Luận án: Tác động của AFTA đến ngân sách, thương mại và FDI của Lào (2014)

MINISTRY OF EDUCATION AND TRANING MINISTRY OF EDUCATION AND SPORT NATIONAL ECONOMICS UNIVERSITY NATIONAL UNIVERSITY OF LAOS VIETNAM LAOS ATHSAPHANGTHONG SIPHANDONE IMPACTS OF AFTA ON GOVERNMENT REVENUE, EXTERNAL TRADE, AND FDI OF LAO PDR A dissertation Submitted to the National Economics University, Vietnam and National University of Laos in fulfillment of requirements for the degree of Doctor of Philosophy in Economics Supervisor: Prof. TRAN THO DAT VIENTIANE – 2014 Viết thuê luận văn thạc sĩ, luận án tiến sĩ Luận Văn A-Z Mail: luanvanaz@gmail.399 ii ACKNOWLEDGEMENT My sincere appreciation and heartfelt thanks are expressed to my supervisor, Professor Tran ThoDat, for his regular provision of invaluable pieces of advice, guidance, correction, and encouragement to me throughout this research. This dissertation could not have been successfully accomplished without his contributions and supports. Also, I would like to dedicate this success to my beloved parents and especially to my everlasting dearest wife, my lovely children, who all the time stay beside me with their love and caring.

I would not be able to achieve this success without their continuous supports and great deal of encouragements. Viết thuê luận văn thạc sĩ, luận án tiến sĩ Luận Văn A-Z Mail: luanvanaz@gmail.399 iii TABLE OF CONTENTS ACKNOWLEDGEMENT. ii TABLE OF CONTENTS. iii LIST OF TABLES .v LIST OF FIGURES.

vi ABBREVIATIONS AND ACRONYMS. vi CHAPTER 1: INTRODUCTION .5 Significance of Study .6 Scope of Study.7 Organization of the Dissertation .9 CHAPTER 2: LITERATURE REVIEW .1 Theoretical Literature Review .1 Definition and Levels of Economic Integration .2 Advantages and Disadvantages of Regional Economic Integration .3 ASEAN and AFTA .4 Challenges and Opportunity for Lao PDR after Joining ASEAN .2 Empirical Literature Review.30 CHAPTER 3: ANALYTICAL METHODOLOGY AND DATA COLLECTION .43 Viết thuê luận văn thạc sĩ, luận án tiến sĩ Luận Văn A-Z Mail: luanvanaz@gmail.51 CHAPTER 4: IMPACTS OF AFTA ON ECONOMIC PERFORMANCE, GOVERNMENT REVENUE, EXTERNAL TRADE AND FDI .1 Lao PDR Economic Performance During 1990-2012 .3 GDP per Capita .2 Impacts on Government Revenue. Tax and Non-Tax Revenue .3 Impacts on External Trade. Exports, Imports and Trade Balance, 1990-2012.

