growth accounting methodology to obtain the data of TFP growth. ..... FDI to total investment will result in a small increase of 0.18 percent in TFP growth. .... country economic growth', International Business Review, vol. ...... agency, information systems and software are designed to be user-friendlyâ, and âIt is easy for me.
Academy of Taiwan Business Management Review Volume 10* Number 2* August 2014 ISSN 1813-0534 The journal is listed in Cabell’s, Ulrich’s, and the Journal Rank List of Australia Research Concil with ERA ID 40538. It is ranked “B” by ABDC (Australian Business Deans Concil)
BOARD MEMBERS Dr.Kent Tseng Dr. Yi-Hsin Liu Dr. Pao-Hsiang Lin Dr. Wei-Hsiung Shen Dr. Ghi-Feng Yen
EDITORIAL ADVlSORY BOARD Dr. Yi-Hsin Liu Dr. Ali Salman Saleh Dr. Jochen Wirtz Dr. Chris Rowley Dr. Robert-Leigh Compton Dr. Wei-Hsiung Shen Dr. Kurt April Dr. Ghi-Feng Yen Dr. Martin C. Kao
)RUHLJQ'LUHFW,QYHVWPHQWDQG7RWDO)DFWRU3URGXFWLYLW\LQ9LHWQDP $Q (PSLULFDO,QYHVWLJDWLRQ Vo Thi Trung Trinh,Information Division,Department of Planning and Investment,Ho Chi Minh City Vietnam Ali Salman Saleh( Author for correspondence),Notre Dame University,Louaize, Lebanon Reetu Verma,University of Wollongong,Wollongong, Australia
$%675$&7 This paper investigates the relationship between Foreign Direct Investment (FDI), Research and Development (R&D), Human Capital (HC) and Total Factor Productivity (TFP) growth in Vietnam during the period of 1990-2010. The relationship is examined using the Narayan and Popp (2010) unit root test with two structural breaks and the Autoregressive Distributed Lag coin tegration approach. The findings indicate that a short-run positive relationship exists between FDI, R&D and TFP growth in Vietnam during this period. The results also reveal that human capital (HC) have a negative impact on TFP in Vietnam in both the short and long-run. Measures are suggested in order to enhance TFP growth and sustainable growth for the Vietnamese economy. Keywords: Total Factor Productivity (TFP), Foreign Direct Investment (FDI), Research and Development (R&D), Human capital (HC), Vietnamese economy, policy implications
,1752'8&7,21 Total Factor Productivity (TFP) is a key component of economic growth for most countries. It is also a vital measure of efficient use of capital and labour inputs (Berument et al. 2011). TFP growth can be explained as growth through technological innovation and efficiency achieved by enhanced labour skills and capital management (APO 2011). Mahadevan (2004) indicated that TFP growth has become synonymous with long-run growth as it reflects the potential for growth. Foreign Direct Investment (FDI) plays an important role in the development of various sources of TFP growth, such as technological change and managerial efficiency. This is due to FDI’s involvement in the transfer of financial capital, technology and other skills in terms of managerial, marketing and accounting (Moosa 2002). A number of empirical studies found that TFP growth is affected by several factors such as FDI, human capital development, research and development (R&D) expenditure as well as inflation volatility (Alfaro et al. 2009; Berument et al. 2011; Liu & Wang 2003; Tuan et al. 2009). In the case of Vietnam, FDI is one of the most important sources for sustained export and economic growth (Anwar & Nguyen 2010; Nguyen & Xing 2008). However, FDI has also been criticised as increasing labour disputes and not contributing to technology transfer thus limiting the economic benefits it provides to the host country (MPI 2008). The objective of this paper is to contribute to the literature by empirically investigating the short-run and long-run relationship between FDI and TFP growth in Vietnam during the period of 1990-2010. It is surprising that despite the importance of this issue, there is very limited research on the relationship between FDI and TFP growth for both short-run and long-run in the case of Vietnam. In the international trade literature, although, there are a number of studies (see Anwar & Nguyen 2009, 2010, 2011; Le & Pomfret 2011; Nguyen & Xing 2008; Varamini & Vu 2007; Vu 2008) that investigate the relationship between FDI and the Vietnamese economy, none of them focused on the relationship between FDI and TFP growth. For instance, Anwar and Nguyen (2009) examined the impact of FDI on TFP growth utilising both horizontal and vertical linkages. However, their study only focused on Vietnamese manufacturing; not on the Vietnamese economy thus missing the important relationship between FDI and TFP growth. Additionally, it can be argued that their findings are outdated due to a number of changes in Vietnam’s economy and to Vietnam’s recent economic policies since the study was completed. For example, in 2005, Vietnam promulgated the Investment Law 2005 and Vietnam has been a WTO member since 2007. Accordingly, flows of foreign capital are expected to increase significantly in the form of direct investment and indirect investment, particularly in the service industry. Hence, it can be argued that the relationship between FDI and TFP growth in Vietnam is not clearly confirmed yet and that it is necessary to further examine this relationship. Hence, this study explores the following question: Did FDI have a positive impact on TFP growth in Vietnam between 1990 and 2010? This question is important as it is anticipated that the findings could assist policy makers to improve investment policies in order to gain benefits for the Vietnamese economy. However, this has not been addressed by previous empirical studies. In terms of the potential for growth, TFP has become synonymous with long-run growth (Mahadevan 2004). Hence, this study aims to enrich empirical knowledge on the short-run and long-run relationship between FDI and TFP growth in Vietnam and to examine whether FDI has played any role in 1
