Vietnam Economic Structure Change Based on Vietnam Input-Output Tables 2012 and 2016

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1 Theoretical Economics Letters, 2018, 8, ISSN Online: ISSN Print: Vietnam Economic Structure Change Base on Vietnam Input-Output Tables 2012 an 2016 Nguyen Ho Phi Ha 1, Bui Trinh 2* 1 Acaemy of Finance, Hanoi, Vietnam 2 Vietnam Development Research Institute (VIDERI), Hanoi, Vietnam How to cite this paper: Ha, N.H.P. an Trinh, B. (2018) Vietnam Economic Structure Change Base on Vietnam Input-Output Tables 2012 an Theoretical Economics Letters, 8, Receive: January 30, 2018 Accepte: March 5, 2018 Publishe: March 8, 2018 Copyright 2018 by authors an Scientific Research Publishing Inc. This work is license uner the Creative Commons Attribution International License (CC BY 4.0). Open Access Abstract National economic structure is efine as the composition an patterns of various components of the national economy such as: prouction, value ae, consumption, gross capital formation, export, import an gross value ae. Structural change is conceptualize as the change in relative importance of the aggregate inicators of the economy. It implies that changes of intra-sectoral an inter-sectoral lea to changes in final eman, output, value ae an import. This paper seeks to answer some questions: 1) What woul be the impact on the power of ispersion an the sensitivity of ispersion by sectors? 2) What woul be the impact on value ae inuce by final eman? an 3) How woul the final eman impact the level of import? The main fining in this stuy is to fin a sectoral structure an a factor of the final eman for Vietnam s evelopment. Keywors Dispersion, Sensitivity of Dispersion, Value Ae, Final Deman, Import, Consumption Gross Capital Formation, Export 1. Introuction In Vietnam, it has been politically irecte an generally accepte that the structure of economy shoul be ajuste towar larger proportions of inustry an construction sector (Sector II) an service sector (Sector III) in GDP an this has long been consiere as the holistic solution to boost economic evelopment [1]. Accoringly, the government has taken various measures to promote both Sector II an Sector III. The capital stock of the manufacturing inustry has been rising an is estimate to account for over 53% of the economy s total balance of payments. Nevertheless, the generous investments in the sector DOI: /tel Mar. 8, Theoretical Economics Letters

2 o not seem to be well pai off as the n value ae-prouction ratio of this sector (Sector II) has fallen ramatically. This rate went own from 34.1% in the structure of 2007 (the structure of the I/O 2016 table) to only 21% in 2016 [2]. This means that this sector is increasingly inefficient an less prouctive, leaing to an increase in investment to compensate for such inefficiencies. The economic structure was propose by W. Leontief [3] to analyze the structural change of the US economy base on the 1919 an 1929 input-output tables. Since then the input-output analysis has been evelope by many moels such as W. Leontief [4], Schoonbeek, L. [5], Ebiefung, A.A., Uo, G. [6], Dobos, I. an Floriska, A. [7], this stuy iscusse some key features of the Vietnamese economic structure which are inicate by absorption matrices, which were evelope by Chenery an Watanabe [8]. Inter-sectoral structure is etermine through intermeiate consumption an the relationship between final eman an gross output, ae value an import. In Vietnam, there are some stuies that apply the input-output moel to analyze an measure economic structure such as T. Bui, K. Kobayashi [9], T. Bui an Phong N.V. [10], Tran et al. [11], Nguyen P. Thao [12], T. Bui an Hoa P.L. [13]. 2. Data Source an Processing Metho This paper uses the Vietnam input-output tables of 2012 an The 2012 input-output table was publishe by Vietnam General Statistics Office [14]. The input-output table 2016 was upate base on input-output table 2012 an the 2016 enterprise survey ata of Vietnam General Statistics Office. The approach for upating is as follow: Determine the new gross output (X 2016 ) base on the enterprise survey; Determine the vector of intermeiary input (II 2016 ) base on the enterprise survey; Intermeiate input matrix: In this metho: A ( ) X = X II II A where: A ( aij Xij X j ) ( n n ) ij ij j j = = with n is number of sectors in the input-output table; The final consumption is estimate base on the Househol Living Stanar Survey, investment, import an export of goos an services ata collecte from Vietnam General Statistics Office [15]; The input-output table 2016 was ajuste to 2012 price; After that, RAS metho was use to balance the input-output table 2016; In orer to be compatible with the input-output tables of some Asian countries an available ata for upating input-output table 2016, the research team selecte 19 sectors (Table 1). DOI: /tel Theoretical Economics Letters

