Motorbike Joint Working Group

 Hearings of Stakeholders in the Motorbike Sector

November 2006

1. Background

The Motorbike Joint Working Group, consisting of related officials, producers and experts, is currently drafting the motorbike master plan with new methodology and contents. Its role in drafting this master plan is officially recognized by the Ministry of Industry and also requested by the Vietnam-Japan Joint Initiative Phase 2. The Vietnam Development Forum (VDF) supports and coordinates its activity.

In November 2006, the Motorbike Joint Working Group led jointly by IPSI/MOI and VDF hosted a series of hearings in the North and South to explain its skeleton draft and receive questions and opinions of assemblers and suppliers. A seminar was also held in Ho Chi Minh City to exchange views with businesses, officials, researchers and journalists. This was the first round of stakeholder hearings. The Motorbike Joint Working Group plans to hear more from stakeholders as the drafting process progresses.

This summary was prepared by VDF, and all responsibility for the content rests with VDF.

2. Hearings and seminar

An invitation to hearings was sent to all motorbike-related companies based on information available to MOI and VDF. In addition, government officials, research institutes, universities and press were invited. The following organizations accepted our invitation and participated in the hearings and the seminar.

3. Summary of views

Various opinions expressed during the three hearings are summarized below. All views are reported anonymously. They are rearranged by content, and opinions on the same topic are listed together even if they were heard in different locations. Responses by Joint Working Group (JWG) members are shown with square brackets [ ]. These responses were either by VDF or IPSI/MOI.

(1) Promoting supporting industries (SI)

--Government research so far has not proposed any concrete measures for promoting SI. There should be concrete targets and actions for specific parts, starting from screws, nuts and bolts. Research on which parts are currently imported, why, and how to produce them domestically is needed. [JWG: Agreed. We will draft concrete measures in chs.4 and 9. METI will also dispatch two Japanese experts to us for SI promotion.]

--Before relying on foreign experts, the Vietnamese Government should take initiative in collecting information, starting with simple surveys and seminars. [JWG: The private sector should also make effort; don’t rely too much on officials since they are also very busy. Foreign experts are useful at this early stage, but Vietnam should take the lead in policy making in the future.]

--A certain Japanese automobile maker approached us for the possibility of buying our parts. But the Japanese eventually decided to buy from related companies in Japan, although our quality and price were satisfactory. It shows that Japanese companies rarely buy from non-keiretsu suppliers. [JSW: Situations in automobiles and motorbikes may be different because of different demand sizes and development stages. All Japanese motorbike assemblers in Vietnam say that they want to buy from domestic suppliers regardless of nationality, provided that quality, cost and delivery are satisfactory.]

--FDI assemblers require strict quality control, and their demand volume is not very large since parts are produced for particular models only (i.e., integral manufacturing). Under these circumstances, policy support in technology and finance is needed for SMEs and local suppliers to develop.

--We are a small company (100% Vietnamese) trying to expand business aggressively by supplying to FDI firms, exporting, and building new factories. We aim at international quality and price, not cheap but low-quality products. But financing is a big problem. Local banks do not understand SI at all, and we cannot borrow. Borrowing from foreign banks, with the arrangement of our foreign manufacturing partners, is easier.

(2) Tariffs and external liberalization

--I am not sure if the Government wants to present goals, measures and standards needed to elevate Vietnam’s motorbike industry to the world level, or just open up according to WTO and FTAs and let the market play. A competitive motorbike industry will not emerge under free market policy. I really want to know the government’s plan on this fundamental point.

--It is necessary to conduct a detailed study of WTO impact on the motorbike industry.

--Under WTO and FTAs, we are afraid that domestic producers like us may be eliminated by imports of completed units or parts from large motorbike producing countries like Indonesia. [JWG: We need to conduct a study on the impact of trade liberalization. However, policy can only offer equal and fair business conditions for all; it cannot protect individual companies.]

--Under WTO, local suppliers like us cannot survive unless the government assists us. We are in a very difficult position now.