increasing TFP growth in Vietnam during this period. This paper has applied a positivist methodology and taken a deductive approach to examine the relationship between FDI and TFP growth in Vietnam between 1990 and 2010. This study focuses on both the short and the long-run relationships between FDI and TFP growth. Specifically, we aim to determine the factors which impacted on TFP growth in the Vietnamese context. In order to do so, this paper employs advanced econometrics models, namely the Narayan & Popp (2010) unit root test with two structural breaks and the Autoregressive Distributed Lag (ARDL) cointegration method. The remainder of the paper is organised as follows. Section 2 provides an overview of the Vietnamese economy and Section 3 reviews the literature. Section 4 introduces the theoretical framework. The methodology is highlighted in Section 5. Data and empirical findings are detailed in Section 6. Section 7 discusses the empirical findings. Section 8 concludes the study with policy implications.
$129(5,(:2)7+(9,(71$0(6((&2120. VnEconomy 2011, Lam phat do dau? , viewed 15/02/2013, VPC 2009, Vietnam Productivity Report 2006-2007, The Vietnam Productivity Centre Hanoi. VPC 2011, Vietnam Productivity Report 2010, The Vietnam Productivity Centre Hanoi. Vu, TB 2008, 'Foreign direct investment and endogenous growth in Vietnam', Applied Economics, vol. 40, no. 9, pp. 1165-1173, bth, EBSCOhost, Waldkirch, A 2010, 'The Effects of Foreign Direct Investment in Mexico since NAFTA', The World Economy, vol. 33, no. 5, p. 36, Waldkirch, A, Nunnenkamp, P & Bremont, JEA 2009, 'Employment Effects of FDI in Mexico's Non-Maquiladora Manufacturing', Journal of Development Studies, vol. 45, no. 7, pp. 1165-1183, Wang, M 2009, 'Manufacturing FDI and economic growth: evidence from Asian economies', Applied Economics, vol. 41, no. 8, pp. 991-1002, WB 2011, Research and development expenditure, The World Bank, viewed .
14
(QYLURQPHQWDO*RYHUQDQFH $&DVH6WXG\LQ6LQJDSRUH Huong Ha, UON Singapore (University of Newcastle, Australia, Singapore campus)
$%675$&7 This article discusses a multi-sector governance model for environmental management with three governance approaches corresponding with the level of government intervention and the level of non-state actors’ participation. It explains how governance works in a context where democratic processes/opportunities are limited and where state-based approaches dominate, using Singapore as a case study. It also examines how non-state sectors’ participation affects the governance outcome in Singapore. Positive and negative lessons from the Singapore experience, regarding how to balance between democratic development and environmental management, may benefit other city-states. Keywords City state, environmental sustainability, multi-sector governance model, participation, state-based approach, Singapore
,1752'8&7,21$1'5(6($5&+2%-(&7,9(6 The reforms of public management and rapid environmental change have prompted relevant actors to search for new forms of governance. Thus, new concepts of governance emerged, embracing government, the private sector and civil society, which have been extensively discussed by Kooiman (1999) and Coghill (2004), Ha (2011; 2012a; 2012c), and Ha, Coghill and Maharaj (2009, 2011). Yet, new governance approaches are still being tested, and the effectiveness of such “governance arrangements are unclear and require further scrutiny” (UNEP 2012, p. v). Also, the impacts of environmental degradation have gone beyond the traditional governance approaches, crossed the boundaries of various research disciplines, and crossed nations and regions, and thus innovative governance approaches are urgently required to address the issues associated with environmental management (Esty and Ivanova 2002). There is a positive co-relation between good governance, especially democratic aspect, and sustainable development (Almeida and Ferreira 2002). Yet, there are situations where governance with limited non-state actors’ participation can function relatively well. This article aims to (i) discuss a theoretical framework including a multi-sector governance model and three associated governance approaches for environmental management, and (ii) explain how governance works in a city state, using Singapore as a case study. For the purpose of this article, the role of state and non-state sectors, and non-state sectors’ participation are the main focus of the discussion. In this article, stakeholders include government (the public sector), the private sector (business/market), and civil society or civil society organisations (CSOs). CSOs are the representatives of citizens and include interest groups, industry, professional and consumer associations involved in environmental protection. The author does not aim to present the case of Singapore as “reliable histories of events” (Moore and Hartley 2008, p. 7), nor as a representative sample of good governance. Instead, the case has been offered as a particular evidence of governance approaches, which may not seem to fit in the usual frame of environmental governance in many countries. Thus, the value of this case lies in its ability to incite the conventional and conceptual thought in governance. This article would provide insights for further research in environmental governance and management, especially when governance works in the context where the aggregate indicator of voice and accountability was in the average range (World Bank Institute, n.d.). However, there have been signals of social shifts in environmental management towards more open to public participation as explained by Tortajada and Joshi (2013) that the activities of civic societies (especially in water demand management) in Singapore have thrived under the support of the government’s support. Although policy processes, power relationship and other factors may affect environmental management, the focus of this article is on governance.
