This paper attempts to examine the impacts of the ongoing regional economic integration on Vietnam’s economy using a global Computable General Equilibrium (CGE) model. The discussion will continue in section 2 analyzing the trade liberalization and regional economic integration in Vietnam.
Discussion Paper No 132 Regional Economic Integration and its Impacts on Growth, Poverty and Income Distribution: The Case of Vietnam by Tien Dung Nguyen* and Mitsuo Ezaki** March 2005 * Researcher, Division of Management and System Research, Institute of Information Technology, Vietnam Institute of Sciences and Technology ** Professor, Graduate School of International Development, Nagoya University This research was financially supported by the following Grants-in-Aid of Japan Society for the Promotion of Sciences (JSPS) in the fiscal year 2004: (1) Grant-in-Aid for Scientific Research (B) (No.16330037), “Regional Economic Integration and Growth, Income Distribution and Poverty Alleviation in East Asia: Econometric Study based on CGE Modelling” Project leader: Mitsuo Ezaki (2) Grant-in-Aid for Exploratory Research (No.16663017), “Study on the Method of Relational Analysis between Trade and Investment Liberalization and Poverty Alleviation under the Global Economy” Project leader: Hiroshi Osada Abstract The trade liberalization and regional economic integration have recently accelerated in East Asia, with several free trade areas have been established or are under negotiation As for Vietnam, after acquiring ASEAN membership in 1995, the country has signed a bilateral trade package with the United States and participated in the China-ASEAN free trade area This paper attempts to analyze impacts on Vietnam of the ongoing regional economic integration, focussing on growth, poverty reductions and income distribution For this purpose, we have constructed a global linked Computable General Equilibrium (CGE) model and make use of GTAP database version 6.0 and Vietnam’s living standards surveys The simulation analysis shows that the regional economic integration generally has positive impacts, and it is both welfare enhancing and income-distribution improving for Vietnam Household income and consumption increase, and poor and rural household groups benefit more than high income urban groups Table of Contents Introduction Trade liberalization in Vietnam Poverty and income distribution Model specification 11 Simulation analysis 16 Summary and conclusions 27 References 28 Appendix A: The equation system and model notation 31 Appendix B: The social accounting matrix for Vietnam 39 Appendix C: The elasticities of substitution 48 Regional Economic Integration and its Impacts on Growth, Poverty and Income Distribution: The Case of Vietnam Tien Dung Nguyen and Mitsuo Ezaki Introductions Twenty years have passed since Vietnam began profound social and economic reforms, which have transformed Vietnam from a centrally planned economy to a market one Since the beginning days of the economic reforms, trade reforms and the open-door policies have constituted an integral part of overall economic reforms The restrictions and limitations on trade activities have been steadily and progressively removed, and Vietnam has successfully developed trade and investment relations with countries in Asia, Europe and North America Trade reforms have contributed to the rapid growth of exports and the overall economic growth The economic integration with the regional and global economy has recently accelerated in Vietnam Vietnam became a member of ASEAN in 1995, joined APEC in 1998, while negotiating for WTO membership Vietnam has also concluded a bilateral trade agreement with the United States in 2000, and has participated in the China-ASEAN free trade area Given the national target of sustained growth and poverty alleviation, the Vietnamese policy makers are greatly concerned with the possible consequences of these liberalization movements on growth, poverty and income distribution This paper attempts to examine the impacts of the ongoing regional economic integration on Vietnam’s economy using a global Computable General Equilibrium (CGE) model The discussion will continue in section analyzing the trade liberalization and regional economic integration in Vietnam It is followed by section examining poverty and income-distribution issues in Vietnam The structure of the global CGE model is presented in section 