Relationship between sectoral exports and economic growth A time series analysis for Vietnamese fishery sector 1997-2008

UNIVERSITY
OF
ECONOMICS
HO
CHI
MINH CITY
VIETNAM
INSTITUTE
OF
SOCIAL STUDIES
THE
HAGUE
THE
NETHERLANDS
VIETNAM-
THE NETHERLANDS
PROJECT
FOR
M.A. ON DEVELOPMENT ECONOMICS
RELATIONSHIP BETWEEN SECTORAL
EXPORTS AND ECONOMIC
GROWTH-
A TIME SERIES ANALYSIS
FOR
. VIETNAMESE FISHERY SECTOR
1997 - 2008 .
BQ
GIAO
DVC
£JAO
TAO

TRlJONG
HQC
KINH
r{rP.HCM
THU
9
VIEN
.
By
NGUYEN ANH TRAM
SUPERVISOR: DR. NGUYEN MINH DUC
l13
MASTER
OF
ARTS IN ECONOMICS
OF
DEVELOPMENT
HO
CHI MINH CITY, DECEMBER 2009
CERTIFICATION
"I certify that the substance
of
this thesis has not already been submitted for any
degree and has not been currently submitted for any other degree.
I certify that the best
of
my knowledge and help received in preparing this thesis and
all sources used have been acknowledged in this
thesis."
NGUYEN ANH

TRAM
Date: 16/12/2009
ii
ACKNOWLEDGMENTS
No man is an island, entire
of
itself-
John Donne
The work
of
this thesis represents the concerted efforts
of
many individuals.
One
of
the features is collaboration and certainly it required many acts
of
collaboration by quite a few people in order to come to fruition.
Firstly, I am heartily thankful to my supervisor, Dr. Nguyen Minh Due, whose
encouragement, supervision, and support from the preliminary to the concluding level
enabled me to develop an understanding
ofthe
subject.
Secondly, I would like to thank Prof. Karen Jansen, Dr. Nguyen Trong Hoai,
and Dr. Tran Tien Khai for serving on my thesis committee, valuable suggestions,
invaluable encouragement, insightful comments, and hard questions.
I thank my friends, thirdly, for the stimulating discussions, and for all the help
and fun we have had during the master course. Besides, I also give many thanks to all
project teachers and staffs in Ho Chi Minh City.
Further, I would like to express my sincere gratitude to my parents for

patiently putting up with a daughter who could never get enough
of
school.
Lastly, I offer my regards and blessings to all
of
those who supported me in
any respect during the completion
of
the project.
111
ABSTRACT
Numerous studies in literature have tried to test the relationship between exports,
especially sectoral exports, and economic growth. This paper examines the
relationship with evidence from fisheries exports
of
Vietnam during 1997 to 2008.
The contribution
of
fishery sector in Vietnamese Gross Domestic Products (GDP)
may be mathematically calculated with statistical figures. However, the effects
of
fishery exports on the economic growth are yet
to
be thoroughly studied in an
econometric approach. Descriptive and time series analyses in this thesis present
positive effect
of
fishery exports on the Vietnamese economic growth in long run. The
modern econometric approach with stationary and co-integration tests and vector error
correction models used in this study also allows forecasting a persistence

of
the
effects
of
fishery exports on Vietnamese GDP despite
of
different seasonal phase
business. For the long run estimation, a double increase in its fishery exports value
would raise the
GDP by
7%;
This has a great economic meaning in developing
process
of
the economy. In reverse side, Vietnamese fishery exports would increase
by 5.2% with
10%
increase in its GDP. Confirming
the·
role
of
fishery exports in
economic growth, it
is
necessary for the sector to improve its competitive capacity.
Firstly, it should continue to obey international standards, keep negotiating to get
benefits from existing regulations, improve domestic institutional management to
attract more foreign investment. Particularly, the stakeholders
of
Vietnamese fishery

exports should concern some main problems such
as
product's quality, marketing
strategy, production cost, trade barrier and tariff as well.
IV
ADF
APEC
APFIC
BTA
CPI
EU
FAO
FISTENET
GDP
GNP
GSO
ICT
OLS
SBV
USD
VECM
WTO
ACRONYMS AND INITIALS
Augmented Dickey-Fuller
Asia-Pacific Economic Corporation
Asia-Pacific Fishery Commission
Bilateral Trade Agreement
Consumer
Price Index
European Union

Food
and Agriculture Organization
Fisheries Scientific Technological Economic Information
Gross Domestic Product
Gross National Product
General Statistical
Office
Information & Communication Technology
Ordinary Least Squares
States Bank
of
Vietnam
The United States Dollars
Vector Error Correction Modeling
World Trade Organization
v
TABLE OF CONTENTS
LIST
OF
TABLES vii
LIST
OF
FIGURES viii
Chapter 1.
INTRODUCTION
····················································o••·····························
1
1.1.
PROBLEM
STATEMENT

• • •
1
1.2.
SCOPE
OF THE STUDY

3
1.3.
RESEARCH OBJECTIVES

3
1.4. RESEARCH QUESTIONS • •.•.• • • • 4
1.5.
RESEARCH HYPOTHESIS

4
1.6. METHODOLOGY
AND
DATA COLLECTION

4
1. 7.
THE
STRUCTURE OF THE THESIS

5
Chapter 2. LITERATURE REVIEW 6
2.1.
THE
RELATIONSHIP BETWEEN ECONOMIC GROWTH

AND
TRADE

6
2.2.
THEORETICAL
AND
EMPIRICAL BACKGROUNDS
OF
SECTORAL EXPORTS

8
2.3.
WHY
FISHERY SECTOR WAS CHOSEN FOR THIS STUDY?