/,7(5$785(5(9,(:$1'7+(25(7,&$/)5$0(:25. ˅*RYHUQDQFH Governance embraces different dimensions, namely, structures, practices, responsibilities, mechanisms, interactions, authorities, regulations, and communications (Kooiman 1999; Stocker 2004; Haque 2005; Black 2012). The Department of Economics and Social Affairs, United Nations (2007) defined governance as “the formal and informal arrangements that determine how public decisions are made and how public actions are carried out from the perspective of maintaining a country’s constitutional values” (p. iii). Praven and Kenis (2007), Kooiman et al. (2008), Black (2012), and Falaschettie (2013) viewed governance as interactive networks and processes which could solve societal problems and distribute interests. In other words, governance refers to the process of how decisions are made and implemented by different groups of stakeholders in society.
15
˅'LIIHUHQW*RYHUQDQFH$SSURDFKHVDQGD7KHRUHWLFDO)UDPHZRUN Braithwaite and Drahos (2000), Moore and Hartley (2008), Deringer, Fisher and Black (2010), Fisher and Surminski (2012), Falaschetti (2013) explained that governance embraces state, the private sector and CSOs that shares respective responsibility apart from covering the multi-dimensions of governance discussed in the previous section. Kooiman et al. (2008) explain that Governance in its broad sense suggests that not only the state but also market and civil society have prominent roles in the governing of modern societies, from local to international levels (p. 1)… (3).
Drezner (2004) argued that government could not be completely replaced by non-state sectors due to its roles as a creator and facilitator of economic development, political stability and social order. Government acts as a regulator and a policy maker, an economic stimulator to facilitate economic growth and business sustainability, a provider of public goods/services and a coordinator of the activities of different sectors (Braithwaite & Drahos 2000). )LJXUH The multi-sector governance model and three corresponding governance approaches Being a policy and rule maker and an enforcer/monitor
Being a strategic plan maker and an institutional establisher
Assisting business Being a R&D investor and a resource allocator
*RYHUQPHQW (state/public sector)
Complying with regulations Adopting self-regulation Practising social responsible Co-operating with other sectors Investing in R&D
Educating the public and coordinator of activities of non-state sectors
Monitoring activities of the public %XVLQHVV (market/public sector)
&LYLOVRFLHW\ (the third sector)
and private sectors
Taking non-regulatory actions against business offenders
Educating the public Co-operating with other sectors
Spectrum of governance
Control-based/Directed governance approach
No or limited (i) participation of non-state sectors, and/or (ii) interaction among sectors
Enabling/Facilitation governance approach
Moderate level of (i) participation of non-state sectors, and/or (ii) interaction among sectors
Laissez fare governance approach
High level of (i) participation of non-state sectors, and/or (ii) interaction among sectors
Source: by the author
Market forces are considered the fundamental drivers for competing resources to meet the market demand and contribute to sustainable development (World Economic Forum et al. 2005). However, businesses do not share the same values, objectives or good practices in terms of social and environmental protection, and thus some forms of external or social regulation are required (Huetter 2002). Therefore, CSOs have a role to play in environmental governance via monitoring the compliance of businesses with government regulations and guidelines, and advocate for better business practices and social responsibility. Though Sacks (1996) argued that “(w)ithout a strong civil society, even political and economic structures [would] fail (17), the level of their participation and activities vary widely from country to country. Generally, government requires inputs from other sectors to (i) accomplish its roles, and (ii) ensure transparency, accountability, and effective provision of public services to citizens (Strandenaes 2007). Since environmental management “requires the participation of all members of society, as public policy makers, producers, consumers … community activists and voters” (UN Department of Economic And Social Affairs 2002, p. 1), all sectors should play a role in environmental governance. The theoretical roles of different sectors are summarised in Figure 1. 16
This multi-sector governance model recognises the interdependence and interaction among the sectors. However, in some contexts, government will exercise more control, whereas in other circumstances, there may be an absence of government intervention. The roles, the position of stakeholders, the power base, and the rules of interaction among different sectors would vary according to external conditions. Thus, Gunningham and Grabosky (1998), and Hysing (2009) discussed different versions of environmental governance, including centralized governance, decentralized governance, public-private governance, interactive governance and self-governance. The theoretical framework of this article has been built on the argument that the multi-sector governance approaches can be classified into three main groups, namely control-based or directed governance approach, enabling or facilitation