La nguyendoantrang sum

1 INTRODUCTION methods, survey methods, quantitative methods Quantitative methods include Vector Error Correction Model (VECM), the OLS regression method, and Exploratory Factor Analysis (EFA) Background Research scope and subject The reform of the Vietnamese economy was initiated by the Sixth National Party Congress in 1986 The time range of the dissertation is from 1995 to 2016 The studied objective is the impacts of public Over 30 years of reform, the economy has changed dramatically Domestic products grew at an annual rate investment on economic growth of 5.1-9.5% in the period from 1988 to present Along with the economic changes, Vietnam's infrastructure Key contributions of the thesis system has constantly changed in terms of quality and quantity, basically solving the imbalance between Theoretical contributions supply and demand, contributing positively to boosting the economy The results are first of all the - The dissertation clarified the nature and concept of public investment; contribution of the public investment Public investment has the effect of orienting and attracting other - The dissertation reviews the whole theoretical background related to public investment In addition, sources of capital, contributing to investment and building of the infrastructure of the production and the thesis also synthesizes the theories and the results of empirical research relating to public investment in business sectors, developing the social activities, and strengthening the potential of economic regions the world as well as in the country In light of this, the importance of public investment in economic throughout the country to develop together for the country's socio-economic development goals development can be clearly seen However, many questions are being asked about the impact of public investment on economic growth New contributions from the research results in Vietnam: (i) First, public investment still accounts for a large proportion of total investment i (35%), while - The thesis has quantified the impact of public investment on economic growth in the period the economy still shows many inadequacies Although reforms have opened the economy for a long time, from 1995 up to now and concludes that public investment had positive impacts on output, aggregate Vietnam has lagged behind in development gap with other countries in the region and in the world; Per demand, private investment and labor productivity, thereby contributing positively to economic growth capita GDP was ranked as low as 121st in the world Vietnam's major manufacturing and export sectors are However, low public investment efficiency due to weak management has reduced the contribution of labor-intensive, low value-added; The pace of economic growth is slowing down, while the capital-based public investment on economic growth and limited the room to finance public investment in the future growth model is critical and reveals many inadequacies; (ii) Secondly, public investment has not yet clearly demonstrated its role as a facilitator of private investment; and (iii) Third, some negative incidents - The thesis has quantified Vietnam's optimal public investment / GDP ratio for each year and period for the period 2001-2015 (corruption, waste) in public investment have been revealed in the past which raises skepticism about the impact of public investment on Viet Nam's economic growth On the empirical side, there are many studies in the world that assess the impact of public investment on economic growth, using different methods, but each study focuses on only some certain aspect of the - The thesis has quantified the determinants of the relationship between public investment and economic growth including public investment management, public investment allocation, public investment demand and capital investment socialization Limitations of the thesis impact of public investment on economic growth Meanwhile, the studies on public investment in Vietnam In the chapter on the impacts of public investment on economic growth, the dissertation did not focus primarily on the situation of public investment, the impact of public investment on private investment quatify all the channels of the impacts of public investment on economic growth as introduced in the or on a particular aspect of public investment research framework due to the data and resource limitation In the context of the urgent need to restructure public investment and the skepticism about the impact Key contents of the thesis of public investment on economic growth, the authors have chosen the topic “The impacts of public The dissertation was structured into three chapters as bellows: investment on economic growth in Vietnam” to a PhD dissertation, aiming to clarify the methodology and - Chapter 1: Theoretical issues on public investment and its impacts on economic growth assess the impacts of public investment on Vietnam's economic growth on a qualitative and quantitative basis This will aso create a scientific basis for policy makers to develop appropriate solutions for public - Chapter 2: Literature review and research methodology investment to promote Vietnam's economic growth - Chương 3: The situation of public investment and economic growth Research objectives - - Chapter 4: The impacts of public investment on economic growth in Vietnam Summarize the theoretical foundations and empirical models on assessing the impacts of public investment on economic growth - Conduct empirical assessment of the impacts of public investment on economic growth in Vietnam; - Recommend the solutions to maximize the positive impacts of public investment