GRIPS Campus, Saturday, 09 August 2008
by Giang Thanh Long, Vu Tuan Khai and Vu Hoang Nam
On Saturday 9 August 2008, at the campus of National Graduate Institute for Policy Studies (GRIPS), we held the Fourth VDF-Tokyo Conference on the Development of Vietnam. The same as other annual conferences held since 2005, this conference also aimed to disseminate research findings and policy implications for Vietnamfs development, as well as expand human networking for research on Vietnam.
In this conference, we welcomed about 50 participants from different research and policy-making institutions and universities in Japan and other countries. The conference included six presentations, in which there were two keynote presentations in the morning session, and four paper presentations in the afternoon. These presentations covered different topics on the current status and future challenges of Vietnamfs development.
The conference was officially opened by a welcoming speech from Mr. Giang Thanh Long, a VDF-Tokyo research fellow. He also reviewed the research activities of both VDF offices in Hanoi and Tokyo since its establishment.
MORNING SESSION: KEYNOTE PRESENTATIONS
Keynote Speaker 1: Professor Kenichi Ohno
"Industrial Strategy for Vietnamfs New Era: Policy Content and Formulation Method"
Professor Kenichi Ohno, VDF research director, delivered the first keynote presentation in the morning session. The main theme of his presentation was about industrial strategies for Vietnam in the new era of development. According to him, high economic growth in Vietnam would help the country reach to the middle-income country group in very near future. In order to promote such a strategy, a breakthrough in productivity and production value is necessary. In addition to this core objective, Vietnam also needed to create internal source of growth, deal with new social problems arisen from urbanization and high economic growth, and improve macroeconomic management capacity. Going further with industrial development as the main motive for the countryfs growth and development, Prof. Ohno argued that the industrial base in Vietnam has been weak with simple manufacturing production under imported technology. Vietnam needed to promote the ecatching-upf process by learning good and bad experiences from neighboring countries, particularly Malaysia and Thailand. These two countries experienced impressive industrialization processes under large flows of foreign direct investment and supportive policies from their governments. Though, these two countries also had failures, which have been mainly attributed to their heavy dependence on foreign factors, and production has not really been internalized. As such, two countries in particular and ASEAN in general have not been able to overcome the eglass ceilingf to achieve a higher level of production as those of Korea and Taiwan. For Vietnam, under swift economic transformation and integration as well as influential globalization, Prof. Ohno suggested a production cooperation with Japan in order to improve Vietnamfs competitiveness. Such a cooperation resulted from such important factors as ongoing demographic changes toward aging society in Japan, and lack of skilful industrial human resources in Vietnam. Among a variety of policies pursuing such a strategy, Prof. Ohno argued that supporting industries would play a crucial role. To promote these industries, he proposed a list of epolicy menu and actionsf, which included such activities as industrial capacity building, industrial human resources development, financial promotion, foreign investment marketing. More importantly, Prof. Ohno also emphasized that the current policy formulation in Vietnam needed to be fundamentally reformed, so as to further promote industrial development in particular, and economic growth and development in general in the coming decades.
Keynote Speaker 2: Mr. Noritaka Akamatsu
"Finance and Enterprise Sector Reform in Vietnam"
The second keynote speech was delivered by Mr. Noritaka Akamatsu. He is the lead financial economist of the World Bank in Vietnam, and a capital market advisor for Asia and the Pacific Region. In his presentation, Mr. Akamatsu focused on the recent development and challenges of the financial and enterprise sector, particularly banking system, in Vietnam. The statistical data showed that the financial sector in Vietnam has been impressively growing in both quantitative and qualitative aspects in a short period. The banking sector has also rapidly grown in order to meet the growing financial demand. According to Mr. Akamatsu, however, such a swift growth under insufficient institutional and legal frameworks has resulted in a variety of financial market fluctuations and challenges. For instance, only a small part of rural areas could be able to access banking services, slow process of equitization and huge non-performing loans for the state-owned enterprises, uncertain monetary market, and lack of good human resources for managing these important sectors. In addition, Mr. Akamatsu also analyzed the underlying factors of the macroeconomic turbulences in Vietnam since early 2008, including accelerating inflation and trade account deficit. Such important factors included global inflation, aggressive public sector investment in infrastructure, huge inflows of remittances and foreign direct investment, and the pegging of Vietnamese Dong to US Dollar. Regarding policy implications, Mr. Akamatsu suggest Vietnam have more active financial and monetary policies, in order to promote growth and development of all economic sectors. More importantly, he emphasized that there has been no signal for a financial crisis in Vietnam, and timely and appropriate macroeconomic policies were essential and important. In the short term, inflows of foreign direct investment would have powerful impacts on the economy, and thus consistent and timely policies toward these flow would be requested. In the longer term, Vietnam should strengthen exports and promote import-substitution. Moreover, the domestic long-term savings should be mobilized with institutional investors and contractual savings. Bond market would become a crucial power in the financial market in the coming years.
Presentation 1: Assistant Professor Katsushi Imai
"Poverty, Inequality, and Ethnic Minorities in Vietnam"
The first presentation of the afternoon session was from Dr. Katsushi Imai, an assistant professor at the Department of Economics, the University of Manchester. Using the data from the Vietnam Household Living Standard Surveys (VHLSS) in 2002 and 2004, his paper aimed to determine the underlying factors of poverty for the ethnic minorities in Vietnam, and explain why these people have been persistently poorer than Kinh and Chinese people. In the paper, Dr. Imai used logit models and decomposition techniques to identify determinants of poverty incidence of the interested groups. The estimated results showed that the ethic minorities have experienced chronic poverty, but also were much poorer than were Kinh and Chinese people. As such, they have been vulnerable to various shocks, particularly income shock. Decomposition analysis also pointed out that the ethnic minorities had numerous disadvantages in comparison with Kinh and Chinese people, such as very low literate rates and low average income. The finding also indicated that even the ethnic minorities had the same endowments as did Kinh and Chinese, it would still be difficult for them to get out of poverty. In other words, substantial structural differences between regions have been a critical factor leading to poverty and inequality between ethnic minorities and eethnic majoritiesf (Kinh and Chinese), in which the former have been facing a number of disadvantages. From such findings, Dr. Imai suggested that Vietnamese government invest more in infrastructure and promote non-farm activities for disadvantageous areas where many ethnic minorities are living.
