Japanese Technical Intern Training Program as an Approach to Develop Human Capital and Overcome Middle Income Trap in Vietnam

In 1986, Vietnam adopted an export-led growth strategy as part of its Doi Moi economic reform policy and this has helped produce remarkable economic growth like that found in other Southeast Asian countries. However, there are concerns that Vietnam will not develop further like the Asian Newly Industrialized Economies (NIEs)/Asian Tigers (Taiwan, Singapore, South Korea, and Hong Kong) but stay in the middle-income trap (MIT). Among the keys to economic success for the Asian Tigers has been their development of knowledge, practical skills, and attitudes, collectively known as ‘integrated human capital development’. To overcome the MIT, Vietnam must develop its human capital in an integrated way. One way to do this is to learn skills and technology from developed countries, like Japan, through labor export. Japan’s Technical Intern Training Program (TITP), which was established in 1993, is a program that provides foreign labor for Japan. One of its aims is to help developing countries develop their human capital. This paper investigates the role of TITP in human capital development and looks at its contribution to regional economic integration in Vietnam by examining and analyzing literature and quantitative data. The results of our investigation indicate that even after 30 years of employing an export-oriented strategy, Vietnam still cannot escape the MIT, as has also been true with countries like Thailand, Indonesia and Malaysia, due to its lack of catching up potential and innovative power. But there is hope. Vietnam exports labor to Taiwan, Japan, South Korea, and Malaysia, where ideally Vietnamese workers can pick up skills and technological knowhow. At present Vietnamese trainees comprise the largest Technical Intern Trainee (TITs) population in Japan. There, TITP can help Vietnamese trainees to gain technical knowledge, skills, and attitudes, learn Japanese language, and gain financial and social capital. When they are back in Vietnam, these benefits help them to secure better jobs and improve their living standards. However, TITP also has a number of problems that need to be overcome such as the involvement of too many middlemen, exorbitant costs, high desertion rates and mistreatment of the trainees. The benefits of the program are revealed by the growth of FDI outflows from Japan to Vietnam, and the increase of Japanese imports from Vietnam and Vietnamese exports to Japan that concur with the growth of the number of TITs. In this study we conclude that TITP has contributed positively to human capital development in Vietnam and boosted economic integration between Vietnam and Japan, and this increases economic growth and potentially helping Vietnam escape the MIT. Better integration of sending and accepting firms involved with the TITP, the governments of two countries, Japanese community and the trainees is recommended to improve the effectiveness of the TITP.