11
2.4.
AN
OVERVIEW
OF
VIETNAM FISHERY SECTOR

15
2.5. BILATERAL TRADE AGREEMENT, THE UNITED STATES
ANTI-DUMPING
MEASURES
AND
VIETNAM FISHERY EXPORTS IN THE PERIOD
1997-

2008
18
2.6.
THE
EXCHANGE RATE REGIME
AND
VIETNAM FISHERY EXPORTS
1997-2008
19
2.7.
CPI
(CONSUMER
PRICE
INDEX)
AND
VIETNAM FISHERY EXPORTS
1997-
2008 20
2.8. DEFINITIONS •.•.• ; •.• •.• •.•.•.• • • •
21
2.8.1. Fishery production : 21
2.8.2.
Export

21
2.8.3.
Export
growth 21
2.8.4.
Economic

Growth 21
2.8.5. Consumer Price
Index-
CPI

22
2.8.6.
Antidumping
measurement 23
Bilateral Trade
Agreement
(BTA) 24
2.9.
EMPIRICAL
ESTIMATION RELATED TO EFFECTS OF FISHERY EXPORTS ON ECONOMIC GROWTH

26
2.9.1. Dependent variable
26
2.9.2. Independent variables
26
2.9.2.1. Fishery Exports 26
2.9.2.2.
Labor

27
2.9.2.3. Exchange
rate

27

2.9.2.4. Consumer Price Index
28
Chapter 3. METHODOLOGY 29
3.1.
MODEL
SPECIFICATIONS • • • • •.•.• • • •.• •.• •.•• • 29
3.2.
DATA DESCRIPTION

;

31
3.3. DATA FOR VARIABLES

31
3.4. DUMMY VARIABLES

32
Chapter 4. RESULTS AND DISCUSSION 33
4.1 DESCRIPTIVE ANALYSIS • •.••.• , • • • 33
4.2. ECONOMETRIC ANALYSIS .• •.• • •.• • ••.•.•• 37
4.2.1. Stationary testing
of
real variables
37
4.2.1.1. Unit root tests for log(YGNP) : 37
4.2.1.2. Unit root tests for log (REXR) .38
4.2.1.3.
Unit root test for log (XGNP) 39
4.2.2. Two stage least square regression

39
Chapter
5. CONCLUSIONS AND SUGGESTIONS 47
REFERENCES 49
Vl
LIST
OF
TABLES
Table
1.1
Total Imports And Exports
Of
Vietnam
In
U.S
Dollars 1
Table
2.1
Estimate
Of
Overseas Filipino Workers (December 2004)
•••••••• •.••••••
9
Table 2.2 Vietnam Exports
Of
Tra
And Basa Fish (Tons)
24
Table
4.1

Descriptive Statistical Spreadsheet
Of
All Variables 36
Table
4.2
Covariance Matrix Spreadsheet
Of
All Variables 36
Table
4.3
Correlation Matrix Spreadsheet
Of
All Variables 36
TABLE 4.4A DF-GLS UNIT ROOT TEST
FOR
LOG
(YGNP) 38
TABLE 4.4B
ADF
UNIT ROOT TEST
FOR
LOG
(YGNP) 38
TABLE4.5ADF-GLS
UNITROOTTESTFORLOG(REXR)
38
TABLE 4.5B ADF UNIT ROOT TEST
ON
LOG (REXR) 38
TABLE 4.6A DF-GLS UNIT ROOT TEST

FOR
LOG
(XGNP)
;·;
39
TABLE 4.6B
ADF
UNIT ROOT TEST
FOR
LOG
(XGNP) 39
Table 4. 7 OLS
of
Log(YGNP) 40
Table 4.8 The Regression Result
For
Equation 8
In
The Second Stage
•••••••••••••••
41
Table 4.9 First Difference Regression
For
Log(YGNP)
••••••••••••••••••••••••••••••••••••••••••
42
Table 4.10 First Difference Regression
For
Log(XGNP)
42

Table
4.11
Johansen Cointegration Test Summary
43
Table 4.12 Vector
Error
Correction Estimates
••••••••••••••••••••••••••••••••••••••••••••••••••••••
44
Vll
LIST
OF
FIGURES
Figure
2.1
Reported
Aquaculture
Production
In
China
(From
1950)
•••••••.•.••••••••
10
Figure
2.2
Vietnam's
Oil
Production
And

Consumption,
1998-
2008*
• ••••.••••••
11
Figure
2.3
Top
Asia - Pacific Oil
Producers,
2006* 12
Figure
2.4
Vietnam's
Primary
Fishery
Export
Products
In
2006 (Value Basis)
.14
Figure
2.5
Vietnam's
Fishery
Products
Export
Market,
2006 (Value Basis)
•••••••

17
Figure
2.6
Time
Line
Of
Standard
US
Antidumping
Investigation
•••••••••••••••••••••
23
Figure
2. 7
Monthly
Exports
Of
Frozen
Fish
Fillets
To
The
US,
••• • •.•••••• • •••••
24
Figure
2.8 Values
(US$
Millions),
Rates

Of
Growth
(Percentages),
And
Shares
In
Total
Exports
(Percentages)
Of
Vietnam's
Exports
To
The
U.S, 2000-2006
.•
25
Figure
4.1
GDP
In
Vietnam, 1997 - 2008
(Quarterly)
33
Figure
4.2
Fishery
Exports
In
Vietnam, 1997 - 2008

