The Asian Model of the Industrial Cluster Policy For the Global Value Chain

October 10, 2015

Akifumi Kuchiki Nihon University

1 Only 300 hectares in Iran for Industrial agglomeration!

Iran start its growth from 300 hectares! (3 Km2) Objective: In Iran, we will create ’s ！！！

Industrial agglomeration in Asia: Kaohsiung in Taiwan in the 1960s. Penang in Malaysia and Eastern Seaboard in Thailand in the 1980s. Shenzen in China in the 1990s

Industrial Cluster Policy in Iran! Questions:

1. What kinds of the segments of an industrial cluster are built? 2. Is it an efficient sequence of forming the segments? 3. Who is a leader? Key words: segment, sequence, leader In other words, •The segments = The investment environment •Sequence = Prioritization •Leader = Human resource

5 Bases 1. Segments of industrial cluster

Capacity Segment Infrastructure Roads Railways Airports Ports Communication Water supply Electricity Industrial zones Labor Unskilled labor Engineers Managers Institutions Liberalization Land ownership Foreign currency exchange Living environment Schools Hospitals Entertainment Shopping 6 Conclusions: The Asian model: Flowchart Approach: •1. Segments •2. The economies of sequence in forming the segments. •3. We must find a leader as an initial value of a sequence. industrial cluster (a bunch of grapes)

7 1. Industrial cluster

A bunch of grapes

6 Kuchiki’s Definition: industrial cluster of the industry consists of two stages: Stage 1 is the stage of Agglomeration, Stage 2 is the stage of Innovation.

9 Sequence

a b c d

Belly 腹 Breast 胸 Heart心臓 Head 頭

Anchor Water Industrial firms Port supply zone

2. The economies of sequence

10 Today’s topics: Industrial clusters in Asia: 1. Automobile： , China 2. Electronics: Thang Long Industrial Park (TLIP) in Hanoi, Vietnam 3. Automobile: Eastern Sea Board in Thailand 11 Automobile Clusters = Global VC

Beijing/Tianjin Korea Nagoya China Delhi Kyushu Shanghai India Guangzhou Bangkok/Rayong Mumbai Manila [Bombay]

ASEAN Kuala Lumpur

Jakarta

12 13 １．Guangzhou’s Automobile Industry Cluster

14 The Asian model: Flowchart Approach: (a) industrial zones (b) anchor firms (c) the related firms (suppliers) (d) segment building (e) leader

15 The Asian Model: Flowchart Approach

Step Ⅰ： (a) Industrial zone Agglomeration (b) Capacity building(Ⅰ)

1. Infrastructure

2. Institutions

3. Human resources

4. Living conditions

(c) Anchor firm

(d) Related firms

Step Ⅱ： (a) Universities / Research institutes Innovation (b) Capacity building(Ⅱ)

1. Infrastructure

2. Institutions

3. Human resources

4. Living conditions

(c) Anchor persons

(d) Cluster

Source: A. Kuchiki and K. Yoshida 16 (a) Industrial Zones and Segment Building: 6 Industrial Zones

17 Zone East Auto-Industry Belt South of Guangzhou Northwest of Guangzhou Capacity Guangzhou Xingtang Huangpu Nansha Panyu Huadu Auto Economic & Industrial International Automobile City Technological Processing Automobile High-tech Development Zone of Industry Park Industry District Zengcheng Base City

A 110 thousand KVA (kilovolt A 500 thousand KVA Electricity Network with 6 Several 110 thousand VA Supplied by Shilou 110 15 transformer Infrastruct amperes) transformer substation transformer substation and of 110 KVA transformer transformer substations. KV Transformer substations with 110 KV and completed underground 4 transformer substations of substations, a 220 KVA Zhujiang Powerplant, with Substation ,and a new and a 220 thousand KV ure: electrical network with two- 110 thousand KVA. transformer substation and capacity of 1.2 million KW 110 KV transformer transformer substation. circuit electricity supply. Huangpu Power Plant of 1.1 and many thermal power substation is under Power supply rate to (ⅰ)Electri million KW (kilowatt). stations with 50-100 construction. enterprises reaches thousand KW. 100 % with daily supply city of 4,760,000 KW/h. Supply

Xinhe Waterworks with daily Four large waterworks, Supplied by Guangzhou 3 main water pipes from Supplied by Shawan 3 waterworks with daily (ⅱ)Water capacity of 300,000 tons Dadun, Xizhou, Xinhe and Municipal Waterworks Shawan Waterworks are Waterworks with daily supply capacity of Shapu, providing daily serving the whole Park capacity of 560,000 tons. 200,000 tons and the Supply water capacity of 1.2 with daily supply of water quality reaches million tons. 250,000 tons. State’s sanitary standards.

