MINISTRY OF PLANNING AND INVESTMENT

MINISTRY OF EDUCATION AND TRAINING

CENTRAL INSTITUTE FOR ECONOMIC MANAGEMENT

VU THI THANH HUYEN

SUPPORTING INDUSTRY DEVELOPMENT AND
VIETNAM’S ECONOMIC GROWTH: A CASE OF
ELECTRONIC SECTOR

Major: Development Economics
Code: 9 31 01 05

SUMMARY OF DOCTORAL DISSERTATION

Hanoi - 2018


The dissertation is accomplished in:
Central Institute for Economic Management

Scientific supervisors: 1. Dr. Nguyen Thi Tue Anh
2. A/Prof.Dr. Nguyen Thi Minh

Reviewer 1: A/Prof.Dr. Nguyen Ngoc Son
Reviewer 2: A/Prof.Dr. Bui Quang Tuan
Reviewer 3: Dr. Truong Thi Chi Binh

The dissertation will be defended at Dissertation Evaluation Committee at

2. Dissertation significance
Theoretical significance
The dissertation helps to build up and complete theoretical frames
on analyzing the situation of SI to electronic sector (ES) and the
impacts of SI development on EG, investigate factors affecting the
relations between SI development and EG in case of ES so as to create a
foundation for theoretical references for other specific cases in future
research.


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Practical significance
Based on the analysis and evaluation of the situation and impacts
of developing SI for ES on Vietnam’s EG, the dissertation proposes
some solutions to promote the development of SI for ES so as to
promote EG in Vietnam.
CHAPTER 1. RESEARCH REVIEW AND RESEARCH
DIRECTIONS ON SUPPORTING INDUSTRY DEVELOPMENT
AND ECONOMIC GROWTH IN CASE OF ELECTRONIC
SECTOR
1.1. Review of domestic and foreign research on supporting
industry and economic growth in the case of ES
1.1.1. Domestic research
1.1.1.1. Research on supporting industry and SI development
Regarding the concepts and scopes of SI, Nguyễn Thị Xuân
Thúy (2005) proposes the definition of SI in Vietnam as a group of
industrial activities to promote intermediate inputs (including
components, spare parts and tools to produce these components and
parts) for assembly and processing industries. Other studies, such as
those by Nguyễn Thị Dung Huệ (2012), Hà Thị Hương Lan (2014), etc.,

and modernization process. To economic growth (EG), SI contributes to
long-term EG. According to Lê Xuân Sang, Nguyễn Thị Thu Huyền
(2011), SI is the direct momentum to create added values to the
industry, raise competitiveness of the main industrial products and
accelerate the industrialization process.
Regarding methods to evaluate the contributions of SI to EG
Domestic research has just presented theoretical arguments; no
study has investigated nor evaluated the contributions of SI to
Vietnam’s EG.
However, to measure the impacts of an industry on the entire
economy, some research has applied input-output table method to


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calculate the spillover effects and linkages of industries on Vietnam’s
economy. According to Nguyễn Mạnh Toàn and Nguyễn Thị Hương
(2013), input-output analysis to calculate linkage indexes is an approach
commonly used in many countries to analyze the industrial impacts. In
their research, Bùi Trinh et al. (2011) use input-output table published
by General Office of Statistics and fundamental theories of W.Leontief
and J. Keynes to analyze production-promoting indexes and importspromoting indexes based on the structures of the economy.
To evaluate the affecting factors to growth and productivity of an
industry, one of the widely-used methods is Cobb-Douglas production
function and regression method. Specifically, the research by Chu Thị
Thu and Hoàng Thị Dung (2013) uses Cobb-Douglas production
function to analyze factors affecting coal mining output in Vietnam. At
enterprise level, using production function and panel data regression
method with fixed effects, Phạm Thế Anh and Nguyễn Đức Hùng
(2013) analyze and evaluate the impacts of business environment
mechanism on performance of enterprises in Vietnam.