(Quarterly)
34
Figure
4.3
Exchange
Rate
VND/USD, 1997 - 2008
(Quarterly)
•••••••••••••••.•.••••••••••
34
Figure
4.4
Vietnam
Consumer
Price Index, 1997 - 2008
(Quarterly)
••••••••••••••••••
35
Figure
4.5 Us
Consumer
Price
Index,
1997-
2008
(Quarterly)
35
viii
Chapter 1. INTRODUCTION
1.1. Problem statement

World trade has been expanded more and more, with global exports growing
from $84 billion USD in 1953 to $6,272 billion USD in 2002 (HM Treasury, 2004).
The figures demonstrate an increasing economical interdependence in the world
nowadays relative to fifty years ago. However, the most prominent role in the increase
is
of
developing countries and emerging markets; exports from developing countries
as a whole accounted for 29 percent
of
world trade in 2001.
Economic theory and empirical evidence also showed that economies with
trade more tend to grow faster. Therefore, the fact that international trade or exports
are always promoted by the Vietnam government is not an exception.
Prior to the
collapse
of
the Soviet Union, most
of
Vietnam's trade was with the former Soviet
Union and Eastern European countries. Since 1991, the country's trade has diversified
significantly.
It
has also expanded dramatically, reflecting a globalization process
of
the Vietnamese economy. In 1999, its openness (exports plus imports divided by
GDP) reached the level
of
84.5 percent and now (2009) about 170 percent, a useful
indicator for an increasing global integration
of

a country

Table 1.1 Total imports and exports
of
Vietnam in U.S dollars
Trade (expressed in millions
of
US$) : Vietnam Exports Imports
1994
4,054 5,825
1995
5,448
8,155
1996
7,255
11,144
1997
9,184 11,592
1998
9,360 11,494
Source: United Nations. Monthly Bulletin
of
Statistics (September, 2000)
Although Vietnam has consistently had trade deficits, the amount has
narrowed with the boom in Vietnamese exports. For example, in 1989 exports were
only 73.7 percent
of
imports. In 1999, exports had risen to be 98.9 percent
of
imports.

In
the period from 1997 to 2007, Vietnamese economy is prosperous in the context
of
global integration; especially Vietnam joined APEC at the .end
of
1998 and signed the
bilateral trade agreement with the United States in
2001. Since the milestones,
1
Vietnam's exports has continuously grown, leading to a remarkable increase in its
international trade and openness.
However, the global economy began to have the indicators
of
a crisis from the
early months
of
2008.
It
was caused by regression
of
the real estate market in
America, and created a serious financial crisis in the United States. The crisis spread
out over the world, from Europe, Latin America, Middle East, Russia, to Asia and
Vietnam as well. Although Vietnam has been affected by the crisis later than the
others, it stills has faced some problems because
of
its wide economic openness.
An obvious effect
of
the global crisis

is
speedy decline
of
the world's import
demand. That means Vietnam's exports in coming years will be suffer because
Vietnam's economy is likely to follow an export-oriented growth. In Vietnam's
export structure, although crude oil still stand on the first position in export revenues,
labor intensive products such as agricultural and fishery products are very important
exported products
of
the country. In these products, fisheries are prominent because
fish resources represent natural capital and are a potential source
of
sustainable wealth
for Vietnam. This wealth provides the opportunity for such resources to make an
ongoing contribution
to
economic growth, poverty alleviation and people livelihoods
as
well (Due, 2008a, 2009a). Fishery exports also make significant contributions
to
the national economy through the generation
of
foreign exchange derived from
international trade. Exports
of
fishery products have grown rapidly during last ten
years. In fact, the aquatic products once contributed approximate
10%
of

whole
national export revenues (Due, 2009a).
Otherwise, income multiplier effects can potentially "trickle up" to the
national economy ensuring that fisheries can support national economic growth
through contributions to GDP. Although the Vietnamese fishery sector contributes
to
national GDP typically varied by 2.5-4.0 percent, it also generates a wide range
of
tax
revenues, contributing to the national budget. Moreover, the major share
of
fishery
exports have strong backward linkages with the other sectors both in terms
of
primary
and value added commodities.
Unfortunately, with high fluctuation
of
prices and the 2008 global crisis,
global demand for fishery products may decline, and in its tum fishery exports may
affect Vietnamese GDP growth rate because the country relies much upon exports for
economic growth.
2
Therefore, there exist some questions to study such as how fishery exports
effect Vietnam's economic growth in recent yeats and whether the effect
is
positive.
To
get answers, the research will start by estimating an econometric model in which
fishery exports revenue is the interested explanatory variable and real GDP is the

dependent variable.
Some other controlling variables are included, such as exchange
rate,
CPI, CPI
of
the US, labor force, and dummy variables representing for annual
quarters,
2001 Bilateral Trade Agreement between the US and Vietnam, 2003 anti-
dumping tariff levied on Vietnamese catfish exported to the US. Furthermore, this
study will employ the econometric results to figure out some suggesting for national
economic development policies. The authorities may also use these results to refine,
buttress, or in some ·cases, change their qualitative and subjective judgments in
planning policies and strategies
of
development.
1.2. Scope
of
the study
The first part
of
the study provides a brief and clear statement
of
the status and
trends in the fishery exports in Vietnam, the major issues and challenges, focusing on
fishery export data
of
a period 1997 - 2008 alongside with a short review
of
previous
studies, investigation and the expectations.