A modern wastewater disposal First stage of 300,000-ton Water and waste drainage Guangzhou Nansha City The project of drainage 150,000-ton/day waste (ⅲ)Sewag station enabling separate waste water disposal station system is under Wastewater Disposal system which adapt the water piping system treatment for underground water is under construction construction , which is Station, with daily handling rain water type drainage, e and sewage water available with first stage of capacity of the first stage of capable of 160,000 Da Shadi Wastewater 100,000 tons ton/day wastewater Treatment Disposal Station of daily disposal is under way capacity of 200,000 tons

Close to Gunagnzhou Zone of Within 30-minute drive to Close to Guangzhou Yingdong Middle School Located in the southeast Gungzhou Institute of Human High Learning and Guangzhou South China University of University City where many and Nansha Central of the University City, Automobile of South University City. Various of Technology, Sun Yet-Tsen high educational and Primary School, etc only 20-minute drive China University of Resource: middle schools, primary schools, University, research institutes are with rich human resource Technology, Gunagdong kindergartens and Japanese University of Foreign located, capable of available Transportation Education schools are located within the Studies, Guangdong supplying rich human Technology College, area Commercial College resources to enterprises Guangdong Peizheng Business School

A sound environment of green Ecological residential areas, Residential areas including The area is composed of Modern residential areas The Sunshine Residential Living hills and clean water, with villa such as Country Garden Wanke City, Huangpu, Jinbi river and lake with nice with nice environment, Area is surrounded by gardens, noble residences and Phonix City, Jinxiu Heung Millenium are within the natural environment and excellent facilities, and favorable18 environment Condition tourist resorts Kong Xinjiang and area with average estate well-preserved natural convinient transportation Source: The Bureau of Foreign Trade and Economic Cooperation of Guangzhou Municipality, A Foreign Investment Guide to Guangzhou Auto Industry, 2005. s : Xinshijie Residential Area price at 3,500 yuan /㎡ ecological zone network are available Segment: (b) Institutions: One-stop Services

Procedure for Setting up Foreign-invested Enterprises

Pre-verification of the name of the enterprise

Verification of the project site and its impact on surrounding environment

Submission of projecct feasibility study report, contact, articles of association

Application for the organization code

Acquirement of the Approval Certificate of the Foreign-invested Enterprise

Application for the business license

Engraving the seal of the enterprise

Registration of foreign Signing of contract on land use / exchange;application for opening a Registration at the Customs Recruitment of employees contract on leasing of factory RMB account building

Application for project construction; Registration at tax authority Handling of labor insurance Construction; Decoration

Opening of an account with a bank Equipment installation

Registration of finance and Examination and approval of statistics completed project

Business operation

Source: A Foreign investment Guide to Guanzou Auto Industry, 2005 19 (c) Anchor firms: Joint venture company Guangzhou Toyota Motor Guangzhou Honda Dongfeng Nissan Motor Co., Ltd. Automobile Co., Ltd. Company Establishment 2004 September 1998 2004 May 2006 May Joint venture partner Guangzhou Automobile Guangzhou Automobile, Dongfeng Automobile (JVs with First Automotive Dongfeng Automobile Works in Tianjin) (Engines) Main products Camry Accord, Fit Sunny, Tiida Annual production 100,000 (2006) 240,000 (2004). 150,000 volume Production capacity is Second plant is under 300,000. construction. (Scheduled to complete in 2006. Location of Southern coast of Center of Guangzhou city. North of Guangzhou city. headquarters Guangzhou city (Nansha (Guangzhou Economic (: 50 ㎢) district:797 ㎢) Development Zone) Agglomeration of (12 Guangzhou Economic Huadu district components makers keiretsu companies), Development Zone city (6 Keiretsu companies). Main components Japanese makers Japanese makers Taiwanese makers, makers Japanese makers Source: Based on Tsukada (2005), Kuchiki arranged partly. Notes: Korea Hyundai Motor and Guangzhou Automobile produce commercial vehicles in Huadu. (Total investment: 135 billion yen) 20 Hyundai Motor and Beijing Automobile Investment Co. produce passenger vehicles. (d) Related Firms: Suppliers：

