The Needs for Endogenous Development in the Era of
Globalization: The Case of Thanh Hoa Province
DO My Hien*
(Very Preliminary. Comments are Welcomed!)
In January 2007 Viet Nam became 150th member of WTO, so can she challenge well
this big chance to change situation in the international stage? The mission to gain
high growth in the big cities is very important, but the development in local areas is
important too. It is the same as strengthening the Olive Treeܢ before the threat of
“the Lexus” (Friedman, 2000). Now, it is the time for Viet Nam to prepare for her
post WTO era, in which strengthening local areas is highly required to gain
sustainable development, to reduce inequality between urban and rural areas, and
between economic sectors. It is essential to mobilize and utilize local potentials, local
resources to gain sustainable development and strengthen Viet Nam in the post WTO
era coming soon. These issues will be examined in this paper with different
endogenous development theories. This paper firstly introduces theoretical
framework, and then proposes the desired model in the way of endogenous
development for Vietnamese local areas, in which Thanh Hoa province is an
Keywords: endogenous development, globalization, human factor, local economic development.
In the era of globalization that strong competitiveness is highly required, to not to be lost
much, Viet Nam have to strengthen her each local, to make it more effective and flexible from
bottom up to gain sustainable development, too.
From the contents of Endogenous Development, it is necessary for Vietnam to find
effective way for strengthening its economic abilities, build capacity for development, and
become stronger and more competitive in this era. Due to the shortages and ineffective use of
resources, such as finance, social capital, natural resources, and human resources constitute
difficult challenges to local actors in improving their peoples’ living standards and quality of life.
Limited local resources and lack of knowledge in utilizing those are the major constraints of
local development. With all problems that local areas are facing nowadays, it is essential to do
research on how local actors can mobilize, utilize their local resources for development.
Country: Vietnam is an agricultural country and her local areas are facing many problems
such as shortage of finance, small market, un-skilled labor resources, and low productivity.
* PhD student, Graduate School of International Development, Department of International Development,
Nagoya University, Japan. I would like to thank Associate Professor Nishikawa Yoshiaki, my Academic
Advisor at the School, for his generous support and helpful comments on this paper, especially his introduction
of the Endogenous Development Theories from Japanese, Latin American, and European scholars. The
remaining errors are my own. E-mail: firstname.lastname@example.org
Those are common characteristic of many developing countries.
Province: Thanh Hoa is a North Central Coast province, 110km far from the south of
Hanoi capital, has a large population with 3.76 million people (2nd ranking of the whole country)
has 7 ethnic: Kinh (Viet), Muong, Thai, H’mong, Hoa(Chinese), with area of 11,106 sq km.
Labor force rate is 58.8% (27% skilled labor, 5.4% college, university graduate). Thanh Hoa
province is very important place in history also in economic development of the North and the
North Central Coast of the country. With a long history and its potentials in each areas, including
coast area, flat area, and mountainous area, it is said to be a small Vietnam (Chu, 2003). Under
French colonial period, every researcher must study about Thanh Hoa to understand more about
Vietnam history and make an effective policy. Thanh Hoa is also the place that the remains of an
ancient time found. With all the reasons and views, I chose Thanh Hoa province as my object to
do field research on Endogenous Development.
Economic Overview: GDP growth average per year 9,1% (1996–2000: 7.3% ); GDP per
person 2005 year was 430 USD; agriculture, forestry and fishery growth rate was 4.4%
(1996–2000: 3.7%); growth rate in industry and construction was 15.1% (1996–2000: 13.6%);
growth rate in services was 8.1% (1996–2000: 7.2%); GDP 2005 composed of the
agriculture-forestry and fishery sector (31.6%), the industry and construction sector (35.1%), and
the services sector (33.3%). The household poverty rate was 10.56% (under old poverty line).
About this Study: The Vietnamese economy has been rapidly developing for a few decades.
As we know, Vietnam today has more opportunities to develop because of joining the WTO on
11th January 2007. However, it is doubtful that the market-oriented economy in Vietnam is
working effectively. There are some reports which indicate that the gap of development
between rural and urban areas is getting wider and wider, as well as reporting many social and
environmental problems threatening peoples’ lives in rural areas. There are some rural areas rich
in natural resources that are easily developed by foreign investors. On the other hand, there are
other areas where their traditional patterns in producing agricultural products are still remaining.