The second part and also the main part
of
the study will be devoted to examine
the relationship between fishery exports and economic growth
of
Vietnam.
It
will also
suggest priorities and projected resource requirements, and the ways in which the
suggestion might be practicized
as
Vietnam continues its journey in the future.
1.3. Research objectives
Although there
is
lack
of
empirical studies on a clear relationship between
fishery exports and economic growth, Vietnamese government has tried in practice to
promote fishery export growth to boost
up
its economy. This thesis, therefore,
examines the fishery export patterns
of
Vietnam's economy to figure out its effects on
the economic growth based on time series data in the period 1997 to
2008 to give
some recommendations to improve and adjust fishery export policies in particular and
trade policies in general. Through these adjusted and improved policies, the
government can help the economy overcomes the global crisis in short run as well

as
stimulates stability economic growth in long run in Vietnam. In short, specific
objectives
of
this thesis are to examine: (1) the relationship between fishery exports
and economic growth, and (2) the persistence
of
the effects
of
exports during different
phases
of
the seasonal business
3
1.4. Research questions
With the mentioned objectives, this thesis would provide evidence to answer
two following questions:
1.
Has Vietnam's economic growth been affected by fishery exports?
2. Has the persistence
of
the effects
of
fishery exports different phases
of
the
seasonal business?
Obviously, fishery exports and economic
groWth
have a relationship.

However, it is not clear that how Vietnam's economic growth over the decade had
been affected by sectoral exports like fisheries. In literature, effect
of
sectoral exports
on economic growth had been documented by Awokuse (2003) for Canada case, Anh
(2008) for Vietnam case, and Thompson (2009) for Greece case.
1.5. Research hypothesis
The hypotheses for this research, therefore, include:
1.
A causality relationship between the fishery export and economic growth.
2. Effects
of
fishery exports on the economic growth in the duration
of
1997-2008
1.6. Methodology
and
data
collection
Because time series data
of
socio economic data is usually non-stationary in its
level value, it is necessary for the research to check the stationarity
of
the variables in
the first step. The aim
of
this step is to verify whether the series had a stationary trend,
and
if

it is non-stationary, orders
of
integration need to be established. To check the
stationarity, all the variables are firstly examined through graphical inspection
of
their
time series plots. All the series are then transformed into logarithms and rates
of
growth
of
all the variables are approximated by first differences
of
the logarithms
of
the corresponding variable value
of
quarters
of
years in the period. The Dickey-Fuller
(DF) and the augmented Dickey-Fuller (ADF) tests are applied for testing the level
of
integration
of
the variables. These tests are to determine whether the variables follow
a stationary trend.
If
the series are non-stationary, the research can not go further in
the use
of
classical methods

of
estimation such as OLS because it causes the spurious
relationships and thus the results would be meaningless. In case the series are non-
stationary around their averages, the traditional suggestion was to differentiate the
series because this transformation may lead to stationary in the series. Thus, the
research can apply conventional econometrics (Granger and Newbold, 1974).
Cointegration test is applied in the fifth step. The test is used to estimate the long-run
relationship between the two variables, such as
GDP and fishery exports,
it
is
4
necessary only to estimate a dynamic model, and check whether the residuals from the
regression are stationary. Lastly, the research estimates an error correction model after
using two-step
OLS procedure, which provides information about the short-term
dynamic responses
of
the variables. The method is straightforward and involves
regressions using stationary time series.
The data used in this study is quarterly and cover the period
of
1997:1 to 2008:4.
It
is
obtained from Vietnamese General Statistics
Office for values
of
its GDP, CPI, and
labor force. Data

of
exchange rate, fishery exports is collected from websites
of
www.oanda.com and www.fistenet.gov.vn, respectively, while CPI values
of
the US
are collected from the website
of
U.S. Department
of
Labor, Bureau
of
Labor
Statistics, Washington, D.C. 20212(
The Eviews software will be used for econometric regression in this research. This
software is a widely used econometrics program, so it can provide more efficient and
reliable results.
1.7. The structure
of
the thesis
The thesis includes five chapters:
Chapter 1 - Introduction
Chapter
2-
Literature review
Chapter 3 - Methodology
Chapter 4 - Results and discussions
Chapter 5 - Conclusions and suggestions
Chapter two reviews some theoretical frameworks
of

growth and trade. Throughout
these this paper will clarify why sectoral export is very important for economic
growth, especially, fishery exports. In addition, the chapter also analyzes some related
empirical research extracting the relationship between sectoral export and economic
growth.
Chapter three introduces models based on these the model specifications
of
this study
will be built, together with data sources and some treatments as well as calculations
of
data.
Chapter four is the most important part, in which empirical results will be presented
through descriptive analysis and econometric analysis
Chapter five concerns conclusions and from these try to point out suggestions that
will help fishery exports grow in quantity and quality sides;
5
Chapter 2. LITERATURE REVIEW
2.1. The relationship between economic growth and trade
The relationship between economic growth and trade was focused by many
economists when trade comes into being. With the development
of
trade, it has been
the debate
of
academic economic research because
of
its impact on economic growth.
The emergence
of
trade and its development, to a certain extent, were closely related

with economic growth. In a way, trade indeed promotes economic growth
of
a
country:
According to theory, there are links between trade and economic growth and
these were discussed for over two centuries. But, controversy still persists regarding
their real effects. Adam
Smith with the classical school thought can be traced as the
initial wave
of
favorable arguments with respect to trade. Next, this work was
subsequently enriched by David Ricardo with comparative advantage, Torrens, James
Mill and John
Stuart Mill in the first part
of
the nineteenth century. They believed that
trade promoted economic growth in two ways or trade improved the optimal
distribution
of
resources and productivity consequentially and then stimulated the
economic growth; on the other hand, one country could gain raw materials and
equipments which it could not produce. Those provided the material basis for
economic development. These theories interpreted the relationship in some respects
but ignored that the international environment is complex and ruleless.
Since then, the
justification for free trade and the various and indisputable benefits that international
specialization brings to the productivity
of
nations have been widely discussed and are
well documented in the economic literature (Bhagwati, 1978; Krueger, 1978).

