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| Processing cashew nuts at dan On Foods in Tan Binh Dist., HCM City: Agro-product processing has toppled heavy industry to exert the greatest multiplier effect on the city's economy. |
Research on HCM City’s economic restructuring over the past decade shows that the multiplier effects which several basic sectors of the city leave on this city and on other localities of Vietnam have both changed.
It is complicated to estimate and set up a model which straddles across sectors and regions. Therefore, this study focuses on 12 sectors: (1) agro-forestry-fishery, (2) mining, (3) agro-product processing, (4) light industry, (5) heavy industry, (6) power, water and gas supplies, (7) construction, (8) commerce, (9) transport, post and telecommunications, (10) finance and realty, (11) public services and (12) other services.
In general, the multiplier effect which final demand exerts on supply has increased (1.708 compared with 1.613) and is higher than Vietnam’s average (1.64). Given HCM City’s development, the increase in the multiplier effect matters even more than GDP growth.
Sector-wise, agro-product processing has toppled heavy industry, as well as power, water and gas supplies, to become the sector which the greatest multiplier effect on the city’s economy. This is appropriate in view of Vietnam’s economic development path. Thus, when agro-product processing takes off, it will benefit HCM City in particular and the country in general. Notably, HCM City’s services exert greater effects than they used to and surpass the national average, which indicates that the shift toward services is justified.
This study shows that HCM City’s internal strength has surged thanks to its sizzling development. This city is thus less dependent on other localities than it used to be.
Above is merely an overview of the research results, based on a model fleshed out over a year ago. Judging by the outcomes, HCM City should continue to focus more on services. Among processing industries, sectors with higher multiplier effects such as agro-product processing should be given priority. Agriculture has steady multiplier coefficients and should have its share of the city’s economy maintained.
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