To observe in more detail those contrasts, for instance urban – rural development characteristics,
I will do field research in Thanh Hoa province, Vietnam, where I conducted research for my MA
More than that, I will also compare Vietnamese and Japanese local areas. These two
countries, respectively, have their own regional, historical characteristics as well as problems to
solve to obtain a better quality of life. Based upon the outcomes of my PhD dissertation research,
practical and rational advices for Vietnam to make progress and enter effectively into the era of
globalization would be provided.
Japan was seriously damaged by the Second World War but after that, Japan has managed
to become the 2nd strongest developed country in the world. And currently, they are reforming
their huge government system into a smaller one more suitable to the requirements of society and
the economy. In contrast to the case of Japan, Vietnam won the war against the coalition led by
the US in 1975, but has since fallen into the bottom group of the poorest countries in the world.
What can we learn from Japanese lessons after the 2nd World War? What should we adapt from
her successes for the development of Vietnam?
To become a stronger nation, Vietnam must have more independent and liberal regions in
the future. Under the umbrella of international organizations such as ASEAN, APEC as well as
the WTO, how can Vietnam strengthen her power? It is extremely important for her to learn
about and draw useful lessons from the successes and failures of various developed countries
such as Japan.
Both developed and developing countries have their differences in political, social and
cultural systems, but we can still compare and analyze them to learn and find how local
government can activate their potential like human resources, natural resources, and local
self-independent institutions. With such academic studies, I believe that we can find constructive
opinions and solutions by adapting the analytical framework and theory of endogenous
development. Regional activation could also be an essential and useful approach for Vietnamese
local areas for sustainable development in the coming years.
2. Hypotheses and Research Questions
Hypothesis 1: The human factor is sufficient conditions for Vietnamese local actors to
achieve endogenous development through activating its resources for example, human resources,
natural resources, and local self-independent institutions.
Achievement of endogenous
The human factor is sufficient
development in Vietnamese local
condition for activating resources
areas, e.g. Thanh Hoa province.
for endogenous development
(human resources; natural
resources; local self-independent
Hypothesis 2: Vietnam and Japan have many differences in political, social and cultural
system, but main resources, for example, human resource, natural resource; local
self-independent institutions are common as well as necessary conditions for both countries.
Resources for endogenous
Achievements of endogenous
development: human resources;
development in both developed
natural resources, local
and developing countries: Japan
Hypothesis 3: In the era of globalization, AFTA/AEC, WTO, create more advantages and
favorable conditions for latecomers (economical aspect), such as Vietnam, to achieve effectively
The era of globalization:
Vietnam as a
Achievement of endogenous development
2.2. Research Questions
Question 1: What kind of human factor for sufficient conditions in which resources for
endogenous development, for example, human resources, natural resources, local
self-independent institutions are activated by Vietnamese local actors to achieve endogenous
Question 2: Are human resources, natural resources, local self－independent institutions
necessary conditions for developed and developing countries’ local areas achieve Endogenous
Question 3: How can globalization support and also create advantageous conditions for
local actors to achieve endogenous development? (i) Of the economic system? (ii) Of the social
system? and/or (iii) Of the cultural system?
Other questions regarding endogenous development, including (i) How does endogenous
development work in regional development? (ii) How did Japanese local government (in remote
mountainous areas and small islands) achieve in developing themselves and to reduce influences
from central government in Showa period, and currently in the era of an aging population? (iii)
How to activate the regional resources in Thanh Hoa province, (iv) How can rural areas realize
their potential through endogenous development? and (v) What are the relations between
endogenous development and globalization?
3. Definitions used in this Study
Globalization is a process characterized by increasing internationalization of the production
of goods and services and international trade and particularly by growing interdependence of
financial markets (Va’zquez-Barquero, 2002).