Next, Lewis as the representative
of
the structural school developed the dual
economy model theory. For this theory, a developing economy is parted into capitalist
part (the industry sector) and non-capitalist part (the traditional agricultural sector).
The capitalist sector was bound to promote the growth
of
the economy through
absorbing and accumulating surplus labor from non-capitalist sector.
If
the capitalist
part produced the exporting goods and the traditional part produced the importing
goods, trade would undoubtedly expand the market and demand
of
products in
capitalist part and reduce the wages
of
labor. Then it would further increase the profit
and accumulation
of
the part and promote economic growth (Chen, 2009).
6
In addition, Corden (1972) with his theory
of
trade protection represented for
the effect school. Corden recognized that trade
of
a country would affect
macroeconomic side from 5 aspects: the revenue effect, the effect
of

capital
accumulation, the substitution effect, the income distribution effect and the effect
of
the weighted elements. This means that the impact
of
trade on economic growth was
strengthened gradually
as
the development
of
economy with cumulation
of
the above
effects.
Lastly, the work
of
Romer (1986) and Lucas (1988) began a new wave
of
research on economic growth, and it was called endogenous growth theory. The
endogenous growth theory proposed a variety channels through which steady-state
growth is reached endogenously. This theory pointed out that the growth
of
developed
countries would be attributed
to
the improvement
of
productivity. Based on this fact,
the theory made a series
of

models
to
study the relationship among international trade,
technological progress and economic growth. These models have focused on different
variables, such as degree
of
openness, real exchange rate, tariffs, terms
of
trade and
export performance, to verify the hypothesis that open economies grow more rapidly
than those are closed (Edwards, 1998). They viewed that trade could promote
economic growth through technology spillover and external stimulation. The owners
of
advanced technologies, whether they had intention or no intention, would gradually
make other countries learn these technologies through trade. Trade gives more
frequent exchange
of
information and increased competition, which forced every
country
to
develop new technologies and products. The mutual promotion relations
between trade and technical change could ensure a long-term economic growth.
Moreover, although the theoretical literature has frequently focused on the
relationship between trade and economic growth, the interesting phenomenon is that
'empirical examinations have typically examined the relationship between exports
and growth' (Levine and Renelt, 1992, p.953). Besides, the role
of
export
performance in the economic growth process was examined in studies in the late
1960s. In these studies, total exports were pointed out that there are direct or indirect

effects
to
output via some elements. Definitely, these studies were based on things
which trade theorists originally conceived
of
a national economy and national
markets.
7
2.2. Theoretical and empirical backgrounds
of
sectoral exports
In reality, somewhere on the periphery
of
things, there were also some
industries enjoying an international comparative advantage, recently. That sector
could produce world class commodities for a modest export sector. This sector
communicated and traded with buyers in other countries. Now the national economy
has gone far down the path
of
integration with other countries through trade markets.
There is no single, peripheral trade sector. Trade sectors intermingle extensively with
all the other sectors
of
the national economy. Markets are not national, they are
global. The modem theory
of
trade has been designed as well as proponed by Paul
Krugman, the leader in this school. Therefore, trade trend
of
countries, today, are try

to develop key industry for export in order to get gain or economic growth. In other
hand, this trend is also called sectoral export.
Obviously, sectoral exporting
is
economic development strategy
of
many
countries. Tourism service exports in Greece are an example. Greece, with its
thousands-year culture and birthplace
of
philosophy, is famous tourist hotspots
include the capital Athens, the northern Chalkidiki peninsula, the Ionian island
of
Corfu and the island resorts
of
Myconos, Santorini, Paros and Crete. For these
reasons, Greece is one
of
the best places in tourism and an important percentage
of
the
country's income comes from tourism. Thompson
(2009) studied effects
of
the
exchange rate and Euro switch on tourism revenue in Greece. This paper indicated the
Euro switch had a large positive impact on Greek tourism revenue, and tourism
revenue should increase as more countries adopt the Euro currency. In addition,
strategic devaluation
of

a fixed exchange rate is
ill
advised, and appreciation
of
a
flexible exchange rate may raise tourism revenue as in Greece.
Otherwise, the Philippines is the paradigmatic example
of
a state that deliberat
ely constructed state policy for its exports
of
workers abroad. Yang (2004), in an
important household survey, has demonstrated that Philippine families with migrant
members abroad fared considerably better than family member without migrants.
8
Table 2.1
Estimate
of
Overseas Filipino
Workers
(December 2004)
Region
Permanent
Temporary
Irregular
Total
Africa 318 58,369 17,141 75,828
South and
East
91,901 1,005,609 443,343 1,540,853