Anchor Firms: Honda, Nissan and Toyota => Agglomeration

21 NISSAN’s Agglomeration(2003-06) Company name Investor Products Foundation 1 Dongfeng Motor Corporation Nissan Motor Co., Ltd. Dongfeng Motor Corporation Passenger cars, commercial vehicles 2003 2 Unipres Guangzhou Corporation Unipres Corporation Car body components 2003 Yorozu Corporation, Shanghai Bao Steel Int. Economics 3 Yorozu Bao Mit Automotive Co., Ltd. Suspensions 2003 &Trading Co., Ltd., Mitsui &Co., Ltd. 4 Guangzhou Mitsuike Autoparts Co., Ltd. Mitsuike Corporation Metalic dies 2003 5 Dongfeng Passenger Vehicle Research & Development CenterDongfeng Nissan Research and development center 2004 6 Guangzhou Unisia Automotive Parts Co., Ltd. Hitachi Automotive Systems Power Steering System 2004 7 Fuzhou Fukwang Rubber & Plastic Co., Ltd. Kinugawa Rubber Industrial Co., Ltd. Body sealing products 2004 8 Guangzhou Hua Jing Automotive Steelparts Co., Ltd. Mitsui & Co., Ltd. Steel plates 2004 9 Kiriu-Lioho Co., Ltd. Kiriu Corporation, Lioho Machine Works, Ltd.（Taiwan） Brake parts 2004 10 Guangzhou Nishikawa Sealing Systems Co., Ltd. Nishikawa Rubber Co., Ltd. Sealing parts 2004 11 Alpha (Guangzhou) Automotive Parts Co., Ltd. Alpha Corporation, Marubeni Vehicle Corporation Key sets 2004 12 Xingguang (Guangzhou) Autoparts Co., Ltd. (*) Hoshi Diecast Kogyosho Die-castings 2004 13 Tacle Guangzhou Automotive Seat Co., Ltd. Tachi-S Co., Ltd. Automobiｌe seats 2004 14 Guangzhou Kasai Automotive Interior Trim Parts Co., Ltd. Kasai Kogyo Co., Ltd. Interior parts 2004 15 (Shanghai) Corporation (Huadu Branch) Calsonic Kansei Corporation Module Products 2005 16 MI Steel Processing Guangzhou Co., Ltd. Marubeni Itochu Steel Inc. Steel plates 2005 17 CAST Autoparts Co., Ltd. (*) Daiichi Kinzoku Co., Ltd. Automobile parts 2005 Shanghai Min Fang Auto Parts Co,. Ltd. 18 Fuji Autotech Guangzhou Co., Ltd. Automobiｌe seats 2005 Fuji Kiko Co., Ltd., Tachi-S Co., Ltd. 19 Calsonic Kansei (Guangzhou) Components Corp. Calsonic Kansei Corporation Instrument panels, exhaust products 2005 20 Guangzhou Mahle Filter System Co., Ltd. Mahle Filter Systems Japan Corporation Air filters, motor heat insulation boards 2005 21 Tachi-S Trim Guangzhou Co., Ltd. Tachi-S Co., Ltd. Automobiｌe seats 2005 22 Engine factory of Dongfeng Nissan Dongfeng Nissan Engines 2006 23 Toyo Quality One Guangzhou Co., Ltd. (*) Toyo Quality One Corporation, Nagase & Co., Ltd. Automotive devices 2006 24 Guangzhou Nanjo QuanXing Autoparts Co., Ltd. (*) Taiwan QuanXing, Nanjo Kogyo Automobiｌe seats 2006 25 Guangzhou Kanto Autoparts Co., Ltd. (*) Kanto Auto Works, Ltd. Auto bodies and parts 2006 Source: Inagaki (2004), Huadu District, Guangzhou (2005) (* ) = Author's translation. TOYOTA’s Agglomeration(2002-06)