Endogenous development is a process of economic growth and structural change, which is
led by the local community and employs its potential for development to improve the local
population’s standard of living. According to Arocena (1995), endogenous development is a
process in which social aspects are integrated into economic aspects. Public and private actors
make investment decisions aimed not only at increasing firms’ productivity and competitiveness,
but also at solving problems and improving the well-being of local society (Va’zquez-Barquero,
Human factor refers to a spectrum of personality characteristics and other dimension of
human performance that enables social, economic and political institutions can function and
remain functional, overtime. Such dimensions sustain the workings and application of the rule of
law, political harmony, a disciplined labor force, just legal systems, respect for human dignity
and the sanctity of life, social welfare and so on. (Adjibolosoo, 1994a, p.26)
Local economic development (LED) offers local government and its community the
opportunity to improve their economy through a communal work with the private sector and
other sectors. It focuses on enhancing competitiveness and thus increasing growth. LED conveys
many local government functions including planning, infrastructure development, real estate and
finance. LED is about local people upgrading communities to improve their living standards and
retain jobs. (International Relief and development)
Dag Hammarskjold Foundation
In 1977, Dag Hammarskjold Foundation published “Another development, approaches and
Strategies”. According to them, development has 5 characteristics as follows:
(1) Need-oriented, that is being geared to meeting human needs, both material and
(2) Endogenous, that is, stemming from the heart of each society, which defines in
sovereignty its values and the vision of its future.
(3) Self-reliant, that is, implying that each society relies primarily on its own strength and
resources in terms of its members’ energies and its natural and cultural environment.
(4) Ecologically- sound, that is utilizing rationally the resources of the biosphere in full
awareness of the potential of local ecosystems as well as the global and local outer limits
imposed on the present and future generations.
(5) Based on structural transformations, required, more often than not, in social relations, in
economic activities and in their spatial distribution, as well as in the power-structure.
The key of endogenous development utilized by Venezuela government
• To recognize particular regional and national features and promote the development of
• To drive a transformation of natural resource use, constructing chains of production
that link production, distribution, and consumption.
• Efficient use of infrastructure.
• To incorporate excluded populations.
• To adopt a new lifestyle with a new model for consumption.
• To develop new forms of organization those are productive not only economically but
• To construct productive networks those vary in size and technological structure, such as
micro businesses and co-operatives.
In brief, endogenous development seeks to provide a socio-economic climate that:
− Is self-sustaining (and sustainable).
− Uses national products (regional and local) as much as possible.
− Generates dignified local employment.
− Respects the local environment.
− Achieves profits.
− Reinvests surpluses rather than removing them from the system.
− Provides a system of collective ownership of the means of production, and incorporates
− Makes full use of infrastructure and local resources.
− Creates solidarity with the environment, social responsibility (non- mercantilist criteria),
− Has an efficient and just social comptroller.
− Promotes spirituality (not "fundamentalism," but rather emphasis on morality, ethics,
and personal development).
− Is humanistic (the human being is central, after God).
− Promotes our uniqueness, our culture.
− Promotes our style of life and of consumption.
− Constructs productive networks of varied sizes and technological structures, such as
micro businesses and co-operatives.
− Appropriates technology as needed.
Human being development
Nishikawa Jun: (1) Endogenous development that necessary to change economics
paradigm, is assumed to be the ultimate purpose of human being capacities and replacement of
homo economics. (2) Denial the development based heteronymous, dominant from outsider,
building societies for all freedom human beings. (3) Endogenous development model has
relations with participatory, cooperation and self-management. (4)Endogenous development has
characteristics of self-organization and steady performance, emphasizes on ecology and
These thinking linked with the HDR in UNDP 1990 that expanding capacities, accessing
rights, and human development from the economic growth.
Social and folklore studies
Middle of 1970s, Tsurumi started research on Japanese folklore through comparative
studies between American sociologist Tarcot Passons and Yanagita Kunio. She is the first
Japanese scholar on endogenous development. In 1976, after 5 years doing survey on Minamata,
she built her own endogenous development theory. “Endogenous development is the process that
ability of each individual, each organization in each area is activated aggressively, sufficiently to
reach to the purposes of the mankind’s common goals. In Tsurumi’s theory, there are practical
key-person and idea key-person who take the important role in local development movement.
