Tropentag, October 5 - 7, 2004 in Berlin "Rural Poverty Reduction through Research for Development and Transformation"

Can Social Accounting Matrix (SAM)--Based Models Serve as Appraisal Tools for Large-scale Infrastructure Projects? A Provincial CGE Approach for Vietnam

University of Hohenheim, Department of Agricultural Economics and Social Sciences in the Tropics and Subtropics (490A), Germany

Abstract

Large regional disparities persist in Vietnam, with a poverty rate of 68% in the north-western mountainous region compared to a national average of 28.9% (Joint Donor Report, 2003). To confront these inequalities and to lay the foundations for concerted regional action, the national Comprehensive Poverty Reduction and Growth (CPRGS) strategies will be rolled out to the provincial level and to the planning large-scale public investment projects.
An economy wide model is highly desirable to assess the effectiveness of targeted policies and the efficient use of public financial resources. The social accounting matrix (SAM) is a powerful tool for this kind of socio-economic analyses. Our contribution presents a recent SAM (year 2002) for Son La, one of the poorest provinces in the northern mountainous region of Vietnam. It reveals linkages between 22 production activities, 26 commodities, 3 factor endowments and 10 institutional accounts and serves for descriptive as well as a basis for computational analyses. It is the first provincial- level SAM in Vietnam and a step forward towards the use of this framework for regional poverty reduction strategies.
In this context we depart on the use of SAMs as a tool for large scale projects appraisals. It can be shown that this approach has the potential to serve as an effective supplement to project- based and statistical approaches. In the case of Son La, construction of a hydroelectric power plant with an investment volume worth 15 times annual provincial GDP starts in 2005. Preliminary results find great poverty reducing potentials through direct and much more through indirect effects. Construction and transportation services, sectors with presumably high growth rates in the context of infrastructure development, both have large multiplier effects. For each currency unit (CU) of increased demand in these two sectors, demand for agricultural products are estimated to rise by 0.39 and 0.46 CUs. Households could generate an estimated additional income of 0.7 and 0.8 CUs respectively.
Further research will extend the multiplier model to a dynamic CGE model and substantiate the scenarios. Results will be available by the time of the Tropentag conference in October.

Keywords: CGE, Infrastructure, Investment, PRSP, Social Accounting Matrix (SAM)

Contact Address: Clemens Breisinger, University of Hohenheim, Department of Agricultural Economics and Social Sciences in the Tropics and Subtropics (490A), Hohenheim, 70599 Stuttgart, Germany, e-mail: breisingergmx.de