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Local Value Chain Development in Global Supply Network: Technical Learning and Rent Management
- 1. 12th International Post Keynesian Conference “Where Do We Go From Here” Kansas City, September 25-27, 2014 Local Value Chain Development in Global Supply Network: Technical Learning and Rent Management Christine Ngo, Ph.D. Department of Economics University of Denver
- 2. Outline 1. Introduction 2. Case Studies: the Motorcycle Industry in Vietnam 1. Developmental Rent Management Analysis (DRMS) 2. Local Value Chain Development
- 3. Research Interest How do developing countries upgrade their technological capability and what is the role of the state in this process?
- 4. Problems of Development 1. Growth and development requires technological upgrading and industrial capability-building 2. Embedded within each developing economy is a rent-seeking society, which operates both formally and informally • Identifying the constraints or bottlenecks • What if politics matters
- 7. This is exciting and important!
- 9. Vietnam 1975
- 10. Ho Chi Minh City 1980
- 11. Ho Chi Minh City 2009
- 12. Ho Chi Minh City 2009
- 13. 2013
- 14. Transformation of the Motorcycle Industry FDI Oligopolistic Market (1995-2000) The China Shock 2000- 2004 FDI Driven Market (post 2014)
- 15. Major Foreign Motorcycle Firms in Vietnam, 1992–2013
- 16. Political Economy of Development What Tools? 1. Rent 2. Rent Seeking 1. Rent Management
- 17. Developmental Rent Management Analysis (DRMA) Four-step Approach 1. Identify the rent 1. Schumpeterian Rent 2. Learning Rent 3. Monopoly Rent 4. Redistributive Rent 5. Rent with Unintended Effects 2. Identify the incentive induced by the rent 3. *Analyze the configuration of rent management 4. Observe the transformation and outcomes
- 18. Configuration of Rent Management • Configuration of politics and institutions that describes the macro-political order of the rent Political Context of Rent Creation and Management • Policy and policy-making structures that generate and implement particular rents Institutional Structure of Rent Allocation • Structure and boundaries of and between firms and the market Industry Structure
- 19. Local Value Chain 2. Suppliers to local or foreign assemblers 1. Local assembling 3. Second-tier suppliers become first-tier suppliers 4. First-tier suppliers become lead firms 5. Domestic-branded motorcycle
- 20. Case Study 1 (1995-2000) Failure of Learning Rents 1. Locating learning rents 2. Incentive induced by the rent 3. Configuration of Rent management 4. Outcomes
- 22. Case Study 1 (1995-2000) 1. Outcome
- 23. Yamaha
- 24. Honda
- 25. Assembling
- 26. Case Study 2: The “China Shock” Accidental but Growth-Enhancing Rents
- 28. Major Foreign Motorcycle Firms in Vietnam 67.2 63.1 19.4 11.9 19.4 33.3 35.7 36.9 13.5 23.8 75.2 80.5 65.1 37.8 29.6 35.7 90 80 70 60 50 40 30 20 10 0 1998 1999 2000 2001 2002 2003 2004 2005 Percent Honda Yamaha Suzuki VMEP (SYM) Chinese and local assemblers
- 29. Wave Alpha in 2001
- 30. Wave Model 2014
- 31. OUTCOME: Technological Transformation of the Value Chains From Local Suppliers to Parts Suppliers Fujita (2007); reproduced with the author’s permission
- 32. Honda in Vietnam
- 35. Observations 1. Role of FDI and GVC in development 2. Types of technology matters 3. Industrial policy with inadequate institution extraction, and lost opportunity 2. Positive rent management mechanism emerged from the China Shock 3. DRMS: focusing firms capability and institutions that support them
- 36. “Where Do We Go From Here?” State vs. Market Debate
- 37. Rent Management Factors from the Vietnamese Experience 1. Initial capability 2. Market competition 3. Informal pressures 4. Time horizon 5. Loss of rents and future benefits
- 38. Thank You!
Editor's Notes
- Locating learning rent: import substitution, local content policy, prohibited imports of completely built up unit. Intention here is to promote industrialization of the motorcycle industry. Specifically, technology transfer and learning. 2. Incentives of the rents: Chinese and cheap motorcycles and large rents in domestic market create integration opportunities for Vietnamese suppliers 3. Configuration of Rent Management First level: Political will to protect and boost upgrading in the industry Second Level: Failure to implement rent policies and to enforce border controls against illegal Chinese motorcycles Third Level: The availability of simple modular technologies Cost-cutting strategies by Chinese and Japanese producers in competitive market Time horizon insufficient for full transformation of Vietnamese suppliers into assemblers of Vietnamese-branded products