on economic growth in Vietnam Research methodology The dissertation uses a combination of different methods to analyze and assess the impact of public investment on economic growth and its determinants, including: synthesizing and analytical methods, expert - Chapter 5: Summary of results and policy recommendations CHƯƠNG 1: THEORETICAL ASPECTS OF PUBLIC INVESTMENT AND ITS IMPACTS ON ECONOMIC GROWTH 1.1 1.1.1 Theoretical aspects of public investment The nature of public investment The concept of public investment remains a matter of debate not only in Vietnam but also in the world International organizations such as the World Bank, the Organization for Economic Co-operation and Development (OECD) and the International Labor Organization (ILO) argue that public investment is the investment in public investment data does not significantly affect the coefficient of the assessment of the public expenditure (or capital expenditure in public expenditure) that aims to increase the accumulation of impacts of public investment on economic growth Therefore, in the context of limited data, the topic will physical capital However, UNCTAD argues that limiting the public investment concept in government use data on public investment that is collected under the Investment Law 2014 (including state budget and spending can give too narrow picture of public investment, since private public investments may also be loan capitals) for research considered public investment 1.1.2 Classification of public investment have not ended because public investment has very different comprehensions depending on each point of 1.1.3 Characteristics of public investment view The first point views capital ownership as the criteria to define public investment, whereby any 1.1.4 State management on public investment In Vietnam, debates on public investment with different perspectives have taken place since 2007 and Private goods Non-pure public goods investment, wherever it is invested, Pure public goods is public investment if the source of 1.1.5 1.2 investment funds is from the state The second point takes profit or nonA O B Fees profit criteria whereby public investment is understood to be Invested by the private sector The private sector can invest in collaboration with the public sector Invested by the public sector investment programs or projects that Trends of public investment Economic growth Although there are many new concepts of economic growth that go beyond the traditional concept, the concept of economic growth, within the scope of the thesis, is reflected in the growth of gross domestic product (GDP), which refers to the increase in quantity, not to the quality of growth (assuming that the economic structure can not be changed rapidly in a few years) 1.3 Impacts of public investment on economic growth serve the community, not for profit The third viewpoint is based on the purpose of investment, whereby public investment is understood to be Direct impacts on aggregate demand state-owned or state-managed projects or programs that serve the public interest, irrespective of the source of funds The argument the support the state intervention in the economy with public investment tools is the Indirect impacts on aggregate demand failure of the market to provide goods and services Public goods include both pure and non-pure public goods For non-pure public goods that charge users fees, the private sector can invest because private investors can take profit from those fees Figure 1.1: Pure public goods and non-pure public goods PUBLIC INVEST MENT Source: Author’s collection Direct impacts on aggregate supply Based on the theory of public goods, the first two viewpoints on public investment are limited to public funds that are financed by the state The third viewpoint (which based on the purpose of investment) is the best viewpoint of public investment According to this view, public investment is understood as Indirect impacts on aggregate supply investment projects and programs of the State, which are managed by the State (the State is the investment Direct impacts on demand Impacts of private investment Impacts on trade balance ECONOMIC GROWTH Direct impacts on output Impacts on labor productivity Impacts on TFP assigner) to serve the public interests (belonging to econoimc infrastructure projects, social infrastructure projects and other socio-economic development projects), regardless of their capital sources (whether state budget or non-state investment capital) Because of this, the thesis will follow the third view of public investment as a basis for research Figure 1.4: Diagram on the impacts of public investment on economic growth Source: Author’s collection The Public Investment Law of 2014 was adopted by the National Assembly and introduced the concept of public investment as follows: Public investment means the State's investment in the programs and 1.4 projects for the construction of socio-economic infrastructure and in the programs and projects to serve the 1.4.1 Government’s policies on public investment The determinants of the relationship between public investment and economic growth socio-economic development process The concept of public investment by Vietnam's Public Investment Law Government policy and regulation on public investment is the most important factor affecting the generally takes the criterion of ownership to define public investment This definition will restrict public relationship between public investment and economic growth, and covers all other factors Public investment is a investment activities to the state funds, which is not appropriate to call for private sector participation