--We are a supplier company, but we also buy parts. We cannot find parts domestically because of the quality problem. We sincerely hope that part import tariffs should become zero. [JWG: We agree with your view. But it must also noted that different opinions still exist on appropriate part tariffs—whether zero or positive—in Vietnam.]

--The same tariff rates are sometimes applied to high-quality industrial materials and parts not available in Vietnam and popular goods produced in Vietnam, because they belong to the same category. This gives us a headache. Let importing companies decide what is high-quality parts and what is popular products. [JWG: Letting companies decide may cause tax evasion problems. But we agree that there should be an official mechanism to hear private opinions openly as well as a clear list of what is special materials and parts and what is not.]

(3) Possibility of export

--We need to study more carefully on the proper ratios of domestic market supply and exports. I believe that Vietnamese motorbikes should mainly target the domestic market. Export orientation is unrealistic.

--I am in the motorbike business for 15 years. I just returned from the mission to Latin America. Vietnam should recognize its position in the world more precisely and realistically. With the current capability, Vietnam can hardly export motorbikes.

(4) Integral manufacturing

--Vietnam has now overcome the flooding of Chinese motorbikes that occurred about five years ago. We don’t need any more Chinese shock. Vietnam should establish and implement clear standards for quality, safety, environment, intellectual property, etc. If intellectual property rights are strictly enforced, perhaps only the top four-or-so assemblers can survive. [JWG: Learning integral manufacturing is the same thing as high-quality orientation under strict standards for quality, safety, environment, etc.]

--Chinese motorbikes could not enter Thailand. Why? [JWG: It seems that Chinese models cannot sell where Japanese models already dominate. Each country’s characteristics also affect market penetration. Chinese motorbikes are popular in Laos, Cambodia, Bangladesh and Pakistan, but unpopular in Thailand, India or Indonesia. Vietnam accepted them first, but rejected them soon after. This may be because Vietnamese motorbike users contain broad segments of population who prefer high quality.]

--The theory on the difference between integral manufacturing and modular manufacturing is convincing. To provide high and stable quality, learning integral manufacturing is essential.

--Is there any possibility of market segmentation and coexistence, where integral motorbikes supply to the high-end market and modular motorbikes supply to the low-end market?

(5) Vietnamese brand motorbikes

--I seriously doubt the need to promote Vietnamese brand motorbikes. [JWG: In our slide presentation, local brand promotion was listed as one option, but we put a question mark to it to express our doubt. Within MOI, there are opposing views on this issue.]

--In my opinion, Vietnam can produce local brand motorbikes with good quality at reasonable prices. To achieve this, the Vietnam Motorcycle and Bicycle Association should support inter-firm linkage, and the government should conduct demand forecasts for different types of motorbikes. [JWG: If all firms strictly observe intellectual property rights, is it really possible to produce motorbikes satisfying quality, safety and environment standards at prices like $300? It is not clear.]

(6) Fair application of laws and policies

--Violation of industrial property rights is becoming very serious in Vietnam. There should be a concrete policy to eliminate this practice, which should be implemented equally and effectively for all producers.

--Some companies do not follow standards and sell low-quality products at low prices. We demand that all policies be applied equally to all companies.

--Vietnam is adopting EURO2 in 2007. But please make sure that companies producing new models under EURO2 are not disadvantaged against old, polluting models. There should be some incentive measures to promote EURO2 standard for new models.

(7) Other issues

--Although motorbikes are certainly useful for Vietnamese people, current traffic confusion is out of control and unacceptable for a civilized society. There should be a clear future transport vision. Such a vision should emphasize the role of public transportation, modern infrastructure, and civilized use of all vehicles.

--The Vietnamese Government should review all impediments to FDI. [JWG: They are being reviewed by the Vietnam-Japan Joint Initiative. This is an important issue but beyond the scope of the motorbike master plan.]

--This master plan covers many issues. Are you sure that your final draft will be accepted by the Vietnamese Government? [JWG: Even if the probability of acceptance is 50%, we will be happy to try to improve the quality of master plans. If this effort fails, we are prepared to do it many times more.]

END