4, and simulation scenarios are performed and discussed in section Policy implications are drawn and some concluding remarks are given in section Trade liberalization in Vietnam Since the late 1980s, Vietnam’s trade reforms have been progressed steadily, consisting of the creation and amendment of a system of taxation of imports and exports, the gradual removal of non-tariff barriers and progressive deregulation of trade regimes The entry to trading activities has been liberalized for both state-owned enterprises and private firms Currently all businesses are allowed to exports or to imports all goods that are consistent with the field of business identified in their business registration license The deregulation of trading rights has increased the competitiveness and efficiency of trading activities1 At the same time, a legal system, including a tariff system, has been established to regulate foreign trade The tariff system has been simplified and rationalized, and tariff rates have been lowered The average weighted tariff rate dropped from nearly 20% in early 1990s to around 15% in the late 1990s (SRV, 1999) Quantitative restrictions on imports have been removed for the majority of commodities, with the exception of petroleum products, sugar and some other strategic products The surrender requirement and other currency control measures introduced in 1997 to cope with the East Asian crisis have been eliminated Foreign-invested firms are no longer required to balance their foreign exchange account The number of imports that subject to the minimum valuation procedure has also reduced considerably With respect to exports, export duties and quotas have been removed for the majority of products Only a small number of exports are being levied with export taxes mainly for the purpose of raising revenue, but the tax rates are low With the exception of some products regulated due to environmental, health or security concerns, quotas are only imposed on the Vietnam’s trade regimes have been the subject in several studies, such as CIE (1998) and CIE (1999a) The non-tariff barriers that were present in Vietnam by 1999 are surveyed in detail in CIE (1999b) and McCarty (1999) export of garment and textiles to the EU, the United Sates and Canada These quotas are imposed by the importing countries, and are determined in the bilateral trade agreements between Vietnam and these countries The export quotas on garment and textiles are to be removed by WTO members in 2005, as mandated by the Agreement on Trade in Textiles (ATC) However, Vietnam has to acquire WTO membership before it could open the US and EU market for garment and textile products Generally high tariff rates and non-tariff barriers are employed to protect consumer goods, while capital goods and production inputs are subject to low tariffs and very few non-tariff barriers Effective protection provided to many industries is higher than that offered by nominal protection Several studies have shown that many industries and consumer goods industries in particular have enjoyed very high degrees of effective protection2 However, imports of some intermediate inputs, which are being domestically produced such as cement, fertilizers, or steal, have been subject to very high tariffs Protection through tariffs and non-tariffs barriers is also provided to some so-called infant industries, such as automobile or petroleum products The protection of upstream industries, however, raises the price of intermediate inputs and negatively affects downstream industries and export activities3 Together with unilateral reform measures, Vietnam has made important commitments to trade liberalization under various bilateral and multilateral agreements Vietnam became a member of ASEAN in 1995, joined APEC in 1998, while applying for the membership of the WTO In 2000, Vietnam agreed on a landmark trade package with the United States Together with other ASEAN member, Vietnam has participated in the recent formation of a free trade area between ASEAN and China All these bilateral and multilateral agreements are being implemented, and are integral parts of Vietnam’ trade reforms See, for example, CIE (1998) and Fukase and Martin (1999) for the estimates of effective protection rates by industries Fukase and Martin (1999) show that exports-oriented industries suffers negative effective protection as protection given to intermediate inputs