in tool of the Government to promote economic growth, so how does the government use that tool, where it impacts, public investment programs and projects Therefore, this concept needs to be adjusted in line with the policy for what purpose, on what level, and how does the mobilization of resources and the decentralization of of socialization of investment of the State and reduce the burden on the state budget However, as public management are done (as reflected in the Government's public investment strategies and plans) will contribute to investment in Vietnam in the past period has been largely funded by the state, ignoring data on private determining the impact of public investment on growth through different channels as analyzed above 5 1.4.2 Efficiency of public investment project (a measure for the strength of public investment management) CHAPTER 2: LITERATURE REVIEW AND RESEARCH METHODOLOGY Public investment efficiency is a very important factor affecting the relationship between public investment and economic growth Some authors have recently argued that in countries with better public 2.1 Review on the domestic and foreign studies related to the impacts of public investment on investment, the relationship between public investment and economic growth is stronger The IMF (2014) argues economic growth that the contribution of investment in growth can be substantial, but this contribution will be limited if the 2.1.1 Review on the studies related to demand side effects investment process is ineffective 2.1.1.1 The direct impacts of public investment on aggregate demand 1.4.3 Allocation of public investment 2.1.1.2 The impacts of public investment on private investment The misallocation of investment capital is also an important cause of inefficient investment and not 2.1.1.3 The impacts of public investment on trade balance contributing to economic growth 2.1.2 Review on the studies related to supply side effects 1.4.4 Demand for public investment 2.1.2.1 The impacts of public investment on output Due to the decreasing rate of return to public investment, countries / regions with more complete 2.1.2.2 The impacts of public investment on labor productivity infrastructure will have a need to build a new infrastructure that is lower due to the benefits it brings back to 2.1.2.3 The impacts of public investment on total factor productivity the lower economy 2.1.3 Other economic models 1.4.5 Socialization of investment funds 2.2 Research methodology The rationale for the public sector involvement in providing infrastructure (following traditional 2.2.1 Methods to assess the impacts of public investment on economic growth economics) is the market failures in the provision of public goods The market will not be able to provide 2.2.1.1 Models to assess the impacts of public investment on economic growth from the demand side public goods at a socially beneficial level because public goods are characterized as non-competitive and 2.2.1.2 Models to assess the impacts of public investment on economic growth from the supply side non-exclusive goods However, technological innovation has promoted the commercialization of a number 2.2.2 Model to estimate the optimal public investment size for Vietnam of infrastructures, previously largely provided by the public sector Moreover, concerns about the efficiency 2.2.3 Method to identify the determinants of the relationship between public investment and economic of the public sector in the provision of infrastructure have also encouraged the private sector to engage in this growth in Vietnam area CHAPTER 3: THE SITUATION OF PUBLIC INVESTMENT AND ECONOMIC GROWTH IN VIETNAM 3.1 The situation of Vietnam’s recent economic growth 3.1.1 Economic growth rate 3.1.2 Sectoral economic growth and structure 3.2 The situation of public investment in vietnam 3.2.1 Sources of public investment funds in Vietnam 3.2.1.1 State budget 3.2.1.2 State loans 3.2.1.3 Private funds in the public private partnership (PPP) projects 3.2.2 The size of public investment in Vietnam Vietnam's public investment has increased steadily over the years Total public investment in Vietnam has increased from VND 40,787 billion in 1995 to VND 382,354 billion in 2015 (2010 comparable prices) In the period from 1995 up to now, Vietnam's public investment, although still accounting for a high share of total social investment, tended to fall significantly from 45.4% in the 1996 period -2000 to 34.7% on average in the period 2011-2015 Compared with other developed and developing countries, the ratio of public investment / GDP in Vietnam tends to be higher Public investment in other developed countries is less than 5% of GDP, with other emerging economies at 10% of GDP in the 1980s, but it has fallen to around 7-8% Meanwhile, the ratio of investment Public investors played a leading role in this period In the later stages, the growth rate of public public investment to GDP is still around 11% of GDP investment began to decline as the economic growth pattern was shifted in the direction of deepening The rate of public investment / total investment in Vietnam is decreasing as the economy is changing, the role of private investment are increasing in terms of scale and proportion; the demand for investment in infrastructure development is very high The Government has always put priority on infrastructure development in the policy of economic development Vietnam enjoys preferential loans for development assistance of foreign governments and international organizations; the private sector and the foreign invested growth, but the economic growth rate was relatively good This shows that the investment