Transition to an open economy : an analysis of Vietnam's export performance 1986 - 2000 : a thesis presented in partial fulfilment of the requirements for the degree of Master of Business Studies in Economics at Massey University

Abstract

External reform is a large component of Vietnam's overall transition to a market-based economy which officially started in 1986. This study analytically and empirically examines Vietnam's export performance from 1986 to 2000. The spectacular growth in both exports and imports and significant changes in Vietnam's export composition and market structure since 1986 are delineated. Exports, as a demand source, are found to contribute an increasing part of the overall output growth. Vietnam's changing Revealed Comparative Advantage (RCA) indicates a move toward manufactured exports. Increased diversification is apparent within Vietnam's export destinations, but less diversification is evident in its export composition. A Constant-Market-Share (CMS) analysis of the sources of non-oil export growth over the period 1985-1999 shows that Vietnam's exports concentrated on commodities with import demands growing more slowly than the average of all commodities. From 1985 to 1995, Vietnam's exports benefited from increasing penetration into relatively fast growing Asian markets, but the Asian crisis of 1999 effectively derailed Vietnam's export expansion. Inability to adapt export composition and market structure to changes in world conditions affected Vietnam's increasing share in world exports. Vietnam's increased competitiveness, as reflected in the micro-share effects, is found to be the key to observed export growth, representing 118 percent of the total gain in market share from 1985 to 1999. The study further tested observed composition of manufactured exports to three selected groups of Vietnam's trading partners - the world, the OECD and the Asian developing countries - in the light of the Ricardian and the Heckscher-Ohlin theories. Empirical results provide no evidence that manufactured exports to any of these three groups of trading partners is positively correlated with labour productivity. The Heckscher-Ohlin contention that Vietnam should export relatively labour-intensive goods is supported by the pattern of Vietnam's manufactured exports to the OECD and the world, but not confirmed by its pattern of manufactured exports to the Asian developing countries.