raises the cost of production Under the ASEAN free trade area (AFTA), the member countries are obligated to reduce tariffs on intra-ASEAN trade to less than 5% by the year 2002 As a later member of ASEAN, Vietnam is allowed to fulfill its commitment to trade liberalization over a longer period According to the Common Effective Preferential Tariff (CEPT) agreement, products with current tariff rates under 20% will have tariffs reduced to 0-5% by the year 2003 For products with tariffs above 20%, rates are to be reduced to 0-5% by the year 2006 In addition to the tariff reductions, Vietnam is obligated to remove quantitative restrictions and non-tariff barriers The AFTA agreement calls for an immediate elimination of quantitative restrictions as soon as products are phased in the Inclusion List4 The implementation of CEPT began in 1996, but progressed slowly until 1999 Most products that were subject to early tariff cuts were not produced in Vietnam or already had tariff rate of less than 5% and were subject to very few non-tariff barriers (Tongzon, 1999) Since 2000, tariff reductions have been carried out for highly protected products and are expected to have greater impact on the economy When the tariff reduction under AFTA is completed by 2006, over 97% of Vietnam’s tariff lines will have their tariffs reduced to under 5% In November 2001, China and ASEAN agreed to establish a free trade area within ten years, in which tariffs and non-tariff barriers will be removed by 2010 for China and six old ASEAN members, and by 2015 for four new ASEAN members, i.e for Vietnam, Laos, Cambodia and Myanmar The formation of this free trade area is in the interest of both sides with ASEAN members looking for new export opportunities in China’s huge market and China seeking for natural-resource based inputs from ASEAN The China-ASEAN free trade area is, however, one among many efforts made by East Asian countries to liberalize trade and investment regimes in the region ASEAN is seeking for other free trade areas with Japan, Korea and Australia and New Zealand Meanwhile Japan has concluded free trade agreement See, for example, Forster (1998) and Thang (1999) for the detailed liberalization schedule under AFTA with Singapore and Mexico, and is negotiating with Korea and some ASEAN members It can be said that all these efforts have been going into promoting a broader free trade area in the East Asian region The Asia Pacific Economic Cooperation (APEC) grouping was established in 1989 with the objective of liberalizing and facilitating trade and investment The goals of APEC, as defined in the APEC leaders Meeting in Bogor, Indonesia in November 1994, are to achieve free trade and investment for the region by 2010 for developed countries and 2020 for developing member countries Member countries are obliged to carry out liberalization measures that they propose in Individual Action Plans Right after joining APEC, Vietnam submitted its Individual Action Plan (SRV, 1999), which commits Vietnam to unilateral trade liberalization, including free trade, the liberalization of investment regimes and the opening of service sectors to foreign providers Vietnam’s direction of trade has greatly changed over the last decade, as can be seen in table Until the late 1980s, Vietnam traded mainly with the Soviet Union and the Eastern European countries The collapse of the former Soviet Union interrupted the trading relations with these countries, and Vietnam redirected trade toward Asian countries, which dominated Vietnam’s trade in early 1990s Since the mid 1990s, and particularly after the Asian crisis led to a sharp contraction of export markets in the region, the country has managed to expand trade toward Europe, North America and the rest of the World Table 1: Trade direction of Vietnam 1995-2003 1995 Exports Total value (million dollars) 5448.9 Composition of exports (% of total) ASEAN 18.3 of which Singapore 12.7 Other ASEAN countries 5.6 NIEs 17.1 Japan 26.8 China 6.6 EU 12.2 US 3.1 Others 15.9 Imports Total value (million dollars) 8155.4 Composition of imports (% of total) ASEAN 27.8 Of which Singapore 17.5 Other ASEAN countries 10.4 NIEs 31.6 Japan 11.2 China 4.0 EU 8.7 US 1.6 Others 15.0 2000 2001 2002 2003 14483.0 15029.0 16706.1 20176.0 18.1 6.1 12.0 9.8 17.8 10.6 19.6 5.1 19.0 17.0 6.9 10.0 10.2 16.7 9.4 20.0 7.1 19.6 14.6 5.8 8.8 9.7 14.6 9.1 18.9 14.7 18.4 14.7 5.1 9.6 8.0 14.4 8.7 