capital of the whole society has been diversified and accelerated 3.3.2 The role of public investment in human capital development and productivity improvement for the economy Public investment has played an important role in Vietnam's economic growth over the years Thanks sector have not invested much in infrastructure to public investment, transportation infrastructure in the whole country has been expanded and gradually 3.2.3 Structure of public investment in Vietnam modernized, with important facilities such as airports, ports and roads 3.2.3.1 Structure of investment funds At present, public investment activities in Vietnam are mainly invested by the State with state budget funds or loans (domestic and foreign) 3.2.3.2 Structure of investment sectors Analysis of public investment data from 2005 to 2015 indicated that public investment mainly focused on economic infrastructure (transport infrastructure, post and telecommunication infrastructure, electricity, water, irrigation, etc.) Public investment in social infrastructure (education, health care, arts and entertainment) accounted for only a small proportion (4.9% of total public investment in 1995 and 5.5% 2015) 3.2.3.3 Structure of investment by localities Regarding the structure of public investment by localities, the allocation of investment capital is generally "average" This is quite clear in the Prime Minister's Decision No 210/2006 / QD-TTg of 2006 stipulating five criteria for allocating budget capital to localities; the level of development, the rate of poor households, the domestic revenue, the rate of adjustment of the central budget; natural area; number of administrative units; Additional criteria - Central cities and key regions 3.2.4 Public investment efficiency in Vietnam 3.2.5 State manangement on public investment in Vietnam Public investment in human capital development has contributed to increasing the productivity of the TFP factor, thereby boosting economic growth Specifically, TFP of Vietnam has tended to increase rapidly, with the growth rate from 0.85% in 2011 to 3.18% in 2015 Thanks to that, TFP contribution to GDP growth also day from 4.01% in 2011 to 8.43% in 2015 However, the low percentage of public investment in education and training has led to a low productivity of labor in Vietnam compared to the region, thus limiting the contribution to economic growth According to the ILO and ADB 2014 Report on ASEAN Labor productivity, labor productivity of ASEAN countries was 2.12 times higher than that of Vietnam in 2007and 1.98 times in 2013 Although the gap in labor productivity has declined, this improvement is negligible Labor productivity in Vietnam is 18 times lower than in Singapore and 2.7 times that in Thailand in 2013 3.3.3 The role of public investment as a stimulus for the economy from the demand side The stimulus role of public investment in Vietnam is evident in the period 2008-2009 when the economy declined due to the impact of the global financial crisis and economic recession The study by Pham Thi Kim Chi et al (2009), using the Vanmieu2 model, found out the effects of the 2009 stimulus package on consumption of the economy The results show that the implementation of the stimulus package helped private consumption increase 2.25% and GDP increased 0.88% compared with the scenario of not implementing the stimulus package However, the Government's investment stimulus package in 2009, despite its short-term impact, will 3.2.5.1 System of legal documents on public investment have a negative impact in the medium term as a result of high inflation and a return to high inflation Due to 3.2.5.2 The situation of public investment management procedures in Vietnam the large amount of public borrowing while the efficiency of public investment is low, the ability to repay 3.3 The relationship between public investment and economic growth in Vietnam 3.3.1 The role of public investment in economic growth in Vietnam Public investment has played an important role in Vietnam's economic growth over the years Public public debt has dropped sharply It is forecasted that in the coming period, the demand for loans will be very high, but it will be very difficult to mobilize when large public debt prevent the government to borrow from both domestic and foreign sources for public investment From this situation, it can be expected that public investment in Vietnam will not have much resources and room for growth investment in infrastructure construction created the demand for materials, machinery and equipment, hiring labor directly to create demand for goods and services (direct bridge closure aggregate demand), while contributing to increased capital accumulation (contributing to GDP from the supply side) In addition, public investment has contributed to increasing the productivity of the economy, attracting other economic sectors to invest in order to promote growth The role of public investment in economic growth varies from stage to stage, coupled with the pattern of economic growth In the period before 2000, the high growth rate of public investment in the first two phases was associated with a broader growth pattern, whereby economic growth depended heavily on capital CHAPTER 4: THE IMPACTS OF PUBLIC INVESTMENT ON ECONOMIC GROWTH IN VIETNAM 10 investment, private investment and labor; and u are interference in the model, i is the i-th province and t is the time period (yearly) 4.1 The impacts of public investment on economic growth in Vietnam 4.1.1 The impacts of public investment on economic growth in Vietnam from the demand side 4.1.1.1.The direct impact of public investment expenditure on total output Based