Contributions of SI to EG
The roles of SI in economic growth have been affirmed in the views
of some foreign researchers as follows:
Michael Porter (2012) claims that one of the decisive factors to a
country’s comparative advantages in an industry is the existence of
supporting

and

relevant

industries

and

their

international

competitiveness. Junichi Mori (2005) states that the roles of SI in EG
are reflected by the driving of FDI to the country, the attraction of
investments from multinational corporations, the promotion of FDI
accumulation, the acceleration of EG in the long term.
According to Kaldor (1966), there is a close relation between the
growth in added values of an industry and the growth in GDP. Ha-Joon
Chang et al. (2013) clarify the roles of processing – manufacturing
industries as follows: promoting productivity growth; producing inputs
for production; renewing organizations; creating demand for high-yield
activities in other industries; having higher commercial values than
agriculture and service. Besides, research by Adam Szirmai (2009,

to come to research conclusions. For instance, the research by Chu-Yao
Tseng (2008) on the impacts of internal R&D, import technology on
economic added values in case of Taiwan electronic sector, the research
by Daniel Gonçalves and Ana Martins (2016) on factors determining
growth in Portuguese processing and manufacturing industry, etc.
1.1.3. Summary of not-yet-researched issues
(i) Research on supporting industry development
In terms of theories, the theoretical grounds on the development
of SI in general and SI for electronic sector (ES) in particular have not
reached agreements in the concepts and scopes of SI; the criteria to
evaluate the development have not matched the concepts and
fundamental issues of development under the approach of development
economics.
In terms of reality: previous research has not highlighted the
situation of development, difficulties and limitations in the operations
of SI enterprises in connection with specific main industries (for
example, the electronic sector).


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(ii) Regarding the relations between SI development and EG,
previous studies have been limited to theoretical arguments rather than
quantified the impacts of the development of SI in general and SI for
electronics in particular on some macro-economic indicators such as
economic growth, export growth, FDI attraction, etc.
Regarding methods to evaluate the impacts: to evaluate the
impacts of an industry on EG, 2 main methods are often applied by
domestic and foreign researchers: Input-output table method (I/O) and
econometrics method (regression).
(iii) Regarding factors affecting the relations between SI

(i) In content: the theories are generally researched for SI, the
reality merely focuses on the development of SI for Vietnam’s ES.
(ii) In research period:
To analyze the development of SI for Vietnam’s ES, the dissertation
only focuses on the 2011 – 2016 period.
To analyze the impacts of SI development on Vietnam’s EG using
input-output table method, the dissertation uses input-output tables of the
years 2007, 2012 and 2016.
To analyze the impacts of SI development on ES, the dissertation uses
the set of data from the general survey on enterprises in the two periods of
2006 – 2015 and 2012 – 2015.
1.2.4. Research approaches, hypotheses and methods
1.2.4.1. Research approaches
To gain the already-set research goals, the PhD learner
approaches the research from the following angles: approach from
development economics; approach from historic/logic view; approach
from theories to reality; approach from multi sectors; approach from
production and supply chains.
1.2.4.2. Main research hypotheses
Based on research approaches, the research questions that the
dissertation needs to be tested quantitatively via the following


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equivalent hypotheses:

H1: SI for ES have positive impacts on

production values, added values of the entire economy; H2: The
development of SI for ES increases the spillover linkages to the

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measurement indicator. Besides, to evaluate the roles of supporting
industry development in EG, the PhD learner also uses extra indicators
including factors affecting gross supply and demand.
2.1.1.2. Supporting industry development
Concept of SI: In the scope of this dissertation, the PhD learner
chooses to adopt the definition of SI as “industries which product
fundamental materials, components, spare parts, semi-products to
provide to assembly industries such as automobile, electricity,
electronics, etc.”
Concept of SI development: SI development is the increase in
output scale; together with the changes in industry structure and the
advancement in capacities of supporting industry enterprises.
Concept of SI for electronic sector: SI for electronic sector is
industries producing fundamental materials, components, spare parts,
semi-products to provide to electronic assembly industries, etc.
Features of SI and SIs for electronic sector
First, the multi-level of SI; Secondly, links according to production
procedures, regions and dependence on the main industries; Thirdly,
diversity in technology and production levels; Fourthly, attracting a
large number of enterprises, especially small and medium ones.
Besides, SI for electronic sector has the additional typical
features as follows: Firstly, the life cycle of electronic products is short,
thereby demand for products in electronic SI changes rapidly; Secondly,
production of electronic SI depends largely on the development of
science and technology; Thirdly, electronic components can be
categorized into two groups: small components and big machine
components.
Measuring the development of supporting industries