Company name Investor Products Foundation 1 Foshan Melx Leather Co., Ltd. （*） Melx Co., Ltd. Leather products for automobile seats 2002 2 Foshan Nichiwa Co., Ltd. （*） Nichiwa Co., Ltd. Bolts, nuts, pressed parts 2003 3 Toyota Gosei (Foshan) Rubber Parts Co., Ltd. Toyota Gosei Co., Ltd., Toyota Tsusho Corporation Body-sealing products for automobiles 2004 4 Seiki (Foshan) Automotive Parts Co., Ltd. Aisin Seiki Co., Ltd. Engine parts 2004 5 Aisan (Foshan) Auto Parts Co., Ltd. Aisan Industry Co., Ltd., Toyota Tsusho Corporation Throttle bodies, Engine valves 2004 6 Foshan Japan Brake Co., Ltd. （*） Japan Brake Industrial Co., Ltd. Brake assemblies 2004 7 Foshan Shunde Yinhe Motorcycle Co., Ltd. （*） Axle Corporation Motorcycles 2004 8 Foshan Tokairika Automotive Parts Co., Ltd. Tokai Rika Co., Ltd., Toyota Tsusho Corporation Switches, steering locks 2004 Koyo Seiko Co., Ltd. ,Koyo Metaltec Co., Ltd. 9 Koyo Lioho (Foshan) Automotive Parts Co., Ltd. Bearings 2004 Toyota Tsusho Corporation 10 Foshan Yutaka Auto Parts Co., Ltd. Yutaka Giken Co., Ltd. Torque converters 2004 11 Foshan Summit Nikka Mold & Metal Products Co., Ltd. Sumitomo Corporation Mold and metal products 2004 12 Toyota Gosei (Foshan) Auto Parts Co., Ltd. Toyota Gosei Co., Ltd., Toyota Tsusho Corporation Interior and exterior parts 2004 13 Toyoda-Koki Automotive (Foshan) Co., Ltd. Toyoda Machine Works, Ltd. Power steering parts 2004 14 Takagi Auto Parts (Foshan) Co., Ltd. Takagi Seiko Co., Pla-Net Corporation Plastic components, molds 2004 Kobe Steel., Ltd. , Metal One Corporation , Kyodo Shaft Co., Ltd. 15 Kobe Wire Products (Foshan) Co., Ltd. Steel bars and steel wires 2005 Sugita Wire, Ltd. 16 Elastomix (Foshan) Co., Ltd. Elastomix Co., Ltd. Carbon master batch 2005 Nihon Parkerizing Co., Ltd. ,Asahi Chiyoda Kogyo Co., Ltd. 17 Guangzhou Parkerizing Co., Ltd. Surface treatment for automobile parts 2005 Hamamatsu Netsuhori Kogyo Co., Ltd. ,Parker Netsusyori Kogyo K.K. 18 Foshan Co., Ltd. Toyota Boshoku Corporation Oil filters 2005 19 Fujikura Kasei (Foshan) Paint Co., Ltd. （*） Fujikura Kasei Co., Ltd. , Kyokuto Boeki Kaisha, Ltd. Coating for plastics 2005 20 Foshan Unytite Co., Ltd. （*） Unytite Corporation Bolts, nuts 2005 21 Tokai Spring Mfg. (Foshan) Co., Ltd. Tokai Spring Mfg. Co., Ltd., Nagase & Co., Ltd. Precision leaf springs, press products 2005 Toyoda Machine Works, Ltd. , Yamasei Kogyo Co., 22 Yamasei Automotive (Foshan) Co., Ltd. Power steering parts 2005 The Yokohama Rubber Co., Ltd. 23 Sanyo Seiko (Foshan) Co., Ltd. （*） San-Esu Mold parts 2006 24 Foshan Dongrong Xuri Electrics Co., Ltd. （*） Toei Kagaku Kogyo, Xuri Co. Automobile parts 2006 25 Foshan Nitigura Co., Ltd. Nihon Glassfiber Industrial Co., Ltd. Exhaust manifold covers 2006 26 Foshan Shunde Auto Parts Co., Ltd. Yazaki Corporation Automotive instruments 2006 27 Hegu (Foshan) Automotive Fuel System Co., Ltd.（*） Nichiwa Sangyo Co., Ltd. Automobile parts 2006 28 Daiichi Bussan (Foshan) Co., Ltd. （*） Daiichi-Bussan Co., Ltd. Insulators 2006 29 Usui Automotive Parts Co., Ltd. （*） Usui Kokusai Sangyo Kaisha, Ltd. Brake tubes, power steering tubes 2006 30 Enkei Aluminum Products (Guangdong) Co., Ltd. （*） Enkei Corporation Aliminum wheels 2006 31 Foshan Shunde Lefu Hardware Precise Mold Co., Ltd. （*） Osamu Fukui, Tsuneo Imai, Yosuke Fukui, Masaru Nakamura Mold parts 2006 32 Azimit Auto Parts (Foshan) Co., Ltd. （*） Azimit Mold parts 2006 33 Sugiyama Kogyo (Foshan) Mold Co., Ltd. （*） Sugiyama Kogyo Co., Ltd., Toyota Tsusho Corporation Mold parts 2006 Source: Inagaki (2004), Nansha Development District (2005) (* ) = Author's translation. HONDA’s Agglomeration 1997-2006(Suppliers) Company name Investor Products Foundation 1 Guangzhou Showa Autoparts Co., Ltd. , Kanematsu Corporation Shock absorbers 1994 2 Guangzhou Co., Ltd. Stanley Electric Co., Ltd., Honda Motor (china) Investment Co.,Ltd. Automotive lightning products 1999 Auto electrical systems, Two-wheeled 3 Guangzhou Mitsuba Electric Co.,Ltd. ., Mitsuba China (Hong Kong) Ltd. 1999 vehicle engine support Automotive parts (brake tubes, fuel 4 Guangzhou Sanoh Seikan Co., Ltd. Sanoh Industrial Co., Ltd. 1999 tubes, other tubular parts) 5 NIPPON LEAKLESS Corporation GZ LEAKLESS Co.,Ltd. Automotive Gaskets 1999 6 Auto Parts Alliance (China) Ltd. Kikuchi Co.,Ltd., TAKAO KINZOKU KOGYO Co., Ltd. Aluminum structural assemblies 2001 7 Guangzhou Daiyu Seat Co., Ltd. Daiyu Co.,Ltd. Sewn automotive seat components 2001 8 Guangzhou Marujun Co.,Ltd. Marujun Co.,Ltd. Automotive stamping parts 2001 9 NHK-Uni spring(Guangzhou)Co.,Ltd. NHK Spring Co.,Ltd. Coil Springs, Stabilizers 2002 10 Guangzhou NTN-Yulon Drivetrain Co.,Ltd. NTN Corporation, Yulon Group（ Taiwan） Constant-Velocity Joints (CVJs) 2002 11 Guanzhou Vigo Stanley electric company limited Stanley Electric Co., Ltd. Automotive Lightning Products 2002 12 Guangzhou Nanbu Plastics Co.,Ltd. Nanbu Plastics Co.,Ltd. Plastic products 2002 13 Guangzhou GKI Car Interior Parts Co.,Ltd. ITOCHU Corporation, Kotobukiya Fronte Co.,Ltd. Automotive upholstery 2003 14 NHK Spring Precision (Guangzhou) Co.,Ltd. NHK Spring Co.,Ltd. Suspension Springs 2003 15 Honda Automobile (China) Co., Ltd. Honda Motor Co.,Ltd. Motorcycles, Automobiles 2003 16 Guangzhou DEMPU Automobile Ｐ arts Co., Ltd. N.A. （*1） Plastic products 2003 17 Guangzhou Shiroki Corporation Shiroki Corporation Doorframes, Moldings 2003 18 Guangzhou Ahresty Automobile Parts Co.,Ltd Ahresty Corp. Die Casting products 2003 Sumitomo Pie & Tube Co.,Ltd., Sumitomo Corporation 19 Guangzhou You-Ri Automotive Parts Co.,Ltd Electric-resistance welded pipes 2003 Nippon Steel Corporation Anti-vibration rubber parts, 20 Tokai Rubber (Ghuangzhou) Co.,Ltd. Tokai Rubber Industries Ltd. 2003 Automotive hoses 21 Honda Engineering China Co., Ltd. Honda Engineering Co., Ltd., Honda Motor (China) Investment Co.,Ltd. Mold parts 2004 22 Guangzhou NEIVE Co.,Ltd. NEIVE Co.,Ltd. Automobile Parts 2004 23 Decker System China (DSC) Decker Corporation, Chinese United Faith Automobile Parts 2004 24 Guangzhou Tech Interior Trim Manufacturing Co.,Ltd. TS Tech Co.,Ltd. Sewn automotive seat components 2004 25 TEIKURO Guangzhou Corporation Teikuro Inc. Surface treatment for mold parts 2004 26 Guangzhou Chemical Products Co., Ltd. Bridgestone Corporation、 Guangzhou Automobile Group Co., Ltd. Urethane foam 2004 27 Guangzhou Fuji Tool Co.,Ltd. Fujiseiko Limited Carbide Tools 2004 28 Toyo Automotive Parts (Guangzhou) Co., Ltd. Toyo Tire&Rubber Co.,Ltd Anti-vibration rubber parts 2004 29 Ring Techs Automobile Products Co.,Ltd. Ring Techs Co.,Ltd., Metal One Corooration Steel wheels for passenger cars 2004 30 Tsuchiya (Guangzhou) Automotive Components Co., Ltd. Tsuchiya Co., Ltd. Plastic Products 2004 31 Akebono Corporation (Guangzhou) Co.,Ltd. Brakes 2004 32 Ohashi Technica (Guangzhou) Co., Ltd. Ohashi Technica, Inc. Automobile Parts 2004 33 Ghuangzhou Uchiyama Manufacturing Co.,Ltd. Uchiyama Manufacturing Corp. Gaskets, Seals 2004 34 Tocalo& Han Tai Co., Ltd. TOCALO Co.,Ltd., HAN TAI Co.,Ltd. Surface modification 2005 35 Guangzhou Hori Automobile Glass Co., Ltd. Hori Glass Co.,Ltd Plastic parts for windshields 2005 36 Guangzhou Linjun Automobile Internal Decoration Co., Ltd.HAYASHI TELEMPU Co.,Ltd.,Guangzhou Automobile Group Co., Ltd.Automotive upholstery 2005 37 Guangzhou Ninomiya Cold Forging Automotive Parts Ninomiya Co., Ltd. Cold forged products 2006 38 Tigerpoly Manufacturing Tigaers Polymer Corporation Rubber seats, Plastic hoses 2006