Direction of Exports and Imports. Degree of Trade Openness .4 Impacts on Foreign Direct Investment .5 Empirical Evidence of Impacts of AFTA on Government Revenue, External Trade, and Foreign Direct Investment .91 CHAPTER 5: CONCLUSION AND RECOMMENDATION .115 Viết thuê luận văn thạc sĩ, luận án tiến sĩ Luận Văn A-Z Mail: luanvanaz@gmail.399 v LIST OF TABLES Table 2.1: Schedule for Tariff Reduction under CEPT Agreements .2: Timetable for Accelerating AFTA for the Regional Six ASEAN Countries.1: Framework on Analyzing the Impacts of AFTA on Economic Performance, Government Revenue, Trade, FDI.2: Summary of Expected Signs of Independent Variables .3: Data Sources Used in Analysis .1: Directions of Exports, 1900-2012 .2: Merchandise Exports of Lao PDR (% of Total Merchandise Exports) .3: Directions of Imports, 1990-2012 .5: The World‘s most Opened and most Closed Economies in 1996 .6: Degree of Openness of ASEAN Member Countries, 1995-2012 .7: Intra-ASEAN Trade 2009 & 2010 .8: FDI Net Flows to ASEAN .9: Percent Share of FDI in ASEAN .10: FDI as Percent of GDP.11: FDI by Countries, 2001-2010 .12: Results of Regressions by Using Lao Data .13: Results of Regressions by Using the Weighted-Average Data (WAD) .14: Comparing the regression results by using the Lao data and WAD .15: Regression Results by Excluding INFR in the EXP, IMP, and FDI Equations and EXR in the GOVR Equation.16: Regression Results by Excluding INF and EXR in All Equations.101 Viết thuê luận văn thạc sĩ, luận án tiến sĩ Luận Văn A-Z Mail: luanvanaz@gmail.399 vi LIST OF FIGURES Fig.1: Levels of Economic Integration .2: Tendency of ASEAN Members‘ Tariff Rates, 1993-2009 .3: Tariff Rates of ASEAN-6 and ASEAN-4, 1993-2009 .1: Economic Performance of Lao PDR, 1990-2012.2: Resource Sector Contribution to GDP Growth, 2004-2012 .3: Structure of Output as Percent of GDP, 1990-2012.4: Growth Rates of Economic Sectors, 1990-2012.5: GDP per Capita of Lao PDR, 1990-2012 .6: GDP per Capita of ASEAN Members In 2012 .7: Total Revenue of GOL, 1990-2012 .8: Annual Percent Change of Total Revenue and Grant, 1990-2012 .9: Tax and Non-Tax Revenue, 1990-2012.10: Tax and Non-Tax Revenue and Grants as Percent Share of Total Revenue, 1996-2010.11: Components of Tax Revenue, 1995/60-2009/10 .12: Growth Rate of Import and Export Duties, 1996/97-2009/10.13: Total Revenue, Tax Revenue, Total Expenditure, and Budget Balance as Percent of GDP, 1990-2012 .14: Tax Revenue and Tariff Rate, 1998-2012.15: Exports, Imports, and Trade Balance, 1990-2012 .16: Annual Change of Exports, Imports, and Trade Balance, 1990-2012 .17: Exports and Imports as Percent Of GDP, 1990-2012.18: Lao Exports and ASEAN Averaged-Tariff rate, 1996-2013 .19: Lao Imports and Averaged-Tariff rate, 1998-2013 .20: Exports Shared by Countries, 1990-2012.21: Imports Shared by Counties, 1990-2012 .22: Degree of Trade Openness, 1990-2011 .23: Trends of Openness Degree of ASEAN Members, 1995-2012 .24: Foreign Direct Investment in Lao PDR, 1990-2012 .25: FDI Project Numbers by Sectors, 2002-2010 .26: Values of FDI by Sectors, 2002-2010. 90 Viết thuê luận văn thạc sĩ, luận án tiến sĩ Luận Văn A-Z Mail: luanvanaz@gmail.399 vii ABBREVIATIONS AND ACRONYMS ADB Asian Development Bank AEC ASEAN Economic Community AFC Asian Financial Crisis AFTA ASEAN Free Trade Area ASEAN Association of Southeast Asian Nations ASEAN-4 Cambodia, Lao PDR, Myanmar, and Vietnam ASEAN-6 Brunei, Indonesia, Malaysia, Philippines, Thailand, BOL and Singapore CEPT Bank of Lao PDR EXP Common Effective Preferential Tariff EXR Exports FDI Exchange Rate FTA Foreign Direct Investment FY Free Trade Agreement GDP Fiscal Year GDPF Gross Domestic Product GOL Foreign Income GOVR Government of Lao PDR GSP Government Revenue IMF Generalized Systems of Preferential IMP International Monetary Fund Viết thuê luận văn thạc sĩ, luận án tiến sĩ Luận Văn A-Z Mail: luanvanaz@gmail.399 viii INFR Imports Lao PDR Inflation Rate LIB Lao People‘s Democratic Republic MPI Liberalization NSEDP Ministry of Planning and Investment NTRs National Socio-Economic Development Plan ODA Normal Trade Relations RTAs Official Development Assistance TAXA Regional Trade Agreements TAXL Tariff Rate of ASEAN Member Countries VAT Value Added Taxes WAD Tariff Rate of Lao PDR WB Weighted-Averaged Data World Bank Viết thuê luận văn thạc sĩ, luận án tiến sĩ Luận Văn A-Z Mail: luanvanaz@gmail.1 Background Regional integration has become the main form of trade liberalization since the early 1990s. After the conclusion of the Uruguay Round in 1994, no significant progress has been made at multilateral liberalization.