Local economic development
Based upon the work of Antonio Va’zquez-Barquero, the concept of endogenous
development is linked to endogenous industrialization processes, that is, to the economic
dynamics of cities and regions.
The first approach, founded on industrial organization theory (Becatini, 1979 and 1987;
Brusco, 1982; Campi, 1992 and 1993; Piore and Sabel, 1984; Porter, 1990) analyses the
theoretical and empirical aspects and effects of the organization of production
(Va’zquez-Barquero, 2002: 39-40).
The second approach is from the point of view of conventional development theory (Fua,
1983 and 1988; Va’zquez-Barquero, 1983 and 1995; Garofoli, 1983 and 1992; Coffey & Polese,
1984 and 1985; Arocena, 1986 and 1995) examines the mechanisms that drive local economic
growth (Va’zquez-Barquero, 2002: 39-40).
Main propositions of local economic development as below are rooted in the main
paradigms of economic development theory. Thus various rationales and views of development
converge in the theory of endogenous development (Va’zquez-Barquero, 2002: 41-52).
(1) The high theory of development and increasing returns
Endogenous development processes take place as a result of the use of externalities in local
productive systems, which is conducive to increasing returns and economic growth.
(This proposition is not among the assumptions of neoclassical growth theory of the 1950s
and 1960s, but it has recently been restored following Romer’s (1986) seminal studies
(2) The theory of transitional growth and capital accumulation
Endogenous development involves processes of capital accumulation that come about as a
result of the pull of resources from mature to more modern activities and the use of surplus
generated in the productive process.
This proposition has its origins in classical thought, which transitional growth theory
appropriates as its own with Lewis (1954, 1958) and Fei and Ranis (1961, 1974).
(3) Dependency theory and local control of development
Endogenous development is characterized by the use of existing development potential
through the initiative and, in any case, under the control of local actors.
This position is also shared by the high theory of development and transitional growth
theory, particularly in closed models. Dependency theory rejects it in regard to local control of
(4) Territorial development theory and local initiatives
Endogenous development refers to economic and social transformation generated as a
result of the response of cities and regions to the challenges of competition, in which local actors
take up strategies and initiatives aimed at improving the well-being of local society.
This proposition revolves around a central idea in endogenous development policy: the
dynamic and transformation of local economies are necessarily anchored in the forces for change
within the local community.
Table 1: Theoretical roots of endogenous development
-Application of surplus
-Flexible labor market
External economies of scale
-Organization of production
-Organization of society
-Local control of development
X = Convergence between the main development paradigms and the endogenous development theory
Works on developing countries in Asia and Latin America
Local initiatives are very diverse in nature (Vázquez-Barquero, 2005). The basic
characteristic of the new development policy is that an important part of the local initiatives are
designed to spur on the forces and mechanisms that are decisive factors in the capital
accumulation process. One of the objectives of local initiatives is the start-up and development of
firms and the formation of firm networks. In Rafaela, Argentina, an industrial district under
productive restructuring (Ferraro and Costamagna, 2000), the Centre for Entrepreneurial
Development was created in 1996, financed by the Inter-American Development Bank (IDB) as
well as by local firms and the municipality. The Centre gives technical and financial assistance to
local and regional firms, which will allow them to improve their production, have a greater
presence in the markets, and increase the internationalization of small firms.
On the other hand, in the Sierra de los Cuchumatanes, in Guatemala, on the border with
Chiapas (Cifuentes, 2000) during the nineties, cooperatives and associations were recovered and
began to acquire full legal capacity (Formal Organization of Agricultural Producers). These
organizations also recuperate the experience and knowledge of self management that exists
within the local population, and was lost during the civil war. Moreover, more informally
structured organizations, or Interest Groups were encouraged, and this brought people with
common productive and commercial interests together.
