EXPORTING AND GDP

EXPORTING AND GDP

Export is often considered as one of the main determinants of growth; this also seems to be the general view in the case of Vietnam. Kokko & Gustavsson Tingvall regard it the second most important variable, subordinate only to the investment rate (Kokko & Gustavsson Tingvall 2005:7). In the view of the Ministry of Foreign Affairs export is the most obvious strength of the Vietnamese economy because of the extraordinary high export growth rates during recent years, on average 17% between 2001 and 2005 (WTO accession 2006:23). The reasons for this achievement have already been mentioned; primarily policy changes regarding integration with the world market.

Export and Social Indicators

Vietnam is often praised for its successful poverty reduction. We will in this section discuss whether this development is to some part due to increased export. This will be done by measuring simple correlations between GDP and export, on one hand, and two indicators of social welfare (the percentage of students among the population16 and the number of medical doctors per person) on the other. How can export lead to poverty reduction? One obvious answer is that poverty reduction often is a result of high income, which, as we have seen, is in turn connected to large export. Consequently the discussion in the previous section to some extent is also valid here; a positive correlation could be expected. How can then export directly affect poverty? If branches that employ relatively many poor have a possibility of successful competition on the world market, a general increase in export will decrease poverty. In Vietnam’s case cheap labour is the main comparative advantage, and integration with the world economy therefore can generate new employment opportunities in labour intensive industries. This is another reason why a positive correlation can be expected. As mentioned above, garment and footwear industries have been important in this regard, especially for poor women. Also the agricultural sector has benefited and developed with the consequence that poor rural areas

have taken part of Vietnam’s growth (EU Country Report on Vietnam 2006:14).

GDP and higher education

We begin by comparing material from Vietnam’s provinces concerning the percentage of

students in the population and examine whether there is a connection between this variable and GDP. GDP growth often generates improvement in education since state and parents tend to spend more money on this when income and wealth is growing.19 Our hypothesis is therefore that these variables also in the case of Vietnam are positively correlated.

GDP and health care

We continue by examining how development of GDP affects health care by plotting the

simple correlation between GDP per capita and number of people per medical doctor in

Vietnam’s provinces. Our hypothesis is, as above, that high GDP is correlated to high density of medical doctors (few people per doctor).

References

Kokko, A (1997). Vietnam 1997 – Managing the Transition of Free Trade: Vietnamese

            Trade Policy for the 21st Century, SIDA Macroeconomic Report 1997:4,     Stockholm.

Kokko, A & Gustavsson Tingvall, P (2005). Regional Development and Government

            Support to SMEs in Vietnam. Sida Country Economic Report 2005:5 Stockholm.

Kokko, A, (2007). EU som global aktör: Effekter på Vietnam, från Cramér, P,        Gustavsson, S. & Oxelheim, L EU som aktör i världen. Santérus, Stockholm.

WTO accession – A New Stage of Development for Vietnam. (2006) in Economic Bulletin – Special Issue. Vol. 11/2006 Ministry of Foreign Affairs, Department of       Economic Affairs.