Business Sector Programme Support (BSPS)
Component 5: Business Sector Research with Institute of Labour Science and Social Affairs (ILSSA) and Central Institute for Economic Management (CIEM)
and
Poverty Reduction Grant (PRG)
Strengthening the Development Research and Policy Analysis Capacity of the Central Institute for Economic Management (CIEM)
(Phase 2)
TRAVEL REPORT NO. 02/06
FOR TRAVEL UNDERTAKEN BY FINN TARP, PHIL ABBOTT, THOMAS MARKUSSEN AND PABLO SELAYA IN MARCH-APRIL 2006
1. Introduction
This report briefly summarizes the activities and results of the travel undertaken by Finn Tarp, Phil Abbott, Thomas Markusen and Pablo Selaya to Vietnam in March-April of 2006. The terms of reference for the travel can be summarized as follows:
- Pilot testing of the rural household questionnaire under the BSPS. CIEM responsible Dr. Quang and Mr. Khai.
- Planning and implementation of the training activities under the PRG research project 2. CIEM responsible Dr. Vo Tri Thanh and Dr. Huong.
- Status of the SME project under the BSPS (mainly with ILSSA, Mr Vinh).
- Providing advice to CIEM staff identified for training abroad under the PRG project.
- Meetings with the Danish Embassy.
- Other tasks required for effective programme implementation.
2. Activities performed
The activities performed are summarized in accordance with the outline in the introduction in what follows.
Ad. 1: Pilot testing of the rural household questionnaire under the BSPS.
This work was carreid out in three provinces(Lao Cai, Phu Tho and Nhge Anh) from 20 to 25 March). From Copenhagen the following participated in this together with staff from ILSSA, CIEM and IPSARD: Finn Tarp, Phil Abbott, Thomas Markussen, Pablo Selaya (replacing Mikkel Barslund).
The pilot was very successful and led to the identification of a series of changes that will be implemented in the draft questionnaire. These changes were discussed in stakeholder meetings and will be implemented during April in Copenhagen during the forthcoming visit of ILSSA staff. Manual and other guidelines will also be prepared in due course and well before training of enumerators in end-June.
Ad. 2: PRG research project 2
Professor Phil Abbott was in Vietnam from 18 to 31 March, and from 25 March concentrated on the seminar/conference held as agreed on 30 March.
Prof. Abbot held the two presentations/lectures as agreed in accordance with the workplan.
Annex 1 contains the programme, while Annex 2 and 3 contain the draft TOR prepared by Professor Abbott for further work to be pursued under this project.
Ad. 3: SME survey
A series of meetings were held with ILSSA to discuss the SME survey. Data cleaning and preparation is in process, and ILSSA indicated the data will be ready around 18 April when Mr. Vinh and Mr. Binh will arrive in Copenhagen. After this data analysis can begin.
Ad. 4: Advice to CIEM
During the visit interaction took place with CIEM on the following issues:
-Provincial profiles. Meetings were held with Quang and Khai and it was agreed to include the data needs specified by Theo Larsen in the 10 provincial profiles which are under elaboration.
-Higher level training of CIEM staff (two phd programme plans were discussed in detail).
-Planning of conference to be held on 6 and 7 July (a proposed programme will be elaborated by Finn Tarp and agreed upon between CIEM, University of Copenhagen and ILSSA).
-Project activities under PRG research project 1 (further training to take place in July as foreseen in the work plan).
Ad. 5: Meetings with Danish Embassy
Meetings were held as planned with the Danish Embassy.
Ad. 7: Other activities
A variety of ad hoc activities ranging from participation in various meetings (such as the launching of the Annual Vietnam Economy report by CIEM) and the collection of statistics and data on SME and Household development to equipment procurement were also carried out. The same goes for preliminary planning of the activities in June-July and meetings with CIEM officers in charge, Dr. An, Ms. Hong and Ms. Hoai and ILSSA.
3. Final remarks
Work was carried out as planned, and the overall BSPS project was inaugurated on 14 March 2006 in a big conference in which Finn Tarp participated. Follow-up by CIEM on the implementation of the consultancies under PRG research project 2 is key to work in the coming months.
Annex 1: Programme for March 2006 CIEM trade conference/seminar
Chair: Prof. Finn Tarp
Time: 1.15 pm 30 March 2006
Venue: CIEM, 68 Phan Đình Phùng
Time / Presentation / Presenter/chair1.15 – 1.30 / Participant registration
1.30 – 1.45 / Opening remarks / Prof. Finn Tarp
1.45 – 3.00 / What is happening in the WTO?
What do WTO outcomes mean for development? / Professor Phil Abbott, Viện Kinh tế Trường ĐH Tổng hợp Copenhagen
3.00 – 3.15 / Tea break
3.15 – 3.45 / New trends in regional integration in the East Asian context / Dr. Vo Tri Thanh
3.45 – 4.45 / What does all this mean for Vietnam? Brainstorming by participants as input to future activities / Prof. Phil Abbott
Dr. Vo Tri Thanh
Prof. Finn Tarp
Participants
4.45 – 5.00 / Closing remarks / Prof. Finn Tarp
Annex 2:Vietnam’s Accession to the WTO – Implications of the Negotiation Outcomes – TOR for consultancy under PRG research project 2
Vietnam is likely to complete accession to the WTO in the near future. While the broad issues that have held up this process have been relatively clear, details on negotiations have not been transparent. Services trade (financial, distribution, telecommunications), legal reforms (business law), and reform of state enterprises have received more attention than market access. But the ambition of the tariff reduction offer may have also been a sticking point in the negotiations. The specific requests that have been made of Vietnam in bilateral negotiations, particularly sector specific tariff reductions, can be quite revealing, as they show where foreign private sector interests anticipate changes after Vietnam joins the WTO. An alternative means of forecasting post WTO accession impacts would be to focus on those sectors which were the ones where negotiations were most difficult, and yet changes were made.
