A Spatial Equilibrium Analysis of Policies to Promote the Wood-Processing Industry in Northern Vietnam

Hieu Phan Sy (2011). A Spatial Equilibrium Analysis of Policies to Promote the Wood-Processing Industry in Northern Vietnam PhD Thesis, School of Economics, The University of Queensland.

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Author Hieu Phan Sy
Thesis Title A Spatial Equilibrium Analysis of Policies to Promote the Wood-Processing Industry in Northern Vietnam
School, Centre or Institute School of Economics
Institution The University of Queensland
Publication date 2011-03
Thesis type PhD Thesis
Supervisor Associate professor Steve Harrison
Associate professor David Lamb
Total pages 265
Total black and white pages 265
Subjects 14 Economics
Abstract/Summary The Government of Vietnam (GoV) has planned increased self-sufficiency in terms of the domestic production of wood and wood-processing products. For example, by 2010 the forestry industry could supply approximately enough raw materials for the wood-processing industry, including 100% of raw materials for prop, ship, pulp, paper and engineered-wood products, and 85% of raw materials for domestic furniture production. The domestic production of paper and furniture products with the planned quantities of 1.5 and 2.4 Mt respectively would not only meet the domestic demand but also have an export by 2010. In order to achieve the plan, the GoV has sought to increase the area of planted production forest by the implementation of the Five Million Hectares Program and expand the production capacity of the domestic wood-processing industry. For example, in 1998, 19 new paper factories and 20 engineered-wood enterprises were planned to be built in the whole country during the 2000-10 period. Of these, nine paper enterprises and five engineered-wood enterprises were in northern Vietnam. Similar to many countries, main national objectives were not achieved in Vietnam by 2010. Factors impeding the achievement include distances between the new factories, declining import taxes, low design production capacities of the new factories and high average production costs. This thesis seeks to address these problems by developing a spatial equilibrium model (SEM) and applying this model to analyse policies and explain why the gap between objectives and outcomes has existed, and to draw policy implications on how to increase the probability of achieving planned objectives. The statistical data published about wood and wood-processing products published in Vietnam have not been sufficient to populate the SEM. As a result, a research group including the candidate and his colleagues working at the Statistics and Informatics Centre for Agriculture and Rural Development (ICARD) developed new concepts of wood-processing sub-industry, factory and enterprise and new conversion rates between outputs and inputs, and new conversion rates between measurement units of bundle, stere, m3 and tonne. These new concepts and conversion rates were used to re-classify data published in 2008 to make these data understandable and applicable to the SEM. In addition, the research group also collected external price elasticities to use as proxies to domestic price elasticities. In the literature review, the thesis demonstrates that the SEM with linear supply and demand functions and linear constraints can be solved by linear programming, non-linear programming and mixed complementary programming. Because of its simplicity, linear programming has been used to solve the thesis’ SEM. This SEM is used to evaluate the four policy models of base policy model, planned policy model, implemented policy model and recommended policy model. The base policy model is established to test or validate the reliability of the model written in the software package of the General Algebraic Modeling System (GAMS). The contents of the other three policy models depend on policies and their publication time. Two indicators of average production costs and percentages between supply quantities and design production capacities of the factories are used to examine optimal solutions generated by solving these three policy models. A sensitivity analysis is conducted to check how the optimal solutions are affected if domestic price elasticity levels are equal to or 30% less than or 30% higher than external price elasticities. The SEM for nine products and 29 regions reveals that the supply targets cannot be achieved by 2015 period because planned and implemented policies would force tree growers, owners of paper factories and owners of furniture enterprises to sell their products at unprofitable prices and in unprofitable quantities. For these stakeholders’ activities to be financially sustainable the number of planned new wood-processing factories should be reduced and the design production capacity of each new factory should be increased. For example, planned new small-scale paper factories with design production capacities of less than 300,000 tonnes a year and engineered-wood factories with design production capacities of less than 50,000 tonnes a year should not be built. Closure of existing small-scale paper factories of less than 50,000 tonnes by 2015 should be considered. Consequently, the planned area of planted production forest in northern Vietnam should be less than 900,000 ha, considerably lower than the planned level of about 1.2 million ha by 2015. These conclusions are similar to qualitative opinions asserted by various domestic and international experts, who have argued that there are too many factories planned in Vietnam. The SEM developed and applied in this thesis provides a framework for systematic analysis of policy options for the wood and wood-processing industries and the feasibility of planned production targets.
Keyword spatial equilibrium model, engineered-wood product, conversion rate, enterprise, factory, five year plan, sub-industry, simplex method, planted production forest

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Created: Tue, 30 Aug 2011, 20:39:10 EST by Mr Hieu Phan Sy on behalf of Library - Information Access Service