An inquiry into the determinants

of Vietnamese product export

By Nguyen Thi Ha TRANG

and Nguyen Thi Thanh TAM
Supervisor: Dr. Vu Hoang NAM
Foreign Trade University
Outline
1. Motivation
2. Literature review
3. Overview of Vietnam’s export, determinants
and some hypotheses
4. Data and Regression specification
5. Results
6. Policy implications
1. Motivation
Necessity:
 Vietnam has chosen Export led growth model
 New prospect
 How to boost export in upcoming time

 Need to understand impact of different

determinants on export of different products
Research question
 What are the determinants of Vietnam’s
export value of different product groups?

 What are differences in directions of the

impact that these determinants cause for
export value in the case of each product
group?
Size of the research:
 For Vietnam
 From 2004 to 2008
 For export of SITC1 digit level product groups
2. Literature review
Border of Border of
exporting importing
Push country country Pull

Exporting Importing
country country

Production Policy of Distance Policy of Purchasing

ability of encouraging and between encouraging and power of
exporting managing export two managing export importing
country and import of countries and import of market
exporting country importing country

Factors impacting Trade - attracvtive and Factors impacting

on supply trade - restrictive factors on demand

Factors impacting on international trade

Figure 1: Gravity model in international trade

Source: Đào Ngọc Tiến (2008)
2. Literature review
 Equation:

In which:
 A: trade-attractive/restrictive coefficient

 T : traded value between country i and

ij
country j
 Y ; Y : size of the economies of country i and
i j
country j respectively
 DIS :distance between two countries
ij
Previous empirical studies
Factors Trend of Previous papers
impacts
Factors relating to demand and supply
GDP generalised from Positive Từ Thúy Anh and Đào Nguyên Thắng (2008), Do Thai Tri
GDP of both import and (2006), Đào Ngọc Tiến (2009), Tiiu Paas (2000), Nguyễn Thanh
export countries Thủy and Jean-Louis Arcand (2009)
GDP of exporting country Positive Céline Carrere (2003), H. Mikael Sandberg (2004), Inmaculada
Martínez-Zarzoso and Felicitas Nowak-Lehmann D. (2003),
GDP of importing country Positive Céline Carrere (2003), H. Mikael Sandberg (2004), Inmaculada
Martínez-Zarzoso and Felicitas Nowak-Lehmann D. (2003)
Population generalised Positive Đào Ngọc Tiến (2009), Do Thai Tri (2006),
from population of both
import and export
countries
Population of exporting Positive K. Doanh Nguyen and Yoon Heo (2009) and H. Mikael Sandberg
country (2004)
Negative Inmaculada Martínez-Zarzoso and Felicitas Nowak-Lehmann D.
(2003), Jacob A. Bikker (2009)
Population of importing Negative Inmaculada Martínez-Zarzoso and Felicitas Nowak-Lehmann D.
country (2003), Céline Carrere (2003), Jacob A. Bikker (2009)
Attractive/ restrictive factors
Policy of encouraging and managing export and import
Tax Negative Đào Ngọc Tiến (2009)
Bilateral trade Positive Céline Carrere (2003) (NAFTA, ASEAN, CACM)
agreement/ Free trade Negative Từ Thúy Anh and Đào Nguyên Thắng (2008) (ASEAN), Céline
area Carrere (2003) (MECORSUR)
Exchange rate Positive Do Thai Tri (2006), Nguyễn Thị Quy et.al. (2008), Inmaculada
(depreciation of Martínez-Zarzoso và Felicitas Nowak-Lehmann D. (2003)
domestic currency)
Distance
Geographical distance Negative Céline Carrere (2003), K. Doanh Nguyen and Yoon Heo (2009),
Tiiu Paas (2000), Đào Ngọc Tiến (2009)
Economic distance Positive Egger (2000), Di Mauro (2000), Freund (2000), Gilbert, Scollay and
Bora (2001)
Inmaculada Martínez-Zarzoso and Felicitas Nowak-Lehmann D.
Negative (2003)
Common border Positive Li (2000), Soloaga and Winters (2001), Clark and Tavares (2000),
Freund (2000), Gilbert, Scollay and Bora (2001)
Common language Positive Boisso and Ferrantino (1997), Frankel (1997), Fink and Primo
(1999), Krueger (1999a), Soloaga and Winters (2001), Clark and
Tavares (2000)
Cost of transportation Negative Geraci and Prewo (1977)
(CIF/FOB)
Common currency Positive Rose (2000)

Source: generalized by authors and from Đào Ngọc Tiến (2009)