3 Table 1. Sectors selecte for the stuy. N. Sectors 1 Agriculture, forestry an fisheries 2 Extractive 3 Prouction of foo, beverages an cigarettes 4 Prouction of textile proucts, apparels an leather goos 5 Prouction of petroleum proucts an gas 6 Prouction of chemical proucts 7 Prouction of non-metallic mineral proucts 8 Manufacturing an processing metals an metal proucts 9 Manufacturing equipment an machinery 11 Other manufacturing inustries 11 Prouction an istribution of electricity, gas, hot water, steam an air conitioning 12 Water supply; Waste an waste water management an treatment 13 Construction 14 Transportation of warehouses 15 Traing, retail; hotel an restaurant 16 Information an communication 17 Financial, banking an insurance operations 18 Professional, scientific an technological activities 19 Other service inustries Source: Selecte by authors. 3. Methoology The input-output tables of Vietnam were compile with competitive-import type, this means the intermeiate input matrix, final consumption, gross capital formation an export cover both omestic proucts an import proucts. In orer to better unerstan the economic structure, the input-output tables with competitive-import type shoul convert to non-competitive-import type. The way for moving is as below: Leontief stanar equation at competitive-import type:: A X + Y = X (1) where X is the gross output matrix, A= ( aij ) is the irect intermeiate input coefficient matrix with aij = Xij X, Y is the omestic final eman matrix ( n n ) j an n is the number of sectors. Y = C+ G+ I + E M (2) where: C is final consumption of househol, G is Government consumption. I is gross capital formation, E is export an M is import. Decompose matrix A an Y for omestic (A, Y ) an importe proucts (A m, Y m ), Equation (1) can be rewritten: DOI: /tel Theoretical Economics Letters

4 Call m m m m A X + A X + C + C + G + G + I + I + E = X (3) C + G + I + E = Y An notice that m m m m A X + C + G + I = M From Equations (1)-(3) we have: A X Y X + = (4) An the Leontief equation to the non-competitive input-output moel is: ( ) 1 X I A Y = (5) A is the matrix of the irect omestic intermeiate input ratio, ( ) 1 I A is the inverse Leontief matrix an Y is the omestic final eman matrix (incluing final consumption of omestic proucts, accumulation of omestic proucts an exports). Put: ( ) 1 B = I A. The backwar linkage (BL) an forwar linkage (FL) are efine as follows: Backwar linkage: B j n i = B ; Refers to the expansion of an inustry when using other inustry proucts as inputs. Forwar linkage: B i sectors. n j ij = B inicates the level of prouction epening on input from other ij Guo an Hewings [16] argue that increase backwar linkage will generate greater eman for inputs by other inustry an increase forwar linkages will lea to changes in output sensitivity in other sectors. Accoringly, the power of ispersion inex an the sensitivity for ispersion of each sector are etermine as below: ispersion inex: j j ( ) P= B NT (6) Sensitivity for ispersion inex: S= B NT (7) i i ( ) Here T = B ij. The combination of sensitivity an ispersion of each sector inicates the relative importance of that sector to the economy. This combination is efine as the multiplier prouct matrix of the Leontief system: M = S P (8) With: S = ( S ) an ( ) i ( n 1) P = P an j M ( M ) ( 1 n ) ij ( n n ) = are consiere as Economic-Lanscape at a given time an inicate the inter-sectoral structure at that time. The effect of eman on output X an value ae is calculate as follows: Impact of final omestic eman on output X: ( ) 1 Σ I A Y Σ Y Impact of final omestic eman on value ae ( ) 1 Σv I A Y Σ Y Here: shows scalar ivision DOI: /tel Theoretical Economics Letters