The goal of this consultancy is to review and summarize the negotiation process and its outcome as Vietnam sought to join the WTO in order to draw lessons and set direction for future work. We hope that understanding the details of debate in the negotiation process, and examination of where there are significant and specific changes can guide what to expect as impacts from the reforms following WTO accession. Negotiating positions of trading partners are informed by private sector interest, and those interests are likely to be well informed on trade prospects with Vietnam.
Questions to be addressed in this effort include:
What are the detailed changes agreed to by Vietnam in its bilateral accession agreements? Which will constitute significant changes from the status quo? These changes should include tariffs, non tariff barriers, and structural reforms.
Were commitments specific or general in nature? What general commitments were made? Who argued for these general commitments and why?
In what ways do commitments go beyond those made in the US-Vietnam Bilateral Trade Agreement (BTA)?
What sectors, and within those sectors which disaggregated products, were the focus of negotiations? Where were there changes and where did Vietnam resist changes?
What specifically is the Vietnamese tariff reduction offer, and how do tariffs in sectors where there are significant changes compare to previously existing tariffs?
For what goods did Vietnam use TRQs to maintain quantitative restrictions on trade?
What specific structural reforms were agreed to as part of WTO accession? What sectors and products are most likely to be affected by those reforms? (For example, what will be required of state enterprises in order that they behave more like commercial entities, and which SOEs (and so for which products) are these likely to pose difficulties which could lead to the elimination of an SOE?)
Are there domestic policies (e.g. support for agricultural production) which may face limitations according to the WTO accession agreements? How might Vietnam’s commitments reduce its “policy space’ (flexibility) in the future?
Were there specific requests Vietnam made of potential trading partners for which it anticipates export opportunities which will be enhanced following WTO accession?
Annex 3:Cashew Exports and Vietnamese Trade Policy– TOR for consultancy under PRG research project 2
Cashew Exports and Vietnamese Trade Policy
Cashew exports have expanded rapidly in Vietnam, from $100 million in 1999 to $436 million in 2004. As a result, Vietnam has become the second largest shelled cashew exporter in the world, just behind India, and increasing its market share from about 10% to about a third of the world market. Vietnamese exports to the U.S. over this period went from $ 23 million to $152 million, at the same time as the U.S.-Vietnam Bilateral Trade Agreement (BTA) was successfully negotiated. But there never have been tariffs charged by the U.S. on cashew imports. This is clearly a case where regularization of trade rules has likely facilitated expansion of Vietnamese exports. Whether foreign investment has played a role is less certain.
Cashew production is volatile and cashews are processed (shelled) in the source country using a technology that is typically labor intensive but nevertheless exhibits substantial fixed costs and so scale economies. (Several competing technologies exist.) Cashew processors as a result compete strongly for supplies, and trade policy has been used elsewhere (e.g. export bans and taxes on raw nuts in Mozambique) to subsidize processors, guarantee supplies, and stabilize domestic markets. If farmers are risk averse, and in the presence of scale economies, new trade theory argues that interventions are called for. And processing may enhance income growth as a value added activity, with its impact on poverty dependent on the technology adopted. But WTO commitments may reduce Vietnam’s “policy space” and require that second best policies be applied.
One long run goal of this project is to investigate the role of trade policy in cashew for Vietnam in light of WTO commitments. Lessons may ultimately be extended to other agricultural commodities where domestic processing could be significant (e.g. sugar, coffee and cocoa). Toward this end a better understanding of the structural and institutional characteristics of Vietnam’s cashew industry needs to be developed. The short run objectives of a consultancy on the cashew industry then would be to obtain necessary background information on cashew production, marketing, processing and trade in Vietnam.
A simplified supply chain for cashew would likely include farmers, local traders, wholesale markets/exporters and then the world market. This description of the supply chain need to be refined to reflect Vietnamese reality, and data collected on activities, prices and costs at each point along the chain. First, basic historical supply and utilization data on cashews in Vietnam must be collected. Second, costs of production, processing, marketing (margins), and exporting need to be gathered. Third, prices at each link of the supply chain need to be independently collected. Fourth, trade data (by destination) needs to be collected.
With this data and with descriptive information on the cashew sector in Vietnam, a series of questions need to be addressed:
What explains the rapid increase in cashew production on Vietnamese farms?
Why has processing capacity increased? Has it been coordinated with supply expansion or are supply problems for processors evident (we have heard rumors that Vietnam in some years has resorted to importing raw nuts from Africa to supply processors)?
What adaptations did the Vietnamese adopt to processing to make it cost effective in their environment?
Are any incentives or policy interventions in place to encourage cashew production or processing?
How well integrated are Vietnamese cashew markets?
What institutions have facilitated Vietnamese cashew exports? Has FDI played a role in this, and did the U.S. BTA influence this outcome?
Are there pressures for policy interventions in the cashew sector, and are these policies consistent with WTO commitments?
1
- -