DESCRIPCIÓN DE LA INTERFAZ GRÁFICA DE PSS/E [13]

Figure 5.1 shows the importance of the economic sectors based on the backward and forward linkages by the Rasmussen-Hirschman approach in the 2003 economy. The economic sectors were divided into four categories to classify their importance in the economy such as key sectors, backward oriented sectors, forward oriented sectors and weak sectors in each of the four quadrants. The results showed that the food and beverages manufacturing, and agriculture and livestock sectors were the key sectors in 2003. The tourism sector exhibited strong backward linkages along with transport and communication and the electricity and water supply sectors, which were classified as backward oriented sectors. These sectors’ high backward linkage indices show the interconnection of various sectors from which these sectors purchased greater amounts of various inputs from the domestic economy in the country.

Similarly, the wholesale and retail trade; other manufacturing; and personal, community and social services were forward oriented sectors (see Figure 5.1). These sectors’ higher forward linkages indicate the interconnections of direct and indirect output providers between sectors in the industries. The rest of the sectors were classified as weak sectors in the 2003 economy. Bocoum (2000) reported that the highest forward linkage value of a sector indicates that the sector stimulates greater output production in different sectors of the country’s economy and vice versa.

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Legend

Sector No. Economic sector description

1 Agriculture and livestock

2 Forestry and logging

3 Mining and quarrying

4 Food and beverage manufacturing

5 All other manufacturing

6 Electricity and water supply

7 Construction

8 Transport and communication

9 Wholesale and retail trade

10 Banking and finance

11 Real estate and business services

12 Public administration

13 Personal, community and social services

14 Tourism

Figure 5.1 The backward and forward linkages in the Lao PDR economy in 2003. 1 2 3 4 5 6 7 8 9 10 11 ₁₂ 14 (tourism) 13 0.67 0.77 0.87 0.97 1.07 1.17 1.27 1.37 1.47 1.57 0.77 0.87 0.97 1.07 1.17 1.27 1.37 1.47 1.57 Fo rw ar d Li n ka ge s Backward Linkages Forward oriented

Backward oriented sectors Key sectors

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Figure 5.2 shows the backward and forward linkages of the Lao PDR economy in 2008. The wholesale and retail trade sector was the only key sector in 2008. The tourism sector was the strongest backward oriented sector in the economy followed by electricity and water supply, transport and communication, construction and the food and beverages manufacturing sectors. These sectors with high backward linkages have a higher dependency on intermediate goods, which are typically capital intensive. Additionally, the tourism sector showed relatively high indices of the power of dispersion indicating higher backward linkage effects that result in higher output multipliers in the country’s economy. Agriculture and livestock; mining and quarrying; and banking and finance became forward oriented sectors (see Figure 5.2). The rest of the sectors were weak sectors in 2008.

Tourism along with food, beverage and manufacturing, agriculture and livestock, wholesale and retail trade are the four common key sectors for both years. Transport and communication became a key sector in 2003 while mining and quarrying sector in 2008. This is because the mining and quarrying sector had an outstanding production in 2008 and was the biggest jump during the five years period. Transport and communication sector was the biggest surprise as the sector is dominated by the foreign investors, lower level of intermediate activities and sales as proportion of their gross output in the country. As a result the tourism sector has higher income leakages from the country. The values of the backward linkages have substantially improved which shows the tourism sector is consuming more products domestically in 2008 than in 2003. Similarly, the tourism imports have increased in a greater rate in 2008 than in 2003. The reason behind this increase is that the domestic production increased by 21 percent annually while tourism imports increased by 58 percent annually in the economy during 2003-2008.

Reis and Rua (2006) termed backward linkage as the output multiplier, which measures the effects of one monetary unit change in the final demand for each sector on total output of all sectors (including the sector itself). The sector with the higher value in backward linkages represents the sector with the greater effect on the demand for domestic production. Therefore, backward linkages are demand oriented (Drejer, 2003; Eurostat, 2008). The backward linkage (in percentage terms) of a sector quantifies the change in the economy-wide income relative to the average change in the economy caused by a unitary injection in the final demand of that particular sector (Parra & Wodon, 2008, p.61).

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Legend

Sector No. Economic sector description

1 Agriculture and livestock

2 Forestry and logging

3 Mining and quarrying

4 Food and beverage manufacturing

5 All other manufacturing

6 Electricity and water supply

7 Construction

8 Transport and communication

9 Wholesale and retail trade

10 Banking and finance

11 Real estate and business services

12 Public administration

13 Personal, community and social services

14 Tourism

Figure 5.2 The backward and forward linkages in the Lao PDR economy in 2008. 1 2 3 4 5 6 7 8 9 10 11 12 14 (tourism) 13 0.64 0.84 1.04 1.24 1.44 1.64 0.75 0.85 0.95 1.05 1.15 1.25 Fo rw ar d Li nka ges Backward Linkages

Forward oriented sectors

Backward oriented sectors Key sectors

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Jones (1976) termed forward linkage as the input multiplier, which measures the effects of one monetary unit change in primary inputs of each sector on total output of all sectors (including the sector itself). The higher the value of the forward linkages of a given sector the greater will be the impact of a price increase in this sector on the price levels in the economy. Therefore, forward linkages are supply oriented (Drejer, 2003