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and added values for the main industrial products and the entire
economy.
2.2. Analysis frame of the impacts of supporting industry
development on economic growth in the case of electronics and
methods to evaluate the impacts
2.2.1. Analysis frame
 Firstly, the development of SI for electronics plays an important
role in raising productivity and efficiency of the economy.
 Secondly, the development of SI for electronics plays the role of
attracting, orienting and maintaining investment capital, especially FDI.
 Thirdly, the development of SI for electronics can promote
exports
 Fourthly, the development of SI for electronics has spillover
effects and linkages with other industries in the economy.
 Fifthly, the development of SI can restrict trade deficit while an
underdeveloped SI may make imports increase.
 Sixthly, the development of SI can improve the competitiveness
and added values for the main ES and the entire economy.
2.2.2. Methods to evaluate the contributions of supporting industry to
economic growth
Qualitative methods such as descriptive statistical, comparative
and contrast, etc. are used to analyse the situation of supporting industry
development, on that basis, it is possible to evaluate the impacts of the
industry on productivity increase via technological renovation,
organizational reforms, FDI attraction and export promotion.
Quantitative methods: the input-output model and econometrics
model.

effects on income of employees.
2.2.2.2. Econometrics method
The overall equation to evaluate the impacts of SI on the
development of electronic industry is as follows:
log( YCNDT )  log( A)   log( K )   (log L)   log( YCNLKDT )   log( YCNHTK )  Xi

Where:
YCNĐT: revenue of the electronic industry; A: other factors
affecting the revenue of the electronic industry; K: total capital; L:


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number of laborers; YCNLKĐT: revenue of electronic components
production industry; YCNHTK: revenue of other SI; Xi: Control variables
added to the model such as market size; labor quality; factors related to
infrastructure, institution, policies; variables of enterprise characteristics
(enterprise scale, export/not export); etc.
2.3. Affecting factors to the promotion of economic growth of
electronic supporting industry development

Firstly, market volume; Secondly, quality of industrial hr;
Thirdly, infrastructure; Fourthly, policy system; Fifth,
information system; Sixthly, the nation's advantage in the EI
Value Chain; Seventhly, issues related to competitiveness and
business management
2.4. Experience in electronic supporting industry development in
some countries and lessons for Vietnam
2.4.1.

Experience of some countries in the world

economic growth quality: processing-manufacturing industry attracts
most of the FDI and contributes largely to Vietnam’s export growth. In
the past 5 years, processing-manufacturing industry is regarded as
gaining good growth in both quality and quantity, therefore it has made
considerable contributions to the rate and quality of the growth of the
economy. However, Vietnam’s processing-manufacturing industry still
reveals many limitations: it is inclined to exploiting natural resources to
get raw materials, so it does not bring high added values to the economy
and restricts the economic growth quality.
3.2. Situation of the development of supporting industry for
Vietnam’s electronic sector
3.2.1. Overview of the development of Vietnam’s electronic sector
Vietnam’s electronic industry has developed rapidly since 2010.
By the end of 2016, the number of enterprises in the industry was 1145,
attracting 497,037 laborers. Most electronic enterprises are small and


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medium sized, causing lots of difficulties to the innovation and
advancement of technology.
In terms of imports-exports: Exports of electronic products of
Vietnam have experienced quite strong growth. Particularly, importexport turnover of Vietnam’s electronic sector accounts for a quite high
proportion in the total import-export of the country.
In terms of FDI attraction, Vietnam’s ES plays an important
role in attracting FDI capital. However, most of the investment in
electronic industry is in the form of 100% foreign capital while jointventure, especially partnership contract, account for a very low
percentage. This reflects the linkages between FDI enterprises and
domestic enterprises.
3.2.2. Situation of the development of supporting industry for
electronic sector

on production area of supporting industry remains low.
As for the linkage between electronic SI enterprises and
customers and suppliers: Generally, the linkages in industrial zones
and clusters and between enterprises are limited.
3.3. Impacts of the development of supporting industry for
electronic sector to Vietnam’s economic growth
3.3.1. Analyzing the impacts of supporting industry development on
Vietnam’s economic growth using input-output method
3.3.1.1. Description of the applied method and data
Applying the meaning of Leontief matrix, the PhD learner
investigates the impacts of SI on the production of other industries in
the economy and impacts on total production values, added values,
linkages of the economy.
About the data: the learner uses non-competitive I/O table of
Vietnam in 3 periods of 2007, 2012, 2016.
3.3.1.2. Results and evaluation