Gaps
 Most of them do not evaluate separately the
GDP (population) of import and export
economies.
 Most of them are for total export, and do not

care specific characteristics of different

products.
 Some are not agreed at some points
 Some is at product level but not for the case

of Vietnam
3.1 Overview of Vietnam’s export
from 2004 to 2008
 Total export: increased with very high growth
rate (>22%), contribute more than 60% in GDP
 Product level (use SITC clasification)

Primary Manufactured

SITC 0: Food and live animals SITC 5: Chemicals and related

SITC 1: Beverages and tobacco products
SITC 6: Manufactured goods
SITC 2: Crude materials, inedible, classified chiefly by material
except fuels SITC 7: Machinery and transport
SITC 3: Mineral fuels, lubricants equipment
and related materials SITC 8: Miscellaneous
SITC 4: Animal and vegetable oils, manufactured articles.
fats and waxes
Figure 2: Proportion of main primary products exporting
to 73 countries in total export from 2004 - 2008

60
%
Primary products
50

SITC 0: Food and

40 live animals

30 SITC 2: Crude
materials, inedible,
except fuels
20

SITC 3: Mineral
10
fuels, lubricants and
related materials
0
2004 2005 2006 2007 2008

Source: Constructed by authors basing on data collected from

GCO (2010)
Figure 3: Proportion of main manufactured
products exporting to 73 countries in total
export from 2004 - 2008
60

50
Manufactured products

40 SITC 5: Chemicals and

related products
30
% SITC 6: Manufactured
goods classified chiefly by
20 material

SITC 7: Machinery and

10 transport equipment

0
SITC 8: Miscellaneous
2004 2005 2006 2007 2008 manufactured articles.
Year

Source: Constructed by authors basing on data collected from

GCO (2010)
3.2 Overview of some factors
 GDP growth of importing partner countries
 GDP of Vietnam
 Population of importing partner countries
 Population of Vietnam
 Bilateral trade agreement that is effective

and free trade area that Vietnam joined

 Exchange rate policy
 Infrastructure for transportation
 Economic differences from partner countries
3.3 Hypotheses
1. GDP growth of Vietnam influences the export of
manufactured products more vigorously than
that of primary products
2. Free trade agreements have different impacts on
export of different product groups
3. An increase in real exchange rate (depreciation
of Vietnam Dong) has positive but different
impacts on export of different product groups
4. Economic distance has strong positive effects on
export of different product groups – Vietnamese
trade is in accordance with H – O theory
 4.1 Regression specification
Original model:

Transform to linear model:

Adjusted model:
4.2 Data
In the period from 2004 to 2008 for 61 partner countries based on availability

of all these following data:

 The value of export: from Vietnam General Custom Office and generalized

◦ 7 groups of SITC classification: SITC 0; 2; 3; 5; 6; 7; 8

◦ SITC 1 and SITC 4 are excluded

◦ 2 bigger groups: primary and manufactured product groups

 GDP; GDP per capital in current USD, and population: from World data bank.

 Bilateral and free trade area is collected by different sources.

 Geographical distance is from Đào Ngọc Tiến (2010)

 Exchange rate: http://www.ers.usda.gov/Data/Macroeconomics/

 5. Result Primary Manufacture
product d product
  SITC 0 SITC 2 SITC 3 SITC 5 SITC 6 SITC 7 SITC 8 group group
C 4708.09 5794.77 10329.6 4997.76 4350.88 8835.1** 4878.06 4488.14 5308.7
  (1.14) (1.07) (1.03) (1.2) (1.09) (2.05) (1.19) (1.1) (1.3)
-1.69 -3.46 6.67 1.67 2.34 3.11* -0.57 -2.27 -0.77
(-1.05) (-1.49) (1.62) (1.01) (1.5) (1.8) (-0.35) (-1.41) (-0.48)
60.63* 58.9 111.5 60.85* 57.97* 82.67** 59.09* 56.03* 66.23*
(1.77) (1.32) (1.36) (1.76) (1.75) (2.31) (1.73) (1.64) (1.82)
3.86** 8.53*** 0.2 1.53 0.37 0.45 2.93* 4.6*** 3.10*
(2.34) (3.58) (0.05) (0.91) (0.23) (0.26) (1.8) (2.8) (1.9)
-379.98 -435.24 -799.06 -397.24 -357.32 -646.74** -385.78 -357.56 -415.00
(-1.32) (-1.15) (-1.15) (-1.37) (-1.29) (-2.15) (-1.35) (-1.25) (-1.45)

