19 July 2008 (Sat), GRIPS Campus in Tokyo, 14:00-17:00

"Trade Liberalization and Industrial Policies in Vietnam"

Mr. Vu Cuong
PhD candidate, Faculty of Business and Commerce, Keio University, Japan On-leave expert, Ministry of Industry and Trade (MoIT), Vietnam   



Since Doi moi (renovation) in 1986, Vietnam has notched remarkable economic and social achievements. Among many policies, which were attributed to these achievements, trade policies have been an important factor. Trade liberalization has contributed not only to economic growth, but also to changing economic structure of the country. In order to explore such structural changes, Mr. Vu Cuong, a PhD candidate of Keio University and an on-leave expert of the Ministry of Industry and Trade (MoIT) Vietnam, shared his findings with us in our monthly workshop in July 2008.


Mr. Cuong started his presentation by providing an overview of trade policies in Vietnam with a special focus on international trade relations between Vietnam and other trading partners in the region and the world. The accession of Vietnam to the regional and global trade organzations, such as the ASEAN Free Trade Area (AFTA) or the World Trade Organization (WTO), as well as its trade agreements with many countries showed that Vietnam has opened the country, and trade has been quickly liberalized to meet the requirements of both bilateral trade agreements (BTA) and multilateral trade agreements. The presenter also provided a comparison between obligations to BTA and WTO, and showed the roadmap for Vietnam to implement such obligations. Evidence of such open policies was increasing flows of goods, services, and capitals between Vietnam and its trading partners. Mr. Cuong also provided a statistical analysis on changes in the structure of imports and exports and flows of foreign direct investments (FDI) by categories and nationalities. He showed that Vietnam has experienced trade deficits over time, especially since the early 2000fs,  and at the same time attracted a lot of inflows of FDI.  These flows of goods, services, and funds have resulted in changes in the economic structure of the country.


In order to provide a vision of structural changes in Vietnam during pre- and post-trade liberalization eras, Mr. Cuong used Input-Output (I-O) Tables for Vietnam 1989 and 2000. Though these tables provided more than 100 industries in Vietnam, Mr. Cuong gathered them into 24 industries of three main sectors (agriculture, industry, and services) in his research, so as to compare how they changed between the two points of time. After providing a brief description of how an I-O table was organized, and how to see changes in each sector or industry from such a table, Mr. Cuong delineated his estimated results by a skyline analysis. The skylines in 1989 and 2000 for Vietnam clearly showed that the contribution from the agricultural sector had been declined over time, while that of the industrial sector has increased. Conversely, in terms of imports and exports for each sector, the estimates for the agricultural sector show increasing exports, while most of the industries of the industrial sector still heavily imported goods, such as machinery and transport equipments. Only crude oil, natural gas, and coal experienced a substantial increase over time. In addition to the skyline analysis for Vietnam, Mr. Cuong also provided skyline analyses for Thailand and Malaysia, and then compared with Vietnam in terms of structural changes of these economies. To conclude the analysis of findings, Mr. Cuong presented a graph showing how the Index of Power of Dispersion (IPD) and the Index of Sensitivity of Dispersion (ISD) of each industry changed over time. These indices show the importance of each industry, as how it could influence or could be influenced by other industries.


The discussion session was ignited by Dr. Vu Tuan Khai (VDF-Tokyo & YNU). He suggested Mr. Cuong make clear statement in his research, because structural changes in Vietnam were not due to only trade liberalization, but also a variety of domestic policy shocks. Also agreeing with this comment, Mr. Dinh Quang Hop (University of Technology Sydney) wondered whether the presenter could be able conduct some econometric models to evaluate determinant factors of such changes. In his responses, Mr. Cuong said that the main aims of this research were to provide how the economic structure of Vietnam has been changed over the past two decades, where trade liberalization has played an important role, and to use I-O table to explore such a question. He also added that the research did not aim to evaluate determinants of such changes using econometric methods.   


Prof. Kenichi Ohno began his comments by discussing about data used in the research. He said that the period 2005-2008 experienced a lot of changes in exports, imports, and FDI in Vietnam, so it could have been better if Mr. Cuong could have updated the data for analysis. In addition, Prof. Ohno said that the skyline analysis could only provide how each industry changed at each point of time, and could not be able to show its dynamic changes over a certain period. Also, based on the skyline analysis for Thailand, Prof. Ohno predicted that Vietnamfs picture in the near future would be the same as that of Thailand in 1995, in which industries would still be relied on imports of technology. Without development of supporting industries, it would be difficult for Vietnam to gradually escape from such a vision.


Regarding two indices used in the analysis, Mr. Vu Hoang Nam (VDF-Tokyo & GRIPS) suggested that the presenter provide clearer definitions and estimates of IPD and ISD. Such a work would be important, as it could provide policy implications for development of each industry. Providing an example of automobile industry, Prof. Ohno commented that it might be better to explain these indices as upstream and downstream linkages of an industry with others.  


Discussing two graphs showing how IPD and ISD in 1989 and 2000 for different industries in Vietnam, Mr. Giang Thanh Long (VDF-Tokyo & GRIPS) said that the three main sectors were obviously different in various aspects, and thus pooling all sub-industries of these sectors to compare their IPDs and ISDs would not provide meaningful comparisons. Instead, Mr. Long suggested that these indices of the three main sectors would be separately presented, and then different industries in each sector could be compared with each other in terms of these indices, in order to see which industry changed more quickly and influenced / was influenced by other industries more significantly.


Mr. Cuong thanked for all these comments. He again said that this was only initial step of his further research on trade liberalization policies in Vietnam. He would take these comments as much as possible in his on-going research at Keio University.  


At the end of the workshop, we had an hour meeting. New participants introduced themselves with research activities. We discussed some updates on economic issues in Vietnam, particularly inflation and stock market. We also announced on-going and forthcoming research activities of both VDF offices in Hanoi and Tokyo, particularly the Fourth VDF-Tokyo Conference on the Development of Vietnam at GRIPS in Tokyo on Saturday 9 August 2008, and the VDF Conference on the Social Security Issues in Vietnam on Tuesday 9 September 2008 at the National Economics University in Hanoi.


Slides (PDF907KB)


 (By Giang Thanh Long)


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