, clays, metals, rocks,… and which

one we have to protect and preserve because it provides basic living conditions for ussuch as World’s green lungs: Amazon jungle and are the place of animals’ and

organisms’ lives like Amazon jungle, African national parks, tropical jungles in Asia,

primeval forests in America and Europe in the overall picture of humanity.

Besides, exploiting and fishing capacity under the water in the sea and

river must be done in parallel with marine aquaculture to preserve aquatic species and

keep food for the future. Therefore, it is quite important to reasonably use the natural

resource and we have to protect them from over exploitation.

+ Firstly, we have to preserve them.



+ To rivers and forests which have not been polluted or cut down, we have

to restrain enterprises spill wastes into the water or overexploit wood by cutting down

the tree. These actions will distribute living environment of us and around us. This

will affect the future generation.

+ To the polluted river, we have to limit amount of waste into them while

investing more in machinery and technology to filter waste before placing them in the

river flow.

Nonrenewable natural resource

To the nonrenewable natural resource such as oils, rare soil and coals to

the production process, sooner or later they will reduce the number and it takes very

long time to recovery, and as predicted, world’s economy will face the terrible news.

Therefore enterprises and even though the government need to deeply do research and

create artificial materials and fuels to gradually replace existing ones. Solar energy isthe good example and good way to save the energy. Many high building wisely uses

glasses that absorb solar energy then these energies are converted to electric current to

supply electricity for whole building. We should more restrain to be dependent on

original fuels and materials.

4.2.4.4. TECHNOLOGICAL KNOWLEDGE is the understanding of the best ways

to produce goods and services. It explains how the world works. So the best way for

Vietnam today is to learn and import technology from other developed countries such

as Japan, Taiwan, U.S, France, England… to apply in the manufacture of the country.

Besides, Vietnam continuously update information about technology and

try more attempts to catch the world technological knowledge. To do this:

+ Vietnam firstly invests more in the education system for developing the

knowledge of the student so on these potential students will confidently contribute

their capability to create the technology and bring global knowledge to our country.

+ Secondly, Vietnam leapfrogs technology, using promoted and developed

technology to deeply do research green technology. I means that the future technology

with the reduction of dust, toxic waste and original fuels and materials. Hence,Vietnam should limit to import old and out of date machines and technology. This

will prevent the development of the enterprise under a certain aspect because of high

investment in these machines.

However, in the recent time to developing the domestic economy, Vietnam

has to import old ones from other countries that they deserted. It cannot be avoided to

do this because the Vietnam’s economy is on the first and basic step compared to

other ones and Vietnam also have a lack of experience as well as budget to do more.

So on today Vietnam has to go along with the young manufacture to find the way to

on priority stand on global economics to earn the experience and learn technology,

mainly capitals from doing business. But in the future when the education of Vietnam



meets the high level of standard, Vietnam itself will have creation of technological

knowledge that the global have to follow.



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the international trade between vietnam and japan

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