19.1 19.5 15.7 15636.5 16218.0 19745.6 25226.9 28.5 17.2 11.2 27.1 14.7 9.0 8.4 2.3 10.1 25.7 15.3 10.4 27.3 13.5 9.9 9.3 2.5 11.8 24.2 12.8 11.3 28.4 12.7 10.9 9.3 2.3 12.2 23.6 11.4 12.2 25.9 11.9 12.4 9.8 4.5 11.9 Source: Vietnam’s General Statistical Yearbook 2003 Vietnam’s trade with its ASEAN neighbors has been relatively small In 2003, only around 23.6% of imports were sourced from ASEAN, and 14.7% of total exports were shipped to ASEAN Among ASEAN countries, Singapore is the largest trading partner, accounting for around 13.6% of Vietnam’s total imports and over 50% of imports from ASEAN5 Around 30% of exports to ASEAN countries or 6% of total exports were shipped to Singapore The two-way trade with other ASEAN countries has been recently on rise following the tariff reductions It should be noted that Singapore, like Hong Kong, has been acting as a sub-contractor for Vietnam’s exports and imports A significant share of trade with these two countries may have been re-exported to or re-imported from other countries and are excluded from the UN statistics under AFTA East Asian countries are major trading partners of Vietnam, which account for nearly a half of Vietnam’s exports and three-quarters of its imports The two-way trade with China has recently been on a steady and rapid increase since the mid 1990s Export of Vietnam to China increased more than ten times, and imports from China increased by ten times during the last 10 years China has recently passed Japan, which was Vietnam’s largest trading partner in early 1990s, to become Vietnam’s largest import markets Imports of Vietnam from Asian newly-industrializing countries are also large, which are mainly caused by the investment inflows from these countries The major exports to Japan are crude oil making up one third of exports to Japan and a half of total oil exports Other major exports are seafood, coal, wearing apparel, leather products and wood products Most of imports from Japan, Korea and Taiwan are made up by electronics, machinery and equipment While East Asian economies have remained the major import suppliers, the European Union and the United States of America have become increasingly important for Vietnam’s exports The trade with European countries increased rapidly in the latter half of 1990s, partly compensating for the slowdown in trade with East Asia caused by East Asian economic crisis Until the signing of the bilateral trade agreement between Vietnam and the US in 2000, trade between two countries had been relatively small The granting of the US’s most favored nation status to Vietnam has boosted exports to the US, which now becomes Vietnam’s largest export market Combined together, exports to the US and the EU amounted to nearly $8 billions in 2003, or equivalent to 40% of Vietnam’s total exports These are also the major markets for Vietnam’s exports of labor-intensive products such as agricultural products, wearing apparel, textiles and footwear Poverty and Income Distribution When Vietnam started economic reforms 20 years ago, it was a very poor country with income per capita of less than 200 $US Most Vietnamese people then lived under the poverty line with the estimated poverty incidence of over 70% The rapid economic growth over the last decade has not only increased national income, but also sharply reduced the incidence of poverty The percentage of poor people fell sharply to 50% in 1993, 37% in 1998 and 15% in 2002 The absolute poverty incidence based on the food poverty line also fell from 25% to less than 10% between 1993 and 2002 Poverty incidence is unevenly distributed among regions Most of poor people, around 90%, are living in rural areas, while the remaining 10% are urban dwellers (World Bank 1999) Poverty incidence is found very high in mountainous and remote regions, particularly in Northern Uplands and Central Highland These are also the poorest regions of Vietnam with relatively slow economic growth This fact indicates that focussing on rural development and allocating more resources toward poor regions are essential for further poverty reductions in Vietnam There are several reasons that can explain the rapid reduction in poverty Firstly, agriculture grew quite fast and contributed to the income increase in rural areas where the majority of the poor lived The growth of agriculture and agricultural exports also helped Vietnam to stabilize the economy during