Chapter 7 Clusters of Modern and Local Industries in Vietnam

Since the introduction of the Doi Moi ('renovation') economic reform in 1986, Vietnam has experienced a transformation of its economic management, from a central planning economy to a market-oriented economy. High economic growth, created by the liberalization of activities in all sectors of the economy, has changed the economic structure of the country, and the once agriculture-based and poverty-stricken land now generates a midlevel income and possesses many industrial bases. Economic growth has also changed the landscape of the country. Business complexes have been built in metropolises like Ho Chi Minh City and Hanoi, and rice fields have been converted into industrial zones. As the number of enterprises increased, areas began to emerge where many enterprises agglomerated. Some of these 'clusters' were groups of cottage industry households, while many others were large-scale industrial clusters. As Porter [1998] argues, industrial clusters are the source of a nation's 'competitive advantage'. McCarty et al. [2005] indicate that in some key industries in Vietnam, some clusters of enterprises have been created, although the degree of agglomeration differs from one industry to another. Using industry census data from 2001, they include dot density maps for the 12 leading manufacturing industries in Vietnam. They show that most of the industries analyzed are clustered either in Hanoi or Ho Chi Minh City (or both). Among these 12 industries, the garments industry has the greatest tendency to cluster, followed by textile, rice, seafood, and paper industries. The fact that industrial clusters have begun to form in some areas could be a positive sign for Vietnam's future economic development. What is lacking in McCarty et al. [2005], however, is the identification of the participants in the industrial clusters. Some argue for the importance of small and medium enterprises (SMEs) in Vietnam's economic development (e.g. Nguyen Tri Thanh [2007], Tran Tien Cuong et al. [2008]), while others stress the impact of foreign direct investments (FDI) (for example, Tuan Bui [2009]). Adding information about the participants in the above cluster study (and in other studies of spatial patterns of location of enterprises) may broaden the scope for analysis of economic development in Vietnam. This study aims to reveal the characteristics of industrial clusters in terms of their participants and locations. The findings of the study may provide basic information for evaluating the effects of agglomeration and the robustness of the effects in the industrial clusters in Vietnam. Section 1 describes the characteristics of economic entities in Vietnam such as ownership, size of enterprise, and location. Section 2 examines qualitative aspects of industrial clusters identified in McCarty et al. [2005] and uses information on the size and ownership of clusters. Three key industries (garments, consumer electronics, and motor vehicle) are selected for the study. Section 3 identifies another type of cluster commonly seen in Vietnam, composed of local industries and called 'craft villages'. Many such villages have been developed since the early 1990s. The study points out that some of these villages have become industrialized (or are becoming industrialized) by introducing modern modes of production and by employing thousands of laborers.

Migration and Wellbeing at the Lower Echelons of the Economy: A Study of Delhi Slums

This paper based on a primary survey of households (2004-05) in the slum clusters of Delhi examines whether migrants are likely to experience upward mobility in their place of destination or alternatively, if they merely transfer their poverty from rural areas to large cities. First, a simple bifurcation of population in terms of poor and non-poor sub-groups is examined along with the incidence of poverty across different categories of occupations and non-workers. Then, an explanation of the variations in per capita expenditure across households is provided, and a binomial logit model (poor/non-poor) is developed identifying the variables which raise (or reduce) the probability of being non-poor (or poor). Next, an estimate of the wellbeing (deprivation) index is derived from factor analysis of a large number of variables including demographic and economic aspects of households. Empirical findings suggest that while duration of migration and the wellbeing index do not have a definite relationship, migrant households who have been in the city for a very long time have a higher wellbeing index on average than those who migrated in the last ten years. This tends to support the view that migrants do not merely transfer rural poverty to urban areas, and further that population mobility yields improvement in the living standard, if only in the very long term. Implementation of "employment-cum-shelter" support schemes in the urban areas may contribute to their wellbeing.

Search, matching, and self-organization of a marketplace

In many developing countries, clusters of small shops are the typical market-place. We investigate an economic model in which, between buyers and sellers in a marketplace, a circular causality including the search process produces agglomeration forces, given the initial location of the marketplace location exogenously in a linear city. We conclude that initial number of buyers and sellers is important in forming a large marketplace.