on the study of Cristian (2010), the thesis build the model to analyse the impacts of public investment on economic growth in the form as below: Log (GDP ) t = c + α i Log (GDP ) t −i + β i Log ( IG ) t −i + u Where GDP is the total domestic demand, IG is public investment, c is the intercept, u is the interference of the model, t is time, i is the lags of variables and Log means the logarithm of variables The author estimate the model above by using quarterly data from the General Statistic Office, the data The author estimates the whole sample and estimates by region (Region is the Red River Delta, Region is the North and South Central Coast and Region is the Southern Economic Area The results of the model estimation for the whole sample show that: (1) The constants of the models are positive and statistically significant, indicating that there are some other factors that are not explained in the model and have a positive impact on growth; (2) For the whole sample model, it can be seen that while other factors remained unchanged, 1% increase in public investment, private investment and labor respectively result in economic growth at 0.23%, 0.55% % and 0.32% increasing IG on total demand increase would be 0.095, 0.092, 0.089 and 0.065 percentage points Regional estimates show that the impact of public investment on economic growth in different regions is relatively different Regarding the model for Region 1, when public investment, private investment and labor increased by 1% respectively, the corresponding economic growth would be 0.2%, 0.57% and 0.28%; Regarding the model for Region 2, when public investment, private investment and labor increased by 1%, the corresponding economic growth would be 0.35%, 0.26% and 0.32%, respectively For the model for Region 3, when public investment, private investment and labor increased by 1% respectively, the economic growth would be 0.23%, 0.65% and 0.15%, respectively respectively 4.1.2.2 The impacts of public investment on labor productivity 4.1.1.2 The impacts on private investment Based on the study of Jean-Marc Fournier (2016), the author proposed the model to analyse the impacts of public investment on labor productivity as below: ∆ ln( prob) i ,t = ci,t + α i ,t ln( prob) i ,t −1 + β i ,t ln(ig ) i,t −1 + γ i,t ∆ ln(ig ) i ,t + θ i ,t X it + u ti is collected for the 2000QI-2016Q4 period nd th The estimation results show that public investment had strongest effects on total demand at and period, then decrease This implies that the increase in government investment has strongest effects on total demand after 3-6 months Particularly, increasing IG by percentage point at the current time makes the total demand increase by only 0.005 percentage points However, after 1, 2, or quarters, the impacts of Based on the study of To Trung Thanh (2011), the author built the model to analyse the impacts of public investment on private investment using Vector Error Correction Model (VECM) as below: Long-term effect Short-term effect Where GDP is gross domestic product, ITN is private sector investment and IG is denoted as above; i represent the lags of the variables; c1, c2, c3, u1, u2 and u3 are constants and lags respectively in each equation The author uses quarterly data for the 2000QI-2016Q4 period collected from the General Statistics Office The impulse response of private investment to the public investment shock show that there is no crowding out phenomenon of public investment on private investment In particular, the response of private investment to public investment shock is a slight increase in the second period, a decline in the period 3-4, a sharp increase in the period 5-6 and a decrease in the next periods The results of the variance decomposition in the model show that the change in private investment in the early stages was mainly attributed to private investment However, after the tenth periods, changes in economic growth and public investment have also contributed significantly to changes in public investment Specifically, in the tenth period, economic growth and public investment contributed 21% and 5% respectively to changes in private investment 4.1.2 The impacts of public investment on Vietnam’s economic growth from the supply side Where Prob is the labor productivity calculated by dividing GDP by labor; ig is public investment, X is the set of other factors that affect public investment such as time, population volatility, distance and the percentage of trained workers in total labor; ln represent the logarithm of the variables, and ∆ represents the first order variance of the variables The estimation results of the model show that: - The impact of public investment on labor productivity in the short run is higher than in the long run Specifically, the public investment on productivity in the short run is 0.647 and in the long term only 0.287 Accordingly, in the short term, a percentage increase in public investment will lead to labor productivity increase by 0.647%, while long-term public investment increase by 1% will increase labor productivity by 0.287% - The variables to be considered include the distance from the provinces to the central provinces (dis) as explained above, the first order differentiation of the logarithm of population (lpop), the time variable (t), and the first order differentiation of the logarithm of the proportion of trained labor to total labor (llt) The results indicate that: - The coefficient of the distance variable is negative and statistically significant, indicating that 4.1.2.1 The impacts of public investment on output provinces far away from central provinces are less productive than provinces