Source: Inagaki (2004), Shunde District, Foshan City (2005) (e) Leader: Local Government

Guangzhou municipality Guangzhou State-owned Enterprise Projects Industrial zones (30 companies) (6 industrial zones) Anchor firms Guangzhou Automobile Guangzhou Automobile Honda Industry Park (GAIP) Industry Group (GAIG) Nissan (6 companies) (21 companies) Toyota Hyundai Guangzhou Automobile Group (14 component companies) Their related companies

Source: Author’s 25 Sequence 1: Honda’s effect (e) Leadership of a mayor

1998 Guangzhou Economic Development Zone

2005 Zengcheng Industrial Park

Future Foshan Industrial Park

Capacity buildingⅠ Electricity, railway : actors＝Guangzhou city, Guangdong Province 1. Universities and research institutes: university park? 2. Local government incentives: one stop service HONDA (Anchor firm) (Decision Making by the president of Japanese Headquarters)

2001 Keiretsu firms：Tier1, Tier2, Tier3 Zengcheng, Zongshan, Foshan 2002 Capacity building Ⅱ Human resource management: Japanese interpreters: actors＝JETRO

Future Related firms (Yonghe Economic Zone), Foshan

Automobile Industry Agglomeration

R&D, Technology transfer (Innovation), Universities, Research Institutes

Automobile Industry Cluster

26 Source: A. Kuchiki and H. Tsukada Sequence 2:Toyota’s Effect

Step I： (e) Leadership of a mayor Agglomeration (a) Nansha, Shunde, Foshan Competition between the industrial zones

(b) Capacity building I (Construction of subway: actors=Guangzhou city ） (c) TOYOTA

Keiretsu: Tier1

Capacity building II (Construction of highway: actors=Guangzhou city) Keiretsu: Tier2, Tier3 Chinese local firms (actors to invite firms=Guangzhou city, JETRO)

Related manufacturers and service industries I Step II： Machinery Finance R &D Logistics Equipments Innovation (Automobile Industry Agglomeration) Technology transfer (Innovation) Automobile Industry Cluster

27 Source: A. Kuchiki and H. Tsukada Cluster Summary: 1．Segment building for Anchor Firms: Honda, Nissan and Toyota 2．Local government:

Leadership 28

2．The Electronics Industry Cluster in northern Vietnam: Segment Building: The effects of ODA: (a) Highway Route 5, (b) Haiphong Port, (c) Institutional Reform

31 31 Industrial zones and segment building

Contents Items Participation

Development Industrial zones Site development Central and local of Land governments

Tax Central and local governments incentives Infrastructure (a) Roads, (b) ODA Capacity ports Building (c) Investment The government and ODA Climate Institutions Human Resource: ODA Technological Transfer