5 4. Research Results About power of ispersion inex an sensitivity for ispersion inex The results of the research on power of ispersion inex an sensitivity for ispersion inex from Table 2 show that inustry group of agriculture, forestry an aquatic prouct (Sector 1), inustry group of foo processing, beverage an tobacco (Sector 3), the prouction of oil an gas proucts (Sector 5) an other manufacturing inustries (Sector 10) have both power of ispersion inex an sensitivity of ispersion inex higher than the general average of the economy an there is no change in the two I/O tables, which suggests that these four groups of manufacturing sectors not only strongly stimulate other groups of inustry of the economy, but the input eman for the economy is also large. Most service inustries o not have goo power of ispersion inex an sensitivity, especially in sector 18 (Professional, scientific an technological activities) of which both the power of ispersion an sensitivity are significantly lower than average, suggesting that this inustry group oes not impact on others an other inustries o not epen on it. Table 2. ispersion an sensitivity of ispersion inexes of economy. No. Backwar linkage (BL) ispersion Forwar linkage (FL) Sensitivity of ispersion Backwar linkage (BL) ispersion Forwar linkage (FL) Sensitivity of ispersion Source: Calculate by authors base on Vietnam input-output tables, 2012 an DOI: /tel Theoretical Economics Letters

6 The combination of sensitivity an power of ispersion provies us a picture of inter-sectoral linkages, given that the I/O table 2012 represents the economic structure of perio an I/O table 2016 represents the economic structure of perio Figure 1 an Figure 2 below suggest that there has been very little or almost no changes in the inter-sectoral linkages uring the last 10 years. Nevertheless, the level of efficiency presente by the value ae-to-prouction ratio is lower uring than uring in most inustries. The ratio calculate for 2013 base on 2012 input-output table was 36%, but felt own to only 28% in a calculation base on 2016 table. The manufacturing an processing inustries are those which experience the most rastic reuction in this ratio. This reflects a eclining level of prouction efficiency, particularly in processing inustry group (Figure 3). Figure 1. The Economic-Lanscape Figure 2. The Economic-Lanscape DOI: /tel Theoretical Economics Letters

7 Figure 3. Value ae-to-prouction ratio. Value ae an import inuce by a unit increase in final eman So far the paper has only iscusse the ispersion power of eman to prouction. In many cases, the increase in eman stimulates not only the omestic prouction but also the import an therefore has very limite impact on value ae. A sector is consiere to be relative important to the economy if this sector has a relatively strong power of ispersion an high sensitivity inex but has low ispersion to imports an high ispersion to value ae. In this regar, the paper provies a eeper analysis in 4 sectors which have high ispersion power an sensitivity inexes. Table 3 shows that among these four sectors, only the sector group of agriculture, forestry an aquatic prouct satisfy requirement as important sector to the economy as mentione above. Sector of manufacturing an processing inustries, though having high power of ispersion an sensitivity inex, also strongly stimulates imports an isperses to ae value much lower than the average. This shows that the manufacturing an processing inustry in Vietnam remains relatively weak an at the lower en of the value chain, majoring in processing rather than manufacturing. It is also interestingly foun that most service sectors have low power of ispersion an sensitivity inex, but inuce higher impact on value ae an lower impact on import. This suggests that Vietnam shoul enhance capacity to prouce input for service inustries an likewise the services inustries shoul be further evelope to meet eman of other inustries. By oing so, the improve ispersion power an sensitivity inex woul strengthen the inter-sectoral linkages, thus creating a strong impetus for country s economic evelopment. Table 4 shows that the structure of eman an supply tens to change unfavorably. The structure of 2016 inicates that the ispersion of eman factors to prouction is higher than that of 2012, however, the ispersion to the value ae is lower while the ispersion to the import is stronger. Importantly, export of commoities has the lowest ispersion to the ae value while having DOI: /tel Theoretical Economics Letters

8 Table 3. Value ae, import was inuce by a unit increase in final eman. STT Value ae inuce by a unit increase of final eman ispersion on value ae ispersion on import Value ae inuce by a unit increase of final eman ispersion on value ae ispersion on import Source: Calculation of authors base on Vietnam input-output tables, 2012 an 2016, note: 19 sectors consistency with Table 1. Table 4. Output, value ae, import was inuce by factor in Final eman Final consumpt ion Gross Export of capital Goos formation Export of services Final consumpt ion Gross capital formation Export of Goos Export of services Output , Value ae Import Source: Calculation of authors base on Vietnam input-output tables, 2012 an strong ispersion to import. This again reaffirms the above fining that the country s economy has strong characteristic of a processing economy an the slogan Vietnamese use Vietnamese goos no longer hols true. DOI: /tel Theoretical Economics Letters