the late 1980s Secondly, the agricultural terms of trade changed in favour of agriculture and rural areas Over the last decade the food prices increased faster than non-food prices largely thanks to the liberalization of the agricultural product market and the increase in export prices As a result, rural income rose quite fast and brought benefits to the rural poor Finally, as pointed out by Haughton (2001), a large proportion of population initially lived just below the poverty line The increase in income, even a small increase, could lift them up above the line This also means, however, that those people are vulnerable to the change in economic environment, and they could easily fall back below the poverty line (37) M ir = a M ir (38) F$ r = F $ r −δ ir /(1+δ ir ) (ω M ir Pir / PM ir ) /(1+δ ir ) × Qir Linkage between Countries or Regions (39) MS irk = a Sir −θ ir /(1+θ ir ) (ω Sirk PMS irk / PM ir )1 /(1+θ ir ) M ir where M ir = a Sir ( (40) EirS = ∑k MS ikr (41) PM $ irk = PE $ ik (42) ∑ r ∑ω l S irk −θ ir −1 / θ ir MS irk ) F$r = Equilibrium conditions (43) K ir = K irS (44) ∑ LK (45) DirS = Dir (46) ∑ i ik lir = LSlr MS irk PM $ irk − ∑i Eir PE $ ir − F $ r = Walras’ law (47) WlrE × (∑i LK lir − L lr ) + Rr × (∑i K ir − K rS ) + S ( S r + Fr − I rn − (48) ∑ (∑ r ik ∑PV i ir ir ) + ERr ∑ ik ∑ PD i ir ( Dirs − Dir ) + ( MS irk PM $ irk − ∑i Eir PE $ ir − F $ r ) = MS irk PM $ irk − ∑i Eir PE $ ir − F $ r ) = 34 Appendix A: Global Linked CGE Model A2 Model Notation Sets i industries r, k countries or regions l labour types h Household groups (for Vietnam’s model) Price Variables PM $ irk world price of imports PMS irk domestic prices of imports by sources of imports PE $ ir world price of exports PM ir domestic prices of imports PEir domestic prices of exports PX ir output prices PDir domestic prices of domestically produced products Pir prices of composite goods PN i value added prices by sectors Wir wage rates by sectors WK lir wage rates by sectors and types of labour WlrE average wage rates by types of labour 35 Rir capital rents by sectors Rr average capital rent PI r investment price index PINDEX r consumer price index ERr exchange rate Quantity variables X irS domestic output Lir composite labour demand LK lir labour demand by types of labour K ir capital demand by sector K rS total supply of capital LSlr supply of labour by types Qir composite good demand Dir domestic supply of domestically produced products Eir export supply M ir composite imports MS ir imports by country of origin Cir , C hir household consumption by sectors Cr total demand for household consumption Gir demand for government consumption 36 Gr total demand for government consumption F $r foreign savings Ir total real fixed investment IDir demand for capital goods Vir demand for inventory investment DEPr total depreciation expenditure Nominal variables YH r , YH hr household income YGr government revenue SH r household savings SG r government savings Sr domestic savings I rn nominal fixed investment Parameters a X ir scale parameters in production functions ωX share parameters in production functions ir ρ ir exponent parameters in production functions a Lir scale parameters in labour demand functions ωL share parameters in labour demand functions λir exponents in labour demand functions lir 37 a M ir scale parameters in composite goods functions ωM share parameters in composite goods functions ir δ ir exponents in composite goods functions a Sir scale parameters in import demand functions ωS share parameters in import demand functions irk θ ir exponents in import demand functions a Eir scale parameters in export supply functions ωE share parameters in export supply functions ir γ ir exponents in export supply functions iocf ijr intermediate input coefficient of good j in industry i cpcf ir , cpcf hir household consumption shares cgcf ir government consumption shares invcf ir fixed investment shares invtrir ratios of inventory investment to real production s Pr , s Phr household saving rates s Gr government saving rates tmir import tariff rates teir export duty rates tind ir indirect tax rates 38 Appendix B: A Social Accounting Matrix for Vietnam Table B1: Input-Output table of Vietnam (US$ million) Crops Crops Other agriculture Mining Food processing Light manufactures Heavy manufactures Machinery Utility Construction Services Other agriculture Mining Food processing Light