Asia
Middle East 2,312 1,449,031 112,750 1,564,093
Europe 174,387 506,997
143,035
824,419
Americas 2,689,722 292,892
549,725
3,532,339
Oceania
228,946
57,357 30,978 317,281
Sea-based 229,002 229,002
World total
. 3,187,586
3,599,257 1,296,972 8,083,815
Source: Yang (2004)
According to data from Commission on Filipinos
Overseas, Philippine
Department
of
Foreign Affairs
and
Central Bank
of
the Philippines, there are some
figures as follows:
-Population
of
Philippines (2004): 84.6 million
-Value

of
Remittances (2004): $ 8.6 Billion
- GDP
of
the Philippines (2004): $85.1 Billion
The numbers here are striking.
Out
of
a total population
of
84 million,
approximately
8.1
million are working abroad roughly one in ten Filipinos. The other
striking figure is the seven billion dollars
of
remittance income generated by these
workers, or roughly 10%
of
the Gross Domestic Product (GDP)
of
the Philippines.
This means that the Philippines have succeeded in developing a large scale labor
export regime that provides significant level
of
remittances to the Philippine
economy. In addition to the unrequited nature
of
remittance transfers, remittances are
seen as a particularly stable form

of
external finance (Ratha, 2003; Kapur, 2004), and
can even increase during a crisis. The logic is simple enough so that the Philippines
try to keep labor exports as more as possible.
Besides, China is a giant in fishery exports as well as the largest Asian fish
harvester, landing over
41
million tones from capture fisheries and aquaculture in
9
2000.
Years
Source: F AO Fishery Statistics, Aquaculture production
Figure 2.1 Reported aquaculture production in China (from 1950)
In 2003, China registered a total amount
of
30.28 million tones
of
farmed fish,
accounting for 64.34 percent
of
national fishery production (F AO, China fishery).
Exports
of
farmed shrimp, eel, tilapia, shellfish and seaweed have also formed the
backbone
of
Chinese seafood exports, accounting for about 50 percent
of
national
seafood exports in terms

of
value. The rapid development
of
aquaculture in China has
not only contributed to improved food supply, but has also generated employment and
income to the Chinese people. About 4.3 million rural workers are directly employed
in aquaculture with an annual per capita net income
of
8,667 Yuan from 1985 to 2003
(FAO,
China fishery)
As the result, sectoral export is very important for developing countries, it can
help these countries to grow and develop. Vietnam is a developing country and also
one
of
members
of
WTO. Then, sectoral export is focused as strategy. Thus, this
thesis similarly chose fishery exports as sectoral exports in Vietnam for study.
10
2.3.
Why
fishery sector was chosen for this study?
Over the course
of
two decades, Vietnam has emerged as an important
regional producer
of
oil and natural gas in Southeast Asia. The country has boosted
exploration activities, allowed greater foreign company involvement in the oil and

natural gas sectors, and introduced market reforms aimed
at
strengthening Vietnam's
energy industry. While these efforts have helped Vietnam expand production
of
oil
and natural gas, domestic consumption
of
these resources has also increased as a
result
of
rapid economic growth. Half
of
Vietnam's domestic energy consumption
comes from oil, with hydropower
(20 percent), coal (18 percent), and natural gas (12
percent) supplying the remainder. Therefore, net exports
of
crude oil in Vietnam are
not much in future. The below graph is demonstrated this thing.
Vietnam's
Oil
Production and
Consum1)tion,
1998-2008*
450
400
;:.,
350
£

300
VI
250
(';
=
200
.,
150
0
100
c
1-
50
Production
1988
1990
1992 1994
1996
1998
2000
2002
2004
2006
2008
Source:
EIA
International
Energy
Annual
2004;

Short-Term
Energy
Outlook
(June
2007)
Year
*2006
is
estimate;
2007-2008
are
forecasts
Figure 2.2 Vietnam's Oil Production
and
Consumption,
1998-
2008*
In addition, crude oil, though,
is
the first important export sector in Vietnam
and its contribution percentage or· rate on GDP is largest. Crude oil is a primary
product, and is exploited from natural resources. Crude oil will be rapid exhaustion
time by time, so it is not potential export sector in further future. Further, crude oil
export does not impulse development
of
processing technology
as
well as employs
products from other industries, and does not create more employment. Last, crude oil
production

of
Vietnam is not much, the production level is low than that
of
other
countries in the zone.
11
T Ol) Asia-P,lcific
Oil
Producers,
2006'·
China
1 ·
·-·"'' ;.;."'r: ;:.;''•:"""\W'.=.""'
, ,.

-
-·-;

' "'
3,836
Indonesia
1

-=

1,100
India
t """'"'""".
_,
847

Malaysia
1 __;,:-<l'::::'
1111
723
:
Australia
Vietnam
Thailand
Brunei
Thousml<l Barrels Per
D<lY
Source:
EIA
Short-Term
Energy
Outlook
(June
2007)
*estimate
Figure 2.3 Top Asia - Pacific Oil Producers, 2006*
The above graph indicated that Vietnam is small oil producer in her zone, so
crude oil export
is
not competitive advantage sector compared with that
of
other
countries in Southeast Asia such
as
Indonesia and Malaysia.
For textile and garment industry, the second large export sector, has been

existed in Vietnam for at least a century, while traditional handicraft activities such as
embroidery, silk weaving have existed for much longer. The industry started to export
to countries
of
the Comecon economic block in 1976 until the end
of
the 1989s;
Former Soviet Union and East European states were Vietnam's main trading partners
which accounted for about
90%
of
total export value
of
textile and garment. The
collapse
of
the socialist system impelled Vietnam to find new markets. With its new
policy
of
diversifying foreign economic relations, Vietnam's textile and garment
industry carries trade ties with over
30 countries throughout the world, and its
businesses have relations with hundreds
of
overseas companies. As the result, from
1993
garment and textile export to EU countries continuously has increased by 23%
in average annually. In 1993, Vietnam exported
USD 250 million. In 1994 Vietnam
exported

