Input-output analysis of Vietnamese structural changes (1989-1995)

The pattern and sequencing of economic reform in transition economies have become a major issue of interest since the late 1980s. While Eastern Europe and especially the Soviet Union have experienced difficulties in their transition to a market-based economy, Vietnamese reform has proceeded relatively smoothly and resulted in significant improvement in economic performance and macroeconomic stabilization. The purpose of this paper is to analyze the distinctive features of the gradual reform process in Vietnam, and focused on the empirical study of the significant impacts of structural changes and their characteristics in its transition to a market-oriented economy. This paper then proceeds to a discussion of Vietnamese reform utilizing inter-industry analysis. In this analysis, a series of input-output tables are used, in which 25 sectors grouped into 9 major industries of 1989 and 1995 are classified. These input-output tables demonstrate how the output of each industry is distributed among industries and sectors of the economy. At the same time it shows the input to each industry from other industries and sectors. Derived and listed are the important coefficients and linkage effects for inter-industry relation analysis. The results of inter-industry analysis by using a series of input-output tables are as follows: 1) The ratio of domestic production in total supply of output declined due to increased imports; 2) The share of manufacturing production in domestic output and backward linkage effect to other sectors have declined in the open economy; 3) The agricultural sector has continued to play a greater role in overall production and exports than does the manufacturing sector. We find that the key to achieving sustained development in Vietnam will be the ability of the agriculture sector to yield sufficiently large agricultural surpluses on a consistent basis and then utilize such surpluses for productive investment in the underdeveloped industrial sector. The non-agricultural sector, utilizing this increased investment, must grow fast enough to absorb Vietnam's rowing labor surplus. Thus, to ensure sustained growth, Vietnam mu