manufactures Heavy manufactures Machinery Utility Construction 299 20 928 54 35 692 223 154 150 18 113 53 285 107 72 344 123 15 14 1185 2600 372 480 83 299 20 48 740 116 226 11 3321 1114 142 125 10 1780 20 141 460 312 1434 117 159 11 1579 1 71 596 853 42 937 0 90 45 187 248 264 13 37 13 888 345 3770 514 121 64 799 Sub-total 2047 1007 1867 4647 6850 4236 2505 885 6515 Labour income Capital income Production taxes Total value added 1173 1621 251 3045 514 894 103 1511 129 800 310 1239 473 299 292 1064 899 423 1334 2656 447 510 225 1182 258 110 77 445 341 119 27 487 1651 1009 273 2933 5092 2518 3106 5711 9506 5418 2950 1372 9448 Total 39 Table B1: Input-Output table of Vietnam (US$ million), continued Services Crops Other agriculture Mining Food processing Light manufactures Heavy manufactures Machinery Utility Construction Services Sub-total Household Investment Government consumption consumption Exports Imports Import Taxes Total 46 41 19 252 464 1005 773 95 67 2503 3306 961 1581 895 4751 9790 2897 912 189 10537 911 1463 32 4522 1364 1120 1567 466 15763 17 0 0 3265 9660 0 0 0 0 2607 1195 140 1524 1949 6588 957 1387 93 1988 284 62 30 1152 2549 6036 5223 494 9041 36 503 648 413 943 0 5092 2517 3106 5711 9506 5418 2950 1372 9448 21855 Sub-total 5264 35823 27209 12942 2607 15413 24879 2546 66975 Labour income Capital income Production taxes Total value added 5712 10727 152 16591 11597 16512 3048 31156 21855 66979 Total 40 Table B2: Income to formal and skilled labour (US$ million) Crops Other agriculture Mining Food processing Light manufactures Heavy manufactures Machinery Utility Construction Services Total Urban group Urban group Urban group Urban group Urban group Urban group Urban group Urban group Urban group Urban group 10 Rural group Rural group Rural group Rural group Rural group Rural group Rural group Rural group Rural group Rural group 10 0.0 0.0 0.0 0.0 0.0 0.9 0.2 4.2 6.4 11.7 1.8 1.3 1.0 4.5 4.8 2.2 6.4 5.3 9.3 5.0 0.1 0.0 0.0 0.0 1.8 0.0 9.2 7.0 19.9 53.6 0.0 0.5 0.0 6.0 5.8 1.1 0.0 4.9 2.1 0.0 0.0 0.0 0.0 0.6 0.8 2.1 4.3 12.2 19.0 34.5 0.0 0.0 0.4 0.2 0.0 1.9 0.7 1.2 3.7 1.1 0.0 0.2 0.1 0.2 0.1 4.0 5.5 13.1 25.3 94.6 1.8 0.5 0.8 0.0 0.0 3.0 5.1 3.8 12.5 10.9 0.0 0.1 0.0 1.4 3.7 2.6 8.3 15.9 39.0 122.2 0.7 3.1 2.3 3.3 4.7 3.7 17.0 8.7 7.9 5.8 0.2 0.0 0.0 1.3 0.7 3.4 2.0 12.1 14.7 59.4 0.0 0.6 0.0 1.2 4.4 3.5 9.3 9.4 14.1 16.8 0.0 0.0 0.0 0.0 2.1 0.0 7.2 11.8 26.2 49.4 0.0 0.0 0.3 2.2 2.7 1.0 0.4 5.1 16.5 3.7 0.0 0.0 0.0 0.0 2.0 11.6 13.5 24.7 41.8 95.0 0.0 0.5 0.0 0.0 1.5 2.8 4.9 6.5 35.7 3.9 0.0 0.0 0.3 0.0 0.8 8.0 6.3 23.6 74.2 290.9 2.6 0.0 0.0 2.2 4.5 10.4 6.1 9.9 11.0 6.3 0.0 0.6 1.5 4.4 18.6 29.7 61.5 102.8 253.9 820.5 4.1 7.5 23.2 22.1 40.4 75.9 115.0 130.3 141.0 122.1 0.3 0.9 2.0 7.8 30.6 62.4 118.2 227.5 520.4 1631.8 11.0 14.1 28.1 41.7 68.7 105.6 165.0 185.3 253.8 175.6 Total 65.2 112.0 82.9 181.6 250.6 152.8 128.8 244.5 457.1 1975.2 3650.8 41 Table B3: Income to informal and skilled labour (US$ million) Crops Urban group Urban group Urban group Urban group Urban group Urban group Urban group Urban group Urban group Urban group 10 Rural group Rural group Rural group Rural group Rural group Rural group Rural group Rural group Rural group Rural group 10 Total Other agriculture Mining Food processing Light ma- Heavy manufactures nufactures 0.0 2.4 2.0 5.8 5.4 7.9 11.0 33.9 9.1 6.1 35.7 26.8 51.2 52.1 57.2 48.4 41.4 50.3 41.3 24.5 0.0 0.0 0.0 0.4 0.0 4.5 18.4 0.0 27.1 7.3 0.0 4.2 10.2 13.9 1.8 12.1 13.7 8.2 6.8 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.4 0.2 0.9 0.6 0.0 0.2 0.0 0.2 0.6 0.4 2.0 1.0 0.0 0.0 0.0 0.0 0.0 0.2 0.0 0.0 5.9 4.1 10.7 22.9 0.0 1.6 0.0 3.1 3.1 4.6 2.0 4.1 14.5 4.2 0.0 0.0 0.3 0.9 1.9 0.0 3.4 18.6 15.8 97.2 3.7 2.3 1.6 11.4 4.4 6.9 6.8 12.3 14.2 10.5 0.0 0.0 0.1 0.1 0.1 0.3 2.0 8.9 15.7 44.1 2.7 0.6 2.3 3.0 3.5 6.1 5.3 5.4 16.5 2.3 0.0 0.0 0.0 0.0 0.0 0.4 1.4 0.4 3.7 18.2 0.0 0.0 0.0 0.4 0.4 0.0 0.0 0.3 0.3 3.4 512.6 128.6 6.5 81.0 212.3 118.9 28.9 42 MachiNery Utility Construction Services Total 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.7 0.0 0.0 0.1 0.5 0.0 2.0 0.2 0.5 3.5 0.0 0.0 0.2 5.1 7.8 4.2 9.2 17.2 34.4 83.8 84.6 10.2 23.1 31.3 20.4 36.8 26.7 41.2 19.8 49.2 16.6 0.6 0.9 3.1 6.6 5.5 18.3 41.8 103.7 157.8 646.2 1.8 2.8 12.6 13.6 18.3 27.5 36.7 37.9 86.4 90.2 0.6 3.5 10.6 21.8 17.1 40.6 101.5 204.2 324.7 929.0 54.2 61.5 109.3 118.8 126.1 134.7 149.2 139.8 232.7 151.6 8.5 521.7 1312.4 2931.4 Table