USD 285 million. In
1995
and 1996 garment and textile export value is USD
350
and USD 420 million respectively. In 1997, export turnover is USD 450 million
and so on. As above presented Vietnam's textile and garment has achieved a notable
success recently. However, the industry is facing a number
of
difficulties, which need
12
to be surmounted to ensure its continued rapid growth. The industry's most pressing
problem is its equipment and machinery. The out-dated technology has contributed to
low production capacity and bad quality product, thereby, deteriorating Vietnamese
manufacturers' competitiveness in the international market. That is why,
unsurprisingly many enterprises enjoying exports quotas, to the
EU
and other
countries do not export the goods directly, but intermediaries. This has caused losses.
In addition, textile and garment in Vietnam are not much special.
It
is
just
reprocess
work for oversea companies. Obviously, products from textile and garment can be
made by other countries, not only Vietnam, so this has to stand big pressure from
competitiveness
of
other countries in the similar conditions. In addition, profit from
garment is not much, and instability because garment faces many challenges such as
quotas, tariff barriers, tastes

of
consumers, and so on.
According to the above reasons, crude oil and garment have not advantages to
become industries as comparative advantage for Vietnam economy and need to be
promoted
by
the government.
Together with crude oil, textile and garments, fishery products are the most
important exports in Viet
Nam(FAO,
2007). Since 1990s, fishery products have been
the third biggest exported commodity. According to
GSO (2006), its contribution to
GDP is approximately equal to that
of
education and training. National accounts,
however, do not relay the sector's full importance, as fisheries also make a significant
contribution to national food security in a number
of
APFIC states, although there are
concerns that current patterns
of
production and trade are compromising this
contribution. Fisheries and aquaculture industries have also absorbed millions labors
of
Vietnamese growing population. Only in the tra fish aquaculture industry, more
than
500,000 labors and 50,000 farming households had been involved in 2003 (Due,
2007). Furthermore, Vietnam, with a coastline
of

over 3,260 kilometers (km) and
more than
3,000 islands and islets scattered offshore, plus up to 2,860 rivers (Report,
2007) and estuaries, has been geographically endowed with ideal conditions for the
thriving fishery sector which currently exists. For centuries, the Mekong River Delta
in the south and the Red River Delta in the north have been used for wild catch
fishing as well as extensive fish farming. The Mekong River Delta, one
of
the most
productive fishery zones, covers an area
of
about 40,000 square
km
(Report, 2007). In
addition, there are about
4,200 square km
of
rivers, lakes and other natural bodies
of
13
water further inland, which swell to an additional 6,000 square km during periods
of
seasonal flooding.
Consequently, the fishery sector plays an important role in the national
economy, accounting for about
6.1
percent
of
Gross Domestic Product (GDP) in 2006
and earning almost $3.4 billion in export revenues. Production in the fishery sector

grew at an average rate
of
10.51% from
1991
to 2000, and 12.14% from 2001 to 2005
(Report, 2007). Much
of
this growth in production can be attributed to continued
expansion in aquaculture, which increased from a 26 percent share
of
the sector in
2000 to 46 percent in 2006. A strong export market is the· driving force behind the
growth in aquaculture, but there is also a growing domestic market as incomes
improve and local demand increases. The bulk ofVietnam's fishery exports are bound
for Japan, Taiwan,
South Korea, Hong Kong, the United States and the European
Union. With a sixteen-fold increase in fishery exports since the 1990's, Vietnam now
ranks among the top ten seafood exporters in the world.
In fact, Vietnam's fishery product exports have increased considerably since
2000 to become a major income earner and one
of
Vietnam's major export
commodities. Aquatic exports earned over
$1
billion in 2000, $ 2.2 billion in 2003
and $3.36 billion in 2006. Total export volume for 2006 was 811.5 thousand metric
tons, a 29.4% increase over
2005. Catfish and shrimp are by far the largest share
of
aquatic exports, accounting for over 22% and 44%, respectively,

of
total export
earnings in
2006. Currently Vietnamese fishery products have reached more than 120
countries and territories on five continents. Japan and the United States are the two
largest export destinations, by country, while European Union nations, as a group, had
the largest share
of
exports by volume and the second largest share by value in 2006.
Exports are projected to reach more than $4.0 billion in 2008.
Chilled/Frozen
Fish
34.20%
Source: Report from the Ministry
of
Fisheries
Frozen
Shrimp
43.60%
Figure 2.4 Vietnam's Primary Fishery Export Products in 2006 (value basis)
14
According
to
statistics, nearly
10%
of
the population derives their main income
from fishery. The fishery sector is significant contributor to the economy
of
Vietnam.