Living Restaurants, Foreign direct investment Shops conditions 32 Sequence 3: Industrial Clusters in Northern Vietnam Northern Vietnam

Hanoi (TLIP) Haiphong Haiphong Port

Highway No.5 Nomura Haiphong IZ

A Model of Forming Industrial Clusters (a)Highway No.5, Thang Long IP (TLPI) Segment + (b)Haiphong Port Nomura Haiphong IZ (NHIZ) building (c)Institutional Reform (One stop service, tax)

Anchor Companies Canon, Honda, Panasonic, Galaxy Canon’s Effect Related and Other Companies Japanese companies, other foreign and local companies

Industrial Clusters Development of Northern Vietnam

33 Segment: (a) Highway and (b) Port

Type Poduction Market- Market- Import Hai-Phong Highway Example Local Export Port No.5

1 Hanoi Hai Phong Hai Phong XX XX Canon 2 Hanoi Local Hai Phong Hai Phong XX XX TOTO

3 Hanoi Local Hai Phong XX X Vietnam Float Glass

4 Hanoi Computer Com Yabashi

5 Hanoi Noi Bai Hai Phong X X Sumitomo Bakelite

6 Hai Phong Hai Phong Hai Phong XX As’ty 7 Hai Phong Local Hai Phong XX X San Miguel Yamamura 8 Hai Phong Local Hai Phong Hai Phong XXX XX Han-Viet Heavy (inc.local Industry & distribution Construction by ship) 9 Hai Phong Noi Bai Noi Bai XX ESTELL 10 Vinh Phuc Local Hai Phong X X Honda

Note: X shows frequency of use Source: Company survey 34 Segment: (c) Institutional Reforms

(enterprises) 300

250

200

150

100

50

0

-

trade

licenses

-

_ Others _

9

Liberalized

related procedures: related

_ _

-

3

access to banks to access

_ Abolished sub Abolished _

1

owned enterprises owned

registration system registration

business associations business

_ Improved the collateral and collateral the Improved _

_ Simplified government Simplified _

procedures and improved and procedures

_ Improved bidding regulations bidding Improved _

Onestop services Onestop

2

government

7

6

for new business (changed to a to (changed businessnew for

_ Abolished the approval system approval the Abolished _

_ Expanded funding policies funding Expanded _

_ Promoted the establishment of establishment the Promoted _

_ Promoted reforms of the state the of reforms Promoted _

(Development Assistance Fund, Assistance (Development

Export Assistance Fund and other) and Fund Assistance Export

0

4

5 8

(Note: Data collected from private companies only 35 Agglomeration : Canon’s effects

SANTOMAS ABE Asian Tech Volex (Plastic Products) (Users’ manual) (Power code) (Thang Long) (Thang Long) (Thang Long)

Japanese HDQ Thailand Subsidiary Sumi-Hanel Canon(printer) (Writing system) (Saidon B) Inabata Sangyo (Thang Long) (Plastic products)

(Nomura- Dragon Logistics Haiphong) (Transportation) (Thang Long) Parker Processing Fuji Mold (Surface treatment) (Plastic molds) (Thang Long) (Nomura-Haiphong) Nippo Mechatronics (Plastic molds) (Noi Bai) 36 Agglomeration : Thang Long Industrial Park LIST OF TENANTS IN TLIP Company name Date of I / L Nationalit Land Products y Rental １ Pencil VN 29 November Japan 3.8 Writing implements Co., Ltd. 2001

2 Vina KDC Wiring 15 January Japan 0.48 Wire harness & Industries Ltd. 2001 (Rental power supply cord factory) C3 Parker Processing 8 August 2001 Japan 2.31 Paint & Surface VN Co., Ltd treatment parts

C4 Volex Cable 9 August 2001 Singapore 0.47(Renta Power supply cord, Assembly(VN) l factory) Interconnectors Co.,Ltd C5 Canon VN Co., Ltd. 11 April 2001 Japan 20 Ink jet printers

37 Agglomeration (continued) LIST OF TENANTS IN TLIP 18 Seed VN Co., Ltd 30 August 2002 Japan 0.60 Manufacturing and sale (Rental of stationery products factory) 19 Hanoi Steel Center 16 September Japan 1.89 Processing steel sheet Co., Ltd 2002 20 Toho VN Co., Ltd 9 October 2002 Japan 1.36 Design and manufacturing mold for plastic product 21 Kayaba VN Co., Ltd 22 October Japan 0.56 Manufacuture and sales 2002 of part and components for automobile and motorcycle 22 HAV VN Co., Ltd 17 December Japan 1.97 Production and sales of 2002 all types of aluminum castings and casting molds TOTAL 61.19ha Note: C3, C4 and C9-13 provide parts and components to Canon. Source: Sumitomo Corporation, June 2002. 38 Agglomeration : A List of Tenants and Nomura Haiphong Industrial Zone (as of April 22, 2003)

Company District Products Date of Investment permit Vietphong Garment & Standard Factory ladies’ knitwears March 28, 2002 Textile Co., Ltd. B - 2nd.3rd floors Hong Kong Capital R&T manufacturing VN Standard Factory Textile.sewing April 16, 2002 Co., Ltd. A-2nd floor knitwears Hong Kong Capital + Na-16 (1ha)

BT Garment Co., Ltd. Standard Factory Textile. Sewing August 23, 2002 Hong Kong Capital A-4th floor knitwears