near central provinces Based on the study of Klaus B (2016), the author proposes the model to assess the impacts of public investment on economic growth in the following form: fact that as the population grows, the associated costs will increase and the expenditure for improving labor - The increase in population also limits the increase in labor productivity, which is explained by the qualification and skills will decrease - The coefficient of time variable is positive and is statistically significant, indicating that labor Where lgdp represents the logarithm of output of each province, dis is the distance of the provinces to the central province; lig, lithium and ll respectively represent the logarithm of the variables of public productivity in the provinces can increase through the accumulation of experience over time 11 - The coefficient of the proportion of trained labor to total labor is positive and statistically significant, showing a positive effect of training of workers to increase productivity labor 4.3 Optimal public investment size for Vietnam The author calculates the optimal public investment following the endogenous growth model and according to Rezk's (2005) methodology for the Argentine economy The estimation results show that: First, for 2001-2005, 2006-2010 and 2011-2015, to achieve optimum growth, public investment at 2010 comparable prices must reach 18.88% of GDP, 18.12% of GDP and 18.11% of GDP, while actual figures show that public investment at constant prices in 2010 equaled 11.08% of GDP, 11.28% of GDP and 12.25% of GDP With such public investment size, Vietnam's economic growth was not sufficient to achieve optimum growth (highest growth) In order to optimize growth, it is necessary to increase public investment in the provision of essential infrastructure for the economy; while improving the efficiency of public investment 12 socialization on public investment on the relationship between public investment and economic growth, largely due to the very low level of socialization of public investment (PPP) projects in Vietnam The analysis of optimal public investment also shows that the ratio of public investment / GDP of Vietnam in the past periods was much lower than that of public investment to maximize growth Therefore, to maximize the positive impact of public investment on economic growth, the proposed solutions include: improving public investment management; rationalizing the allocation of public investment by sector and region; and increase the resources to meet the needs of public investment CHAPTER 5: SUMMARY OF RESEARCH RESULTS AND POLICY RECOMMENDATIONS 5.1 Summary of research results 5.2 Recommendations Solutions on public investment manangement - Building guidelines and orientations for public investment Second, the gap between the optimal public investment / GDP ratio and the real public investment / GDP ratio declined in the 2011-2015 period compared to 2001-2005 period, when the economy began to increase, the pace of economic growth has slowdowned and the infrastructure has been improved However, given the current situation as the public debt is rising rapidly and the ability to borrow to finance public investment projects is declining, the shortage of public investment to meet the infrastructure needs of the economy will even bigger - Select a public investment project attached to the budget cycle Third, despite the relatively high level of budget spending / GDP, the ratio of capital expenditure / GDP was relatively low and tended to decrease It also implies that to increase public investment spending, it is necessary to reduce current expenditure in total state budget expenditure - Strengthening the monitoring mechanism after the completion of the project 4.3 The determinants of the relationship between public investment and economic growth - Improving the quality of public investment project appraisa - Reforming the regulation on capital issuance - Reducing the negative impacts arising during the implementation of public investment projects - Rearranging the apparatus of public investment capital management Solutions on public investment allocation - Completing the allocation of public investment funds - Restructuring public investment capital between regions Solutions on arranging the demanded public investment capital The author conducted the survey in provinces including Hanoi, Bac Giang, Da Nang, Gia Lai, Kontum, Binh Duong and Ca Mau in May-June 2016 The questionnaire was designed to include an - Restructuring the state budget expenditure - Promoting the participation of the private sector in the provision of public goods independent variable which is the effect of public investment on economic growth and the four dependent - Removing the obstacles for expanding PPP variables including public investment management, public investment allocation, the socialization of Other solutions investment, and the demand for for public investment Table 4.14: Regression results Source: Author’s calculation Regression results show that the factors affecting the relationship between public investment and economic growth in Vietnam include public investment management, capital investment demand and capital allocation There is no evidence that the socialization of investment capital affects the relationship between public investment and economic growth in Vietnam Regression results suggest that the weaknesses in public investment management and public investment allocation and the low ability to meet public investment needs in Viet Nam are the factors that prevent the public investment contribution to economic growth There is no evidence of the effect of