By contrast, a new regional trade agreement (RTAs) is announced almost every month. According to the World Trade Organization, more than 300 regional trade agreements (RTAs) are currently in force and all but one (Mongolia) of its 153 members participate in at least one of those arrangements. Given the rising prominence of bilateral and regional trade liberalization, it is important to understand the implications for world trade. This is even more important because, unlike multilateral liberalization, which most economists believe to be largely beneficial for both liberalizing countries and by standers, preferential liberalization is controversial.

The reason comes from its inherent discriminatory nature: when forming an RTA, members agree to lower trade barriers to each other but their tariffs on imports from outsiders remain unconstrained. This can induce members to substitute inefficiently produced imports from bloc members for imports previously sourced efficiently from nonmember countries. Such trade diversion harms the nonmembers through lost markets, as well as the members through reduced tariff revenue. However, like broader trade liberalization, the RTA is also likely to enhance trade of the goods that are efficiently sourced within the bloc.

This trade creation will enhance welfare. These two forces suggest that preferential liberalization can in principle be either welfare-enhancing or welfare-reducing. Ultimately, the result must be empirical, and may be different for different trading blocs. Trade creation forces may prevail over trade diverting ones in some cases, but the reverse could be true in other cases.

Viết thuê luận văn thạc sĩ, luận án tiến sĩ Luận Văn A-Z Mail: luanvanaz@gmail.399 2 Progress of the integration has been very impressive in recent decades for a number of developing countries in Asia and, to a lesser extent, in Latin America. These countries have become successful because they chose to participate in regional and global trade, helping them to attract the bulk of foreign direct investment in developing countries. This is true of China and India since they embraced trade liberalization and other market-oriented reforms, and also of higher- income countries in Asia—like Korea and Singapore—that were themselves poor up to the 1970s (IMF, 2001). It has been realized since Viner (1950) that the formation of a free trade agreement (FTA) can lead to trade creation and/or trade diversion.

The former arises when the FTA promotes trade among the members without disrupting trade with nonmembers, and tends to be efficiency-enhancing. By contrast, trade diversion arises when the FTA promotes trade among members at the expense of trade with bloc outsiders, and tends to be efficiency-reducing. There have been attempts to pin down theoretically the characteristics that make FTAs more trade creating or more trade diverting. Frankel (1997) develops the ―natural trading partners‖ hypothesis, which states broadly that agreements between countries that already trade significantly (in particular geographically close countries and those that share cultural characteristics that reduce transaction costs, such as language) are the ones most likely to be trade creating.

Although theoretically this does not need to always hold, as Bhagwati and Panagariya (1999) point out, Frankel (1997) finds evidence consistent with the natural trade partners hypothesis in a number of regression analyses based on the gravity equation with country-level trade flows. Lee and Shin (2006) extend the approach of Frankel (1997) and estimate a gravity model with year dummies and with both random and fixed effects to assess trade creation and trade diversion in 175 countries using data from 1948 to 1999. The key trade creation variable is a dummy that is one if both countries are Viết thuê luận văn thạc sĩ, luận án tiến sĩ Luận Văn A-Z Mail: luanvanaz@gmail.399 3 members of a common RTA; the key trade diversion variable is a dummy that is one if one country belongs to an RTA and the other does not belong to that RTA. Lee and Shin interact these variables with geographical and common language variables to identify whether trade creation and trade diversion are different for ―natural‖ trade patterns.

In most specifications, Lee and Shin (2006) confirm that RTAs increase bilateral trade between members. The magnitudes are around 50 percent, but if the countries share a common border this effect increases to up to 200 percent. Similarly, the closer the countries are from each other, the larger is trade creation. On the other hand, RTAs are never found to reduce trade between members and nonmembers significantly.

In fact, in most specifications RTAs are estimated to increase trade between members and nonmembers, from 6 to 15 percent. Trade with nonmembers grows more for RTAs with a smaller average distance between their members and when more members of the RTA have common borders or share a common language. Having the trade creation and trade diversion estimates in hand, Lee and Shin then predict the average trade impact of several proposed RTAs in Asia. They find in particular that the trade effects of AFTA are significantly positive.

There is a sizeable theoretical literature that explores the optimal external tariff response of countries following the formation of FTAs. In a standard model, with a welfare-maximizing government, optimal external tariffs are likely to fall in a free trade area precisely to limit the welfare costs of trade diversion [Bagwell and Staiger (1999), Freund (2000), Bond et al. The intuition is that the welfare cost of trade diversion induces governments to lower external tariffs to recapture tariff revenue and improve economic efficiency. When political-economy motives are incorporated, the results are ambiguous.