As indicated by Scott (2005), the improvement of the cooperative base of the shoe
production cluster in Marikina (Philippines) is one of the objectives of the group of shoe
manufacturers. The Marikina Footwear and Leather Goods Manufacturers Cooperative, for
example, provide financial services to members of the cooperative; among which stand out “the
right to take out loans, to purchase raw materials at a reduced price, and to discount letters of
credit”. The cooperative has a footwear brand (B&G) that the members may use when
manufacturing their shoes. The cooperative provides distribution and marketing services to its
The government of Penang, in Malaysia, created the Penang Development Center (PDC),
whose main objective was to promote socioeconomic development, including the attraction of
export oriented MNCs. The PDC played an important role in the creation of the electronic cluster
in Penang with an important presence of multinational corporations (Clarion and National
Semiconductors, Intel, Motorola, Hewlett-Packard, AMD, Hitachi), located during the seventies;
and consumer electronic firms (such as Sony, Toshiba, Pensangko, Komag, Seagate and others)
located during the eighties and nineties. PDC helped stimulate the formation of firm networks,
and differentiate and diversify the productive fabric, particularly after the late eighties. A
productive fabric has been created in which the domestic SMEs have established ties among
themselves and with the MNCs. Yet, the lack of coordination on behalf of the government of
Penang with the Federal Government of Malaysia restricted the development of local initiatives
in order to upgrade human resources and diffuse innovation within the local productive fabric
Finally, over the last decade in Latin America, Asia and Africa, various forms of
micro-credit and financial support to micro-firms and small businesses have appeared (Lacalle,
2002; Armendáriz and Murdoch, 2001). The Grameen Bank, created in 1974, is a story of success.
In 1999 it had over 2,300 thousand clients (95% women) and a volume of loans of over 2,715
million dollars and it is estimated helped twelve million people in Bangladesh. In turn,
International Action, founded in 1961, has a network of 19 credit offices in Latin America, with
over 380 thousand clients (57% women) and with over 335 million dollars in loans.
There are many experiences in fulfilling the local firms’ needs and demands for services in
Latin America (Muñoz, 2000; Londoño, 2000). In 1992, the Municipal House of the Small
Businessman (Casa Municipal del Pequeño Empresario) in the town of Rancagua in Chile was
established to promote qualification in business management and render technical and financial
assistance to micro-firms and small businesses. The Program for the Support of Small and
Medium-size Firms (Programa de Apoyo a la Pequeña y Mediana Empresa) in Antioquía,
Colombia, aims to provide small textile and clothing industry entrepreneurs with knowledge of
textile materials and design and provide technical consulting and export assistance through a
strategic alliance with the Export and Fashion Institute. In Porto Alegre, the prefecture, in
collaboration with private economic and social actors founded the community credit institution
PORTOSOL, a non-profit company with two main principles, which are the combination of real
guarantees and solidarity bonds, and the provision of services to small businessmen.
The development of a locality or territory is organized by the decisions of the public and
private agents. Frequently, as occurred in Bogotá, in Rosario or in Quezaltenango, in the early
stages of the local development policy, local leaders stimulate the implementation of local
initiatives, but they should count on explicit or tacit support from other local actors as well.
In Latin America, as in Asia, endogenous development policy is also based on initiatives
where social and economic projects are coordinated through new forms of governance such as
partnerships among public and private actors, international agencies, or non-governmental
From another point of view, the new development policy is based on a new form of
regulation and relations between the economic, social and political actors. It is a new form of
governance that designs and carries out policies based on the negotiation and specific agreements
between the public and private actors, non governmental organizations and international agencies.
The implementation of the actions is made through specific intermediary agencies promoted and
managed by the local actors. Lastly, partnership and networks among firms and organizations are
the most common forms of cooperation: partnership leads the transactions based on formal
agreements among local actors; networking is less extended at this time.
What lessons can be learned from the results obtained with this type of policies? Which are
the factors, if any, that condition the final results? Why do some instruments work and others
don’t? Why have some of the territories better results than others? It is difficult to answer this
type of questions with a limited knowledge of the evolution of the endogenous development
policies and their instruments, the result of occasional studies or specific technical visits.