B4: Income to formal and unskilled labour (US$ million) Crops Urban group Urban group Urban group Urban group Urban group Urban group Urban group Urban group Urban group Urban group 10 Rural group Rural group Rural group Rural group Rural group Rural group Rural group Rural group Rural group Rural group 10 Total Other agriculture Mining Food processing Light manufactures Heavy manufactures Machinery Utility Construction Services Total 1.6 0.8 0.2 0.5 0.2 4.2 2.1 0.8 2.7 0.1 10.5 15.9 18.7 14.6 26.2 19.0 24.1 21.2 20.3 6.0 0.0 0.7 5.1 7.1 0.6 0.9 0.0 10.8 3.9 10.4 1.2 0.5 3.4 2.3 15.7 1.0 4.6 7.5 10.5 11.3 0.0 0.0 0.1 0.3 0.7 0.7 1.4 5.1 1.9 4.2 0.6 0.0 0.4 1.1 0.7 3.7 5.0 2.2 0.2 0.8 1.3 0.0 0.4 0.5 1.6 4.5 2.5 8.4 12.9 20.0 0.3 2.9 6.9 6.8 6.1 7.1 6.8 5.1 9.2 5.9 0.1 0.0 0.2 1.7 4.4 2.7 5.3 16.1 16.4 43.7 0.7 3.3 6.3 6.4 10.7 12.1 12.5 21.7 21.5 13.3 0.0 0.8 0.0 0.0 3.3 1.6 0.5 4.4 6.5 14.5 0.6 0.2 2.5 2.6 3.0 5.9 2.5 6.2 12.2 0.2 0.0 0.0 0.0 0.0 0.0 0.0 2.2 4.6 14.0 6.9 0.0 0.0 0.1 0.2 0.7 0.2 3.6 3.3 5.8 0.0 0.0 0.0 0.0 0.0 0.0 4.4 5.8 1.7 12.8 40.0 0.5 0.2 0.0 0.0 0.0 0.0 5.9 1.5 2.5 2.6 0.0 0.7 0.0 1.1 0.0 10.1 1.3 7.5 20.3 42.3 0.4 8.2 7.7 16.0 13.5 4.4 6.1 8.7 9.5 5.7 0.6 1.6 1.1 2.4 6.0 2.9 13.2 30.8 27.4 62.9 2.9 6.9 9.7 14.8 14.7 21.0 23.5 30.1 23.1 10.9 3.6 4.5 7.0 13.7 16.8 32.0 34.3 90.2 118.8 245.0 17.8 38.0 55.9 64.8 91.3 74.5 94.5 107.5 114.9 56.7 189.9 97.3 29.2 109.3 199.0 67.5 41.6 78.0 163.4 306.6 1281.9 43 Table B5: Income to informal and unskilled labour (US$ million) Crops Urban group Urban group Urban group Urban group Urban group Urban group Urban group Urban group Urban group Urban group 10 Rural group Rural group Rural group Rural group Rural group Rural group Rural group Rural group Rural group Rural group 10 Total Other agriculture Mining Food processing Light ma- Heavy manufactures nufactures Machinery Utility Construction Services Total 0.0 4.4 2.0 3.1 3.6 3.6 4.8 52.8 1.3 0.9 22.5 27.7 50.3 29.2 38.5 33.8 25.7 44.5 52.2 4.4 0.0 0.0 0.0 1.0 0.0 1.5 21.6 0.0 50.5 15.4 0.0 13.0 7.2 26.9 0.3 12.7 17.7 1.2 7.1 0.0 0.0 0.0 0.0 0.0 0.0 0.1 0.1 2.5 0.9 0.6 0.0 0.1 0.0 0.3 0.6 0.6 2.5 1.9 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 5.4 1.6 15.2 47.7 0.0 2.7 0.0 4.4 1.5 2.9 1.9 4.1 12.6 1.1 0.0 0.0 0.5 0.4 1.3 0.0 2.8 19.1 20.8 120.0 6.4 2.5 2.6 2.2 4.1 8.2 10.2 13.0 9.3 13.8 0.0 0.0 0.1 0.1 0.1 0.3 1.4 3.2 18.4 39.2 3.3 0.8 1.4 3.5 3.2 5.7 4.9 5.1 15.4 1.7 0.0 0.0 0.0 0.0 0.0 0.4 2.2 0.5 1.1 48.4 0.0 0.0 0.0 0.5 0.5 0.0 0.0 0.4 0.4 4.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.1 0.3 0.0 1.7 0.2 3.1 4.6 0.0 0.0 0.2 2.2 9.9 4.7 9.2 17.4 25.0 86.3 96.5 9.2 23.7 27.5 23.3 35.3 25.9 36.6 22.5 33.9 19.7 1.7 0.3 0.2 1.4 3.2 29.6 37.0 121.2 262.2 1159.6 2.7 2.6 16.5 12.7 19.3 27.9 55.0 70.5 131.4 162.8 1.7 4.9 5.0 15.9 12.9 44.7 92.5 226.0 456.7 1528.3 44.1 73.1 105.6 103.3 103.3 119.3 154.6 166.3 266.9 207.7 405.3 176.1 10.3 101.1 237.2 107.7 58.7 10.0 508.8 2117.7 3732.9 44 Table B6: Total labour income (US$ million) Crops Urban group Urban group Urban group Urban group Urban group Urban group Urban group Urban group Urban group Urban group 10 Rural group Rural group Rural group Rural group Rural group Rural group Rural group Rural group Rural group Rural group 10 Total Other agriculture Mining Food processing Light ma- Heavy manufactures Nufactures 1.6 7.7 4.2 9.3 9.3 16.6 18.1 91.8 19.5 18.9 70.6 71.7 121.2 100.5 126.7 103.4 97.7 121.3 123.1 39.8 0.1 0.7 5.1 8.5 2.4 7.0 49.2 17.8 101.4 86.6 1.2 18.2 20.8 49.0 23.5 27.0 35.9 21.9 26.5 11.3 0.0 0.0 0.1 0.9 1.5 2.9 6.2 20.1 22.7 39.9 0.6 0.3 0.8 1.9 2.0 6.7 10.3 6.2 3.9 2.0 1.3 0.2 0.5 1.0 1.7 8.5 19.4 27.2 64.1 185.2 2.1 7.7 7.7 14.4 10.7 17.6 15.8 17.1 48.8 22.0 0.1 0.1 1.0 4.4 11.4 5.3 19.8 69.6 92.1 383.1 11.4 11.2 12.8 23.3 23.8 30.9 46.5 55.7 52.9 43.5 0.2 0.8 0.2 1.5 4.2 5.7 5.8 28.6 55.3 157.2 6.6 2.2 6.2 10.2 14.1 21.1 22.0 26.1 58.1 21.0 0.0 0.0 0.0 0.0 2.1 0.7 12.9 17.3 45.0 123.0 0.0 0.0 0.4 3.3 4.2 1.2 4.0 9.2 23.1 11.4 1173.0 514.0 129.0 473.0 899.0 447.0 258.0 45 Machinery Utility Construction Services Total 0.0 0.0 0.0 0.0 2.0 16.1 19.3 26.4 54.6 136.8 0.5 0.6 0.2 0.8 1.5 6.5 11.1 11.7 46.4 6.5 0.0 1.1 7.5 18.8 9.6 36.5 42.1 90.5 264.6 514.3 22.5 54.9 66.5 61.9 90.1 67.5 89.9 60.8 103.6 48.3 2.9 3.3 6.0 14.7 33.2 80.5 153.6 358.5 701.3 2689.2 11.6 19.8 62.1 63.2 92.8 152.4 230.2 268.8 381.9 386.0 6.3 13.8 24.7 59.2 77.4 179.6 346.5 747.9 1420.6 4334.1 