Presentation 2: Associate Professor Wade D. Pfau
"Demographic Changes and the Pension Finances in Vietnam: A Long-term Stochastic Actuarial Assessment"
Discussing another issue of the social security system, Dr. Wade D. Pfau, an associate professor of GRIPS, shared his findings on the long-term pension finance for Vietnam. This has been one of the concerned issues for the social insurance scheme in Vietnam, as population aging was expected and millions of people have participated in the scheme. In this paper, Dr. Pfau applied stochastic simulation techniques, which have been applied recently to the pension fund projections in some developed economies. This method allows estimating the pension fund balance within a confidence interval. As such, it mitigated a variety of drawbacks from the previous scenario-based projections for the Vietnamese pension fund. The estimated results indicated that the status-quo pension fund would be depleted in 2052 with a 90-percent confidence interval of 8 years, meaning that the pension fund will be deficit in 2049 at the earliest, and 2057 at the latest. Sensitivity tests showed that contribution rates, indexation of benefits, and actual retirement ages would be significant factors in determining the long-term balance of the pension fund. Conversely, coverage rates, administrative costs, and rate of returns on investments would not help to significantly improve the fund. From these findings, Dr. Pfau argued that Vietnam did not need to reform the current pay-as-you-go (PAYG) defined-benefits scheme to a system of individual accounts as suggested for other countries. Instead, Vietnam should conduct partial reforms with emphasis on such important factors as indexation of benefits, reduction of contribution avoidance and early retirement. Another important factor was that Vietnam should diversify the pension asset allocations, so that the real rate of returns on investment could be higher. In the long-term when Vietnamese population would be aging, wise investment strategy would be a core factor to maintain the pension fund.
Presentation 3: Mr. Nguyen Trong Ha
"The Economics of Not Using Health Insurance Card: A Case Study of Vietnam"
After 20-minute coffee break with lively exchange of information, the conference continued with a presentation from Mr. Nguyen Trong Ha, a lecturer of the National Economics University (NEU) in Hanoi, and a PhD candidate at the Australian National University (ANU). His research aimed to answer the question of why people did not use their health insurance card when accessing health care services. To pursue such an interesting and important question, Mr. Ha used the data from the Vietnam Household Living Standards Survey in 2006 (namely, VHLSS 2006). The statistical data showed that there were 14 percent of the health insurance scheme participants did not use their cards, and this was due to cumbersome procedures, low-quality services, or health insurance was not reimbursed at the health facilities. In order to evaluate such a situation in a greater detail, Mr. Ha used the number of times going to health facilities for both inpatient and outpatient treatments as a proxy for the use of health care services. This indicator was then compared between different groups categorized by individual and household characteristics. The estimates implied that income, health status, treatment costs, costs for accessing health facilities, waiting time at health facilities, and quality of treatments were significant factors in determining the use of health care services with health insurance cards. An impressive point was that the percentage of poor and ill people who could access health care services has increased, particularly in comparison with rich and healthy people. However, the paper also showed that lack of information and low reliability of health care services have made a number of people out of their eligible services. With these findings, Mr. Ha suggested that the expansion of the health insurance be on voluntary bases, and improvement of health care services using health insurance cards need to be addressed. Without such efforts, policy objective to provide universal health insurance for Vietnamese people would never be reached.
Presentation 4: Dr. Le Viet Trung
"The Revolution of Vietnamese Distribution System"
The last presenter of the afternoon session was Dr. Le Viet Trung, a post-doctoral research fellow of Kobe University, Japan. His research analyzed the revolutionary changes of the Vietnamese distribution system, and identified the underlying factors of such changes. An overview of the distribution system in Vietnam showed that economic policies from Doi moi (renovation) has significantly contributed to its changes. Along with high economic growth, the number of distribution channels, particularly at household level, and revenues have increased substantially in the period 1991-2002. In order to see such swift changes, Dr. Trung provided an analysis of the data from a survey that he conducted in Hanoi. In comparison with another survey implemented in 1997 by other researchers, Dr. Trungfs survey data showed that Vietnamese consumersf preferences and demands have evolved, in which they had really different perception and decision about prices, quality of services, and quality of products. As such, the main question was what factors led to these significant changes? Dr. Trung tried to identify possible factors using four hypotheses on income, quality and safety of products, prices, and convenience in accessing markets. Applying probit models, Dr. Trung compared the decision to buy fresh food, processed food and drinks, and non-food products using different individual characteristics of interviewed consumers (e.g. age, gender, and income) and other characteristics (e.g. convenience and transport). The estimated results indicated that prices, convenience, quick bargain, and freshness were important factors for fresh food in the traditional markets, while food security, income, and transport were crucial for this food in super markets. A striking finding was that gender, age, and quality of services did not have significant impacts on decision of consumers to buy fresh food. For processed food and drinks, and non-food product, prices were extremely important factor. Dr. Trung argued that traditional markets and super markets were both ecompetitorsf and ecoordinatorsf in the Vietnamese distribution system because they had advantages and drawbacks to consumers, who had various preferences and demands. As such, policies to promote the development of different distribution channels so as to guarantee healthy competition would play important role in expanding and diversifying distribution system in meeting peoplefs demand.
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