9 5. Conclusions The agro-forestry-fishery sector has goo power of ispersion, sensitivity on prouction, the inuce impact of final eman to value ae. This sector nees capital an high-quality human resources as well as policy support to be able to evelop sustainably. The research results are similar to that of the research by Nguyen Hong Son in the stuy 2020 Vietnam Service: Towars Quality, Efficiency an Moernity [17] as service sector has a goo ispersion to income an less impacts on the greenhouse gas emissions, however, this sector have a low power of ispersion an sensitivity of ispersion inexes on prouction values. If the ispersion an sensitivity coul be improve, it woul positively impact on the quality an sustainability of growth. For the ispersion an sensitivity to increase, it s necessary to take a specific priority policy for the omestic supporting inustries, particularly those that prouce inputs to the service sector. Research shows that the most important resource for sustainable an rapi evelopment is policy resources. It s necessary to take a flexible policy in ealing with the elements of the final eman. This stuy shows that currently, the export has no much ispersion on the value ae. It just has the ispersion on the largest import. The research shoul not focus too heavily on inustry but on agriculture an services. The structure in priority orer shoul be Services, Agriculture an finally Inustrial. Moreover, it is necessary to graually export goos by exporting services. References [1] Vietnam Government. (2015) To Increase the Proportion of Inustries an Services in Orer to Raise Labor Prouctivity. g-ty-trong-cong-nghiep-ich-vu-e-nang-cao-nang-suat-lao-ong/ vgp [2] Trinh, B. an Quoc, B. (2017) Some Problems on the Sectoral Structure, GDP Growth an Sustainability of Vietnam. Journal of Reviews on Global Economics, 6, [3] Wassily, L. (1941) Structure of the American Economy, Harvar University Press, Cambrige, MA. [4] Wassily, L. (1970) Environmental Repercussions an the Economic Structure: An Input-Output Approach. The Review of Economics an Statistics, 52, [5] Schoonbeek, L. (1990) The Size of the Balance Growth Rate in the Dynamic Leontief Moel. Economic Systems Research, 2, [6] Ebiefung, A. an Uo, G. (1999) An Inustrial Pollution Emission Control Moel. Computers & Inustrial Engineering, 37, [7] Dobos, I. an Floriska, A. (2005) A Dynamic Leontief Moel with Non-Renewable Resources. Economic Systems Research, 17, DOI: /tel Theoretical Economics Letters

10 [8] Chenery, H.B. an Watanabe, T. (1958) International Comparison of the Structure of Prouction. Econometrica, 26, [9] Trinh, B., Kobayashi, K., et al. (2012) Analyzing Some Economic Relations Base on Expansion Input-Output Moel. International Journal of Business Performance Management, 7, [10] Trinh, B. an Phong, N.V. (2013) A Short Note on RAS Metho. Avances in Management & Applie Economics, 3, [11] Tran, T., et al. (2016) Fining Economic Structure an Capital Structure for a Greener Economy. International Journal of Economic Research, No. 13, [12] Thao, N.P. (2014) An Analysis for the Northern Key Economic Region: Vietnam Base on the Input-Output Table Noncompetitive Style. Journal of Finance an Investment Analysis, 3, [13] Trinh, B. an Le Hoa, P. (2017) Comparing the Economic Structure an Carbon Dioxie Emission between China an Vietnam. International Journal of Economics an Financial Research, 3, [14] Vietnam GSO. (2015) Vietnam Input-Output Table, Statistical Publisher, Hanoi. [15] Vietnam GSO. (2017) Statistical Yearbook. Statistical Publisher, Hanoi. [16] Guo, D. an Hewings, G.J.D. (2001) Comparative Analysis of China s Economic Structures between 1987 an 1997: An Input-Output Prospective. Discussion Paper at Regional Economics Applications Laboratory, Urbana. [17] Son, N.H. (2010) Service in Vietnam 2020: Towars Quality, Efficiency an Moernity. Hanoi National University Publishing House, Hanoi. DOI: /tel Theoretical Economics Letters