127.0 186.7 298.8 328.6 389.4 434.2 563.3 598.9 868.3 591.7 341.0 1651.0 5712.0 11597.0 Table B7: Total capital income (US$ million) Crops Urban group Urban group Urban group Urban group Urban group Urban group Urban group Urban group Urban group Urban group 10 Rural group Rural group Rural group Rural group Rural group Rural group Rural group Rural group Rural group Rural group 10 Total Other agriculture Mining Food processing Light ma- Heavy manufactures Nufactures 4.9 2.8 6.8 7.2 6.6 15.5 15.9 15.5 18.1 14.3 115.9 141.6 150.1 169.4 179.5 189.0 186.8 177.4 137.7 65.9 1.6 1.5 3.3 4.2 6.9 9.3 12.4 11.2 21.4 27.1 55.8 69.7 78.8 85.4 86.1 95.0 96.8 84.0 92.6 51.1 0.6 7.4 0.5 1.2 8.4 26.1 7.0 21.4 52.3 35.8 27.3 35.7 46.5 73.0 71.6 60.8 87.4 69.6 83.9 83.5 0.0 0.3 0.4 0.8 1.9 2.8 7.8 7.8 12.5 75.4 2.8 10.8 11.1 16.2 22.1 20.6 19.1 24.3 25.9 36.5 2.5 0.3 0.6 1.8 2.6 4.4 9.5 14.5 48.0 106.2 4.4 12.0 18.7 24.1 22.4 34.1 25.6 37.8 34.2 19.4 0.0 0.0 0.5 0.1 0.3 3.5 8.2 35.3 34.7 168.4 1.9 7.0 11.4 14.7 23.2 51.3 28.1 53.2 46.1 22.1 0.0 5.9 0.0 0.0 0.0 4.0 3.9 2.1 23.8 53.7 1.0 0.0 0.0 0.9 0.7 4.0 4.2 2.1 0.0 3.7 1621.0 894.0 800.0 299.0 423.0 510.0 110.0 46 Machinery Utility Construction Services Total 0.0 0.0 0.0 0.0 0.0 21.1 0.0 3.3 0.0 1.6 0.0 6.0 0.0 0.0 20.8 5.3 0.0 49.9 11.2 0.0 0.0 2.1 8.1 0.0 0.0 1.7 16.7 116.8 69.4 464.0 14.9 5.4 5.2 34.6 19.2 24.9 44.4 92.5 36.8 52.1 23.4 32.5 60.0 84.4 137.4 267.9 398.1 703.4 1213.4 3203.5 74.2 173.5 277.5 298.8 445.5 500.2 616.6 666.9 786.8 763.0 33.1 52.8 80.3 99.5 164.0 356.2 479.5 931.3 1493.5 4150.0 298.1 461.7 599.4 717.2 891.1 985.1 1109.0 1257.6 1255.3 1097.4 119.0 1009.0 10727.0 16512.0 Table B7: Household expenditure (US$ million) Crops Urban group Urban group Urban group Urban group Urban group Urban group Urban group Urban group Urban group Urban group 10 Rural group Rural group Rural group Rural group Rural group Rural group Rural group Rural group Rural group Rural group 10 Total Other agriculture Mining Food processing Light ma- Heavy maNufactures nufactures Machinery Utility Construction Services Total 3.2 3.4 5.3 6.7 9.8 15.6 20.9 30.3 47.7 94.7 65.4 74.3 76.3 78.0 77.6 74.9 72.3 67.4 56.2 30.9 2.4 3.5 6.1 9.0 15.8 25.3 39.1 67.7 113.1 272.4 40.9 65.8 79.6 92.1 102.1 108.8 114.4 116.0 112.8 76.0 0.1 0.1 0.2 0.3 0.3 0.6 0.6 0.7 0.8 0.5 3.0 3.3 3.2 3.4 3.3 3.1 3.1 2.6 1.9 0.8 7.8 11.2 18.6 25.9 45.8 70.9 109.7 179.8 331.9 1011.1 144.6 204.8 246.9 276.4 295.6 311.9 338.8 343.4 324.8 222.2 2.0 3.1 5.2 6.8 10.9 20.5 28.7 46.6 92.0 292.8 45.9 64.6 75.1 82.2 95.7 98.0 105.9 104.4 101.3 82.6 2.1 3.0 4.1 6.6 11.2 18.0 28.3 47.8 82.6 243.6 31.0 48.4 57.5 67.2 73.3 80.0 86.5 85.3 84.4 59.3 0.1 0.2 1.0 1.2 3.4 6.7 16.0 32.5 89.1 509.8 4.3 8.1 12.5 19.0 29.9 49.0 85.0 138.1 223.1 337.8 0.7 1.0 1.6 2.3 4.1 8.1 14.0 26.9 51.5 152.2 6.3 9.6 12.5 15.3 18.2 21.4 26.7 30.5 34.6 28.4 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 15.2 23.9 44.9 70.1 111.3 229.2 366.6 733.9 1445.7 4725.8 251.6 399.6 517.7 659.5 785.6 878.5 1039.1 1164.0 1313.2 987.5 33.6 49.3 87.1 128.8 212.6 394.8 624.0 1166.2 2254.4 7302.8 593.0 878.6 1081.3 1293.0 1481.3 1625.9 1871.8 2051.7 2252.3 1825.5 911.0 1463.0 32.0 4522.0 1364.0 1120.0 1567.0 466.0 0.0 15763.0 27208.0 47 Appendix C: The Elasticities of Substitution Table C1: The Elasticity of Substitution in Trade and Production Functions Elasticity of substitution in the production function Crops Other Agricultural activities Mining Food Processing Light manufactures Heavy manufactures Machinery Utility Construction Services 0.24 0.22 0.20 1.12 1.26 1.26 1.26 1.26 1.40 1.38 48 Elasticity of substitution in the composite goods function 2.67 2.11 5.26 2.49 3.46 3.15 3.84 2.80 1.90 1.90 Elasticity of substitution in the import demand function 5.17 4.02 12.69 5.04 7.20 6.39 7.83 5.60 3.80 3.80 ... liberalization As discussed in the previous section, the impact of the trade liberalization and regional economic integration on Vietnam? ??s economy is generally positive The regional integration is... notation 31 Appendix B: The social accounting matrix for Vietnam 39 Appendix C: The elasticities of substitution 48 Regional Economic Integration and its Impacts on Growth, Poverty and Income Distribution:. .. model The discussion will continue in section analyzing the trade liberalization and regional economic integration in Vietnam It is followed by section examining poverty and income- distribution