Office Express Standard Factory staples (ring file) January 8, 2002 Manufacturing Co., Ltd. B- 1st floor Hong Kong Capital

Taiwan Fong Tai Paper F-12b corrugated Febrary 1, 2002 Co.,Ltd. (0.5ha) cartons, package Taiwan Capital materials 39 Sequence 3: The electronics industry cluster in northern Vietnam (Unit: million $: 1$=100\) Year ODA Highway Route 5 1993, 1995 2.10

Haiphong Port 1995, 1999 1.73

Thanglong Industrial Park 1997 Nomura Haiphong Industrial Zone 1997

Institutional Reform 1999 2.00

Canon 2001 Total amount 5.83 100 suppliers 2008

30 thousand employees 40 Conclusion: 1. We found the effects of Canon on the industrial cluster policy in the case of the electronics industry cluster in northern Vietnam. GDP of TLIP = 23%, 80 firms, Labor = 40,000 (2007) 2. We made it clear that ODA played a crucial role in succeeding industrial

cluster policy. 41 41

(1) Detroit in East Asia: Thailand: as an Anchor Firm in the cluster of Eastern Sea Board Region: 420 ha and 10 years: the number of the newly employed is about 30 thousands.

43 Loan contract Loan completion Loan executed executed Sequence 4: agreement Water/Aqueduct Project 7/1982 4/1987 36.06 36.06

Leamchabang Port 9/1984 6/1993 31.78 11/1986 11/1993 48.42 2/1990 9/1995 58.68 10/1985 10/1992 25.76 9/1987 9/1992 19.89 184.53

Leamchabang Industrial 10/1985 10/1992 25.76 Estate 9/1987 9/1992 19.89 45.65

Railway Projects Siracha/Leamchabang 9/1988 7/1996 9.2 Sattahip/Maptaphut 9/1988 1/1997 28.26 Khlong19/Kengkoi 2/1990 12/1999 72.98 110.44

Road Projects Chonburi/Pattaya 11/1988 3/1994 40.74 Bangkok/Chonburi 12/1990 4/1993 134.35 Outer Bangkok Ring 12/1990 4/1993 128.28 303.37 680.05 Mitsubishi Motors Established in 1990 (Thailand) 44 4. The Asian Model: Flowchart Approach: Practical

45 Conclusion: 1. Segments: roads, port, airport, institutions 2. Flowchart Approach : the economies of sequence 3. Leadership: The government, An anchor

firm 46 In other words, •The segments = The investment environment •Sequence = Prioritization •Leader = Human resource

47 Figure 2-1. Flowchart Approach: Sequence Prioritization: An example

Industrial Zone Find actors Priority of actors to bottlenecks No Local gov. Central gov. Semi-gov. NPOs Private companies No Local gov. Central gov. Semi-gov. NPOs Private companies Yes ○ ○ 1 1 Return (after finding actors) Return (1) Infrastructure: Water Find actors No Local gov. Central gov. Semi-gov. NPOs Private companies No Yes ○ 2 Return Return Infrastructure: Electricity Find actors No Local gov. Central gov. Semi-gov. NPOs Private companies No Yes ○ ○ 2 1 Return Return Infrastructure: Communication Find actors No Local gov. Central gov. Semi-gov. NPOs Private companies No Yes ○ 2 Return Return Infrastructure: Transport Find actors No Local gov. Central gov. Semi-gov. NPOs Private companies No Yes ○ 3 Return Return (2) Institutions Find actors No Local gov. Central gov. Semi-gov. NPOs Private companies No Yes ○ ○ 4 2

Return Return (3) Human resources Find actors No Local gov. Central gov. Semi-gov. NPOs Private companies No Yes ○ 2 Return Return (4) Living conditions Find actors No Local gov. Central gov. Semi-gov. NPOs Private companies No ○ 1

Anchor firms Return Return 48 Source: A. Kuchiki and J. Kabir Table 1.Industrialization policies in East Asia

Protection M anage- C apital policy Period C apital Technology Parts m ent goods required/not required Japan 1945- D om estic D om estic D om estic D om estic D om estic Required (LC G ) 60 Foreign Korea 1972- D om estic D om estic D om estic Foreign Foreign Required (LC G ) 77 C hina 1992- D om estic D om estic Foreign Foreign Foreign Required (Industrial Foreign policy) Taiwan 1960- D om estic D om estic D om estic D om estic D om estic Required (SM E) 70 (EPZ) 1965- Foreign Foreign Foreign Foreign Foreign N ot 70 Required C hina 1984- Foreign Foreign Foreign Foreign Foreign N ot (Econom ic Required depelopm e nt zone) M alaysia 1986- Foreign Foreign Foreign Foreign Foreign N ot (FTZ) Required

FTZ:Free trade zone EPZ:Export processing zone SM E:Sm all-size and medium-size enterprise LC G :Large enterprise Source: Prepared by the author. (3) Anchor firms

1. Firms with high Backward linkage (e.g. Toyota, Nissan) i. Automobile = more than 20,000 parts ii. Electronics (ink-jet printers)= 800 parts 2. Trading corporations (eg. Mitsubishi corporation) bring customers (tenants).