Vietnam's fisheries sector contributed some 3% to the GDP in 2015 and generated 9-
10%
of
the total Vietnamese export revenues. Otherwise, the importance
of
fish
to
human populations around the world
is
undeniable. Throughout history, different
cultures have used fish protein
as
a food source, with wild-caught fish providing the
bulk
of
fish-derived protein. Further, fishery industry has played an integral role in the
economic development
of
many economies. For example, the American colonies were
able to develop financial independence with the abundance
of
cod, and the Vikings
of
Iceland made a fortune from the wealth offish in·the region. Now, centuries later, fish
are still key players in the global economy. As developing countries have grown and
consumers are becoming richer, the demand for fish is shaping the markets for
seafood across the globe. Global consumption
of
fish has doubled in the past thirty
years, with more than

90%
of
the developing world contributing to that increase. As
more countries become dependent on this new staple, more economies have become
based around the fisheries as well. Thus, world demand
of
fishery products always
exists; this thing is good indicator for promoting fishery industry development
strategy in Vietnam. Besides, growth in fishery exports helped to use products from
backward and forward linkage industries.
If
fishery exports more and more increase,
more commodities will be used to serve for this and also to create more jobs, more
income. Then, this cycle will make increasing in GDP; it means that there is the
growth in economy.
2.4. An overview
of
Vietnam fishery sector
The aim
of
this part is to present some characteristics
of
fishery sector in
Vietnam and to sketch out a dynamic picture
of
the sector.
It
puts forward some
preliminary assessments on comparative advantages
of

Vietnam fishery sector, on its
competitiveness, on production system and marketing channel in general and their
operations in the period.
Generally, the fishery sector, including marine capture, aquaculture,
processing, trade and services, has been defined as one
of
the national spearhead
sectors.
An
increasingly concerted coordination has been established between fishery
trade with production and processing.
It
is a safe bet that trade, for the most part in the
form
of
export as in the case
of
Vietnam, constitutes the final and also vital stage in
creating the much-needed margin in the value chain, serving the purpose
of
15
maintaining and expanding the markets for the whole fishery sector. The recent
impressive record
of
achievements accruing from fishery exports has largely
contributed to the national export growth, which can be demonstrated in a number
of
statistical figures.
Though fluctuations on the world market, the total export value in Vietnam
has constantly experienced a marked upturn, increasing from $1.351 billion in 1997 to

greater than
$2
billion in 2002 and reaching $2.74 billion in 2005 (Anh et al, 2006),
and so
on.
For the development process, Vietnamese fishery sector have a long-
standing history, from the spontaneity in earning a living such as collecting crabs and
shellfish, then together with the socio-economic development, boat building appeared;
swimming and rowing skills were the basics
of
fishing. The ancient Vietnam moved
step by step from inland waters
to
the sea. However, up
to
the 1950s, the Vietnam
fisheries had still been backward and non-mechanical not became a production
industry corresponding
to
the national natural condition and not met the demand
of
social development. During the past 20 years ( 1986 - 2005)
of
the renovation process,
the fisheries sector showed a continuous annual growth, in 5-year plans. In
2006, the
total fisheries production was 3,695, 927 metric tons
(MT),.
of
which 1,694,276 MT

came from aqua cultivation; the fisheries export value gained more than
US
$ 3
billion, and about 4 million laborers were involved in the fisheries sector. The sector
has become
an
agri-industrial economy with high rate
of
growth, increasing scale,
thus contributing to stabilization and development
of
the country.
Actually, fishery sector is small and not bulky industry relative to other
industries. However, annual export value
of
this industry has increasing trend and
exceed
10%
(nearly 12%)
of
Vietnam exports in 2001. Thus, fishery industry can
count as real strong point
of
Vietnam economy as its markets are diverse globally
(Figure 2.5). According to statistical figures from Fistenet, fishery industry created
approximately
7,100 employments per year from 1997 up
to
now, this contributed in
unemployment rate decrease in Vietnam.

Nevertheless, Vietnam's strategy
of
increasing its fishery exports faced a
number
of
constraints and deficiencies. Some
of
these .were common
to
other
commodities from Vietnam. The geography and topography
of
Vietnam makes the
country highly vulnerable
to
natural hazards. Each year, natural disasters such as
typhoons, storms, floods or drought have severe effects on fishery industry. The lack
16
of
awareness and control on the marine fishery capture significantly impacted coastal
fishery resources and aquatic biodiversity.
Others
14.50%
USA
'19.80%
Source: Report from the Ministry
of
Fisheries
2'1.60%
Figure 2.5 Vietnam's Fishery Products Export Market, 2006 (value basis)

In addition, deficiencies in management seriously affected the improvement
of
actions: in 1993 the Vietnamese Government had an insufficient knowledge
of
the
biologic resources available in the marine and aquaculture sectors. This had a
negative impact on national disease control as well as on its product quality
development plans. Also, the ban on fishing practices having a negative impact on
aquatic resources and the environment was hard to enforce.
Moreover, a number
of
facilities were lacking: the fleet
of
vessels for the
various types
of
fisheries was insufficient and inefficient, transportation and retailing
facilities (i.e., storage, depuration establishments, or
"cold chain" facilities, etc.) were
underdeveloped, access to credit was difficult, extension services and marketing
channels were lacking, and there was low awareness among farmers and processors
with respect to hygienic standards, quality tools and chemical monitoring.
All these constraints or shortcomings led to very low added value products, which
were not competitive on the international markets. Furthermore, high levels
of
food-
borne pathogens, with poor water quality and deficient production, processing,
marketing and retailing technologies, in particular
of
meat and vegetable products,

caused high levels
of
food-borne di$eases. Next, high levels
of
toxic residues and the
exceeding
of
maximum residue levels for pesticides were common problems. In the
early
1990s, no information was available from producers on the quantity
of
antibiotics used in meat and fish production. Specific concerns
of
the fisheries sector
17