-5.83*** -5.06*** -9.45*** -5.11*** -5.01*** -5.88*** -5.03*** -5.76*** -5.43***

(-7.16) (-4.65) (-4.67) (-6.16) (-6.32) (-6.8) (-6.23) (-7.12) (-6.29)
5.05*** 6.91*** 0.11 2.61** 2.42** 2.19* 4.45*** 5.54*** 4.63***
(4.02) (3.79) (0.03) (2.05) (2) (1.63) (3.58) (4.42) (3.54)
74.53** 64.31 143.08* 72.75** 72.2** 89.9*** 70.28** 66.52* 72.35**
(2.11) (1.4) (1.7) (2.05) (2.12) (2.45) (2) (1.89) (2.09)
2.16 2.11 17.09*** 4.28*** 2.53* 4.71*** 1.76 2.67* 2.29
(1.39) (1.04) (4.9) (2.74) (1.68) (2.9) (1.13) (1.73) (1.48)
3.21 2.63 1.47 5.76*** 6.41*** 5.94*** 5.27** 3.53 4.83**
(1.45) (0.88) (0.3) (2.59) (3) (2.57) (2.39) (1.6) (2.2)
R2 0.48909 0.45473 0.52486 0.51954 0.53729 0.56429 0.49462 0.5108 0.50253
Adjusted R2 0.47172 0.43618 0.5087 0.5032 0.52156 0.54947 0.47743 0.49416 0.48561
Left censored obs 76 137 218 104 90 106 75 74 73
Observation 305 305 305 305 305 305 305 305 305
Figure 3: Estimation result (Tobit - ML - Censored Normal method)
 5. Analyses
 Hypothesis 1: Vietnam’s GDP is a little bit
significant in explaining the growth of export
value of the product in SITC 5; 6; 7; 8 while it
is not significant in the case of SITC 3 in
particular and primary group in general
 Reason: industrial structure of economy

Primary Manufactured
SITC 0 SITC 2 SITC 3 SITC 5 SITC 6 SITC 7 SITC 8 product group product group

Coefficient 60.63* 58.9 111.5 60.85* 57.97* 82.67** 59.09* 56.03* 66.23*
(1.77) (1.32) (1.36) (1.76) (1.75) (2.31) (1.73) (1.64) (1.82)
z value
 5. Analyses
 Hypothesis 2: BTA and FTA have positive
impacts on all product is not totally
reasonable:
◦ BTA and FTA have positive impacts in the case of
SITC 3; 5; 7 (Reason: few non tariff barriers)
◦ Not significant in the case of others
Primary Manufactured
  SITC 0 SITC 2 SITC 3 SITC 5 SITC 6 SITC 7 SITC 8 product group product group

Coefficient 2.16 2.11 17.09*** 4.28*** 2.53* 4.71*** 1.76 2.67* 2.29
(1.39) (1.04) (4.9) (2.74) (1.68) (2.9) (1.13) (1.73) (1.48)
z value
 5. Analyses
 Hypothesis 3: Reasonable
 Depreciation of Vietnam dong makes export

value of different groups of Vietnam

increasing differently:
◦ More remarkably for manufacture case than for
primary case
◦ However, it is not significant in case of SITC 3
Reason: the elasticities of demand for those goods
respect to price are different
Primary Manufactured
  SITC 0 SITC 2 SITC 3 SITC 5 SITC 6 SITC 7 SITC 8 product group product group
Coefficient 74.53** 64.31 143.08* 72.75** 72.2** 89.9*** 70.28** 66.52* 72.35**
(2.11) (1.4) (1.7) (2.05) (2.12) (2.45) (2) (1.89) (2.09)
z value
 5. Analyses
 Hypothesis 4: Reasonable
 Vietnam trade in H – O model
 Reason: low technology level  not suitable

for the new trade theory of economies of

scale.
Primary Manufactured
  SITC 0 SITC 2 SITC 3 SITC 5 SITC 6 SITC 7 SITC 8 product group product group
Coefficient 5.05*** 6.91*** 0.11 2.61** 2.42** 2.19* 4.45*** 5.54*** 4.63***
(4.02) (3.79) (0.03) (2.05) (2) (1.63) (3.58) (4.42) (3.54)
z value
5. For other factors
 GDP of import partner and Population of
Vietnam do not affect on export value of all
product groups
 Population of importing countries have a little

positive effect on all groups with the level of

impacts decreasing in the order of: SITC 0;
SITC2; SITC8
◦ Reason: some are necessary goods and some are
input of production with high labor-intensity
5. For other factors
 Distance cause negative impacts on export of
all groups with the higher level in primary
case than in manufacture case
Reason: Deterioration characteristics of some
goods
 Border cause positive impacts on export of all

groups with the higher level in manufacture

case than in primary case
Reason: Similarity in culture and tradition
6. Policies implication
 Promote supply of export product: transform
industrial structure, enhance labor
productivity, moving export product.
 Adjust exporting destination. Have different
market structure strategy for each group.
 Manage exchange rate and international
cooperation policies accurately
Thank you for your
listening