governance approach, and laissez faire governance approach (see Figure 1). In the first governance approach, government agencies will play the dominant role of providers or controllers of information, power, resources and interest distribution. This is also referred to as the command-and-control governance approach by Falaschetti (2013). In the second approach, government would encourage non-state sectors to participate in environmental governance. Government would play the role of a facilitator to enabler other sectors to take a bigger role in environmental management. In this case, some governments have shifted from being direct providers of goods, services, rules, etc. to overseeing the making, monitoring and enforcement of rules, regulations and norms by other sectors (Scott 2010). Falaschetti (2013) also described this form of governance as monitoring-based governance. In the last approach, government intervention is minimised or even absent in the governance process. This type of self-governance refers to the capacity of non-state actors to identify their own problems and frame their own solutions (Stocker 2004). Lidskog and Elander (2010) argued that non-state actors’ participation is one of the mechanisms to achieve democracy, which is an essential dimension of good governance (UN Department of Economics and Social Affairs 2007). Participation refers to the level of involvement of non-state sectors in the decision making process in environmental governance (Ebdon, 2002). Mizrahi, Vigoda-Gadot and Cohen (2009) discussed a ladder of participation. The bottom of the participation ladder “comprises processes in which power holders seek to educate the public about particular issues” (Mizrahi et al. 2009, p. 11). At a higher step on the ladder, authorities will consult relevant stakeholders who could affect and could potentially be affected by a decision. On the next step of the ladder, authorities agree to share some responsibilities with non-state actors regarding decision making, and on the highest rungs of the ladder, non-state actors will dominate the decision making process (Mizrahi et al. 2009). This is the highest level of participation which requires a transfer or sharing of “decision-making power from traditional decision makers to lay individuals” (Mizrahi et al. 2009, p. 12). According to King, Feltey and Susel (1998), non-state sectors’ participation in decision-making processes would improve the performance of government agencies. Vigoda (2002) also agreed that participation is important in all administrative and political processes since it may enhance the level of trust in public agencies because such engagement would facilitate the dissemination of information stakeholders have about various aspects of governance. Since the “interactions (among sectors) are shaped by the context of complexity and diversity in which they take place”, the level of interactions among various actors vary in different governance approaches (Stocker 2004, p. 440). Therefore, the level of non-state sectors’ participation and the interaction among sectors in Singapore is a nucleus of examination in this paper.
5(6($5&+0(7+2' This is a conceptual paper, and the main theoretical framework has been revolved around governance approaches, and the role and interaction of different sectors in environmental management. According to the UN Department of Economics and Social Affairs (2007), “on a national level, governance can be analysed more comprehensively thanks to more flexible and specific features” (p. 6), and thus this paper examines environmental governance at the national level, and this fits to the context of Singapore as a city-state with only one level of government. Information for this case was obtained from various sources, including scholarly and peer-reviewed academic and non-academic literature, publications by industry, and reports by government and non-government agencies. Some sources of published information about Singapore regarding governance, the role of different sectors, critique on democracy, and non-state sectors’ participation, are from the United Nations and its agencies, and respective ministries in Singapore. The method of enquiry is to examine the activities of the three sectors, focusing on non-state sectors’ participation in Singapore. The analysis will help to evaluate the level of government intervention, i.e. the government plays the role of a provider or a controller or facilitator or an enabler of resources and power, in environmental governance. The examination criteria are based on the role of each sector identified from the literature and various sources mentioned above, the level of government intervention and the level of non-state sectors’ participation. This article essentially tries to explain how a city state can achieve a certain level of environmental sustainability, with limited input from 17
non-state sectors. Singapore is selected for the following reasons. Singapore has a unique feature of being a small independent city-state with limited natural resources. This reality forces the political leaders to mobilise various sectors to generate a sustainable environment for national building and development in a highly volatile and competitive region. Thus, effective governance and management of physical and social resources are keys to national survival in Singapore.
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