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Analyzing the impacts via closed I-O model
Impacts of SI on production values and added values: The trend
is SI production makes production values increase, added values
decrease (the coefficient of impacts of supporting industry on added
values decreases from 0.53 to 0.38 and 0.41).
As for linkage impacts: the coefficient of backward linkages of
SI is quite low (

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Equation 2:
log( doanhthu _ dientu it )  log( A)   log( laodong _ dientu it )   log( von _ dientu it )
  log( dtlkdt _ tinh it )   log( doanhthu _ ptkhac _ tinhit )   log( GDP _ tinh ) 

PCI it  daotaold it  qmdn _ ld i  XNK i  n hom dni  eit

3.3.2.2. Impact results
(i) Regression model with dependent variable as revenue of
electronic sector at provincial level
Results indicate that revenue of the electronic sector depends
largely on capital, laborers of the sector and revenue of the componentsproducing industry. All regression coefficients have high significance
(over 95%) and have positive value. At (mh4), the regression coefficient
χ = 0,08879545, meaning that when other factors remain constant, an
increase of 1% in the revenue of the components-producing industry of
the province in the previous year will result in an increase of 0.089% in
the revenue of the electronic sector of the province in the following
year. This affirms the positive effects of the components-producing
industry on the revenue of Vietnam’s electronic sector.
(ii) Regression model with dependent variable as revenue of
electronic sector at enterprise level
The calculation results in all 4 models show that the revenue of
the components-producing industry and revenue of some other
supporting industries have impacts on the revenue of the entire
electronic sector. At (mh4), the regression coefficient χ=0,25290833,
indicating that when other factors remain constant, an increase of 1% in
the revenue of the components-producing industry of the province will
result in an increase of nearly 0.253% in the revenue of the electronic

Vietnam has made specific policies to develop SI. In 2015, the
Government issued Decree No. 111 on Developing Supporting
Industry so as to stipulate incentive and preferential policies to


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supporting industry development. However, the process of building up
and implementing policies has revealed lots of inadequacies.
3.4.5. Information system
At present, the information system of market, trade and
investment promotion, producers and suppliers of supporting industry
products is mainly provided by Ministry of Industry and Trade,
Associations and Centres for Business Supports. However, due to slow
implementation, modest care from most supporting industry enterprises,
loose connection with electronic supporting industry, the positive
impacts that the system brings about remains low.
3.4.6. The nation's advantage in the Electronic Industry Value Chain
Vietnam is considered one of the countries with advantages of
abundant labor force and low wages; In addition, the ES has advantages
in terms of market size; Therefore, it attracted a large number of FDI
enterprises investing in the field of EI. However, production activities
are mainly through assembly activities, which depend heavily on
imported, underdeveloped SIs, which have made the country's
advantage not have a positive impact on Vietnam's EG. .
3.4.7. Factors related to competitiveness, business management and
others
From FDI enterprise engaged in SI production to provide for
Samsung, the interview results show that there are three main
difficulties in production activities of enterprises: production costs are
high due to dependence on imported materials; market volume is not

renovating technology, renewing production; fourthly, promoting
linkages.
Solutions to promote factors with positive impacts to the
promotion of EG of electronic SI development include: fostering the
demand for SI products; developing and improving the quality of
human resources for SI; strengthening the implementation of policies to


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develop SI; exploit better the national advantages to participate more
effectively in the value chain of electronic industry .

CONCLUSION
New contributions of the dissertation
In theories, the dissertation has two main contributions: (1)
Building up and completing theoretical frames on the roles of electronic
SI in EG, including: Raising the productivity and effectiveness of the
economy; Attracting and driving investment flows; Promoting exports;
Fostering spillover effects and linkages; Impacting on imports;
Enhancing the competitiveness and added values for the main electronic
industry and the entire economy. (2) Proposing methods to evaluate the
effects and impacts of electronic SI on EG by combining 2 quantitative
methods: Input-output table model (I-O) and regression model based on
open Cobb-Douglas production function.
In reality, the dissertation has made the following dicoveries in
the case of Vietnam: (1) Overviewing the situation of SI for Vietnam’s
ES; (2) Evaluating the impacts of the development of electronic SI on
Vietnam’s EG; (3) Identifying affecting factors to the promotion of
Vietnam’s EG of electronic SI development; From those, point out the
causes leading to limitations in the impact of electronic SI on the EG;