Nevertheless, there is an issue that affects the success of the policies and the results of the
instruments used in a remarkable way; and that is that the actions and initiatives should obey a
specific strategy and development policy in each city or region that defines the main objectives
and actions to be accomplished, because economic development is a result of the interaction of
the economic forces. When this is not the case, it is only by chance that the results can meet
The success of the policy depends, therefore, on the adaptation of the actions to the
economic and social conditions of each locality or territory. Endogenous development policies
take on different shapes in the old industrialized regions, such as the Grand ABC in Sao Paulo,
Brazil, that is now experiencing strong industrial restructuring processes; in endogenous
industrialization areas, such as Rafaela in Argentina, the State of Santa Catarina in Brazil or
Marikina in the Philippines, where production service activities are more and more developed; or
in rural areas with development potential, such as the region of the Sierra de los Cuchumatanes in
Guatemala, where they are in the first stages of the industrial development process.
Last of all, the State’s central administration has an important role to play in the application
of the endogenous development policy, both on the technical as well as on the financial level.
Although endogenous development policy cannot be understood as a State policy, given that it
has appeared spontaneously as an answer on behalf of the municipalities and regions to the
productive adjustment problems and to social exclusion, good practice again recommends that
the central administrations should take it on as its own, since it is in line with its objectives of
growth, increased productivity and productive adjustment. This could be put forward as an action,
as done by international organizations, financing the endogenous development actions and tools,
and specifying the requirements for local initiatives in order to be eligible for State financing.
Explanation about the roots of endogenous development
A new scenario for development begins with the new phase of economic integration during
the late 1980s; when the growth models inspired by the fundamentalism of capital are no longer
useful. This is so, not only because the breakdown of the Soviet Union and the fall of the Berlin
wall proved the superiority of the market economy over a planned economy, but also because the
policies carried out in many developing countries and implemented by international aid
programs from the developed countries and international organizations failed, as Easterly (2001)
points out. Since the eighties, Schumpeter’s ideas (1934, 1939) as well as those of others who
contributed in the post-war years to what Krugman called “The Great Development Theory”
return. Among the different approaches that have emerged during the last twenty years is the
reintroduction of Solow’s growth model on behalf of the new generation of growth theorists like
Romer (1986) and Lucas (1988). At the same time, as pointed out by Garofoli (1991, 1992),
since the early eighties, a new approach appears, that can be called endogenous development. It
considers development as a territorial process (not a functional process) that is methodologically
based on case studies (not on cross-section analysis) and that considers that development policies
are more efficient when carried out by local actors (not by the central administrations). Giorgio
Fua (1994), intellectually linked to Abramovitz, maintains that the development capacity of an
economy depends on the immediate sources of growth, such as the size of the working
population, the number of hours worked and the availability of equipment goods and social
capital. What is really decisive for sustainable development are the factors that Fua defined as
structural, such as entrepreneurial and organizational capability, labour training and skills,
environmental resources and the functioning of institutions.
Philippe Aydalot (1985), a follower of Perroux and Schumpeter, adds that the
development processes have three main characteristics: First, he refers to the fact that the
development actors must be flexible productive organizations, as occurs with the small and
medium size firms, capable of overcoming the rigidity of large Fordist organizations. In this
way, the economies would obtain better results, particularly in times of rapid change in both the
milieu and the market. Second, and more strategic, he defends diversity in techniques, in
products, in tastes, in culture and in policies, which facilitates opening up various development
paths for the different territories according to their own potential. Third and last, and more
instrumental, he states that development processes are the result of having introduced
innovations and knowledge through the investments made by the economic actors. This is a
process that is territorial in nature given that it is a result of the forces that shape the milieu in
which the firms are inserted; in other words, thanks to the interaction of the actors that shape
what Aydalot calls innovative milieu.
This approach shows that development does not necessarily have to be focused in large
cities, but rather is diffused in urban centres of different size, as explained by Giacomo
Becattini (1979), a specialist on Marshall. The entrepreneur (both individual and collective),
plays an outstanding role in industrial development and becomes the motor force of growth and
structural change due to his creative capacity and innovative nature (Fua, 1983). Fua and
Becattini add, however, that the firms are not isolated entities exchanging products and services
in abstract markets, but are located in specific territories and are part of the productive systems,
and are strongly integrated within the local society. In other words, society organizes itself for
the purpose of producing goods and services more efficiently that give way to industrial
districts and clusters of small and medium size firms that bring out network economies within