3. Companies in the neighboring counties = lower entry costs: South African firms or other firms 50 A sample:

Flowchart Players (candidates?) Industrial zone Trading corporations

Infrastructure JICA Capacity Human JETRO building Resource Living condition Trading corporations

Anchor firms Targeting (candidates?) 1. Trading corporation 2. Toyota 3. Nissan 4. Local firms Candidates: Iran: next target: Competitors: India, Indonesia, South Africa: Global competition

52 Conclusion: The Asian Model: Flowchart approach: (1)Segment Building = the environment of investment (2) The economies of sequence (3) Leadership Appendix 1: Worksheets!!! 1. Ask ten professionals as you did and fill out “Worksheet 1”. 2. Compile “Worksheet 2” again as you did in FY2008. 3. Find the candidates of anchor firms. Just do it! 54 Candidates of respondents： １．Local government ２．Central government ３．Research institute ４．Research institute ５．ODA organization: JICA, JETRO, UNDP, ADB, World Bank ６．Researchers of Universities ７．Private companies including trading corporations ８．NGOs, Others

Let’s apply it to our cases! 55 Table 1. Questionnaires on industrial cluster policy: Dalat: Agri. 1 2 3 4 5 6 7 8 9 10Results Problems 1. Does industrial zones exist sufficiently? O O O O O O O O O O 10 Capacity building: Physical infrastructure 2. Does transport infrastructure exist X X X X X X X X X X 0X sufficiently? 3. Does electricity infrastructure exist X X X X X X X O O O 3X sufficiently? 4. Does communication infrastructure exist O O O O O O O X O X 8 sufficiently? 5. Does port infrastructure exist sufficiently? X X O O X X X X X X 2X 6. Do institutions exist sufficiently? X X X X X X X X X X 0X Human resources 6. Unskilled labor X X X X X X X X X X 0X 7. Skilled labor X X O O O O O O O O 8 Living conditions 8. Do hospitals exist sufficiently? O O X X O O X O O X 6 9. Do schools exist sufficiently? O O O O O O O O O O 10 10. Do entertainments exist sufficiently? O O X X X X X O O O 5X 56

Source: A. Kuchiki and T. Gokan (interviews in Hanoi on Aug. 28-30, 2008) Figure 1. Nortern Vietnam's Flowchart Flowchart Prescritions Roads → ①．Highway 5 for Automobiles ↓Yes No ②．Highway to link Hanoi and soutern China ③．Highway to link Noibai Airport and the center of Hanoi ↙Return Electricit Build-Operation-Transfer, Official Development → Increase of power supply → y Assistance ↓Yes No ↙Return Ports → Upgrade of Haiphong Port ↓Yes No ↙Return Institution → Customs clearance → ①．The simplification of paper procedures s ②．The simplification of exchange in container trucks ↓Yes No at the border ↙Return Unskilled → Employment of labor from rural area → The end of this flowchart labor ↓Yes No No ↙Return Entertain → Facilitation of entertainments → Private companies ments ↓Yes No ↙Return Thefts → Ethical education

57 Worksheet 2: Find players!

Flowchart Players (candidates?) Industrial zone JICA, Trading corporations

Infrastructure JICA Capacity Human Resource JETRO, building JICA Living condition Trading corporations

Anchor firms Targeting (candidates?) 1. Mitsubishi corporation 2. Toyota 3. Vietnamese firms 4. Other Asian firms Work 3: Find the candidates of anchor firms!

Examples: 1. Firms with high Backward linkage (eg. Toyota, Tata) i. Automobile = more than 200,000 parts ii. Electronics (ink-jet printers)= 800 parts 2. Trading corporations (eg. Mitsubishi corporation) bring customers (tenants). 3. Companies in the neighboring counties = lower entry costs: Vietnamese firms, Other Asian firms

59 Appendix 2

Definition: Economies of Sequence Definition •Economies of sequence

The order of forming segments；A，B

Period: 1, 2, 3

The order of A: ｛s1→s2→s3｝

A=｛s1，s2，s3｝ B=｛s1，s3，s2｝ Thank you very much for your attention! KUCHIKI Akifumi Nihon University References: Kuchiki, A . & M. Tsuji (2004) Industrial clusters in Asia, Palgrave Macmillan. Kuchiki, A & M. Tsuji (2008) Flowchart approach to industrial cluster policy, Palgrave Macmillan. Kuchiki, A & M. Tsuji (2010) From agglomeration to innovation, Palgrave Macmillan. Kuchiki A. and M. Tsuji eds. (2011) Industrial Clusters, Upgrading and Innovation in East Asia, Cheltenham: Edward Elgar.

62 •Production function of A YA

•Production function of B YB

Production function of a cluster

YA=f（A）=f（｛s1，s2，s3｝）

YB=f（B）=f（｛s1，s3，s2｝） •The interest rate (constant) r

The production cost: YA，YB

2 CA=（1+r） C1（s1）+（1+ｒ）C2（s2）+C3（s3）

2 CB=（1+r） C1（s1）+（1+ｒ）C2（s3）+C3（s2）

Total cost of period i to implement sk: Ci（sk） （k=1，2，3 ； i=1，2，3） YB is smaller than YA It costs infinite to proceed from s3 to s2→YB is nearly zero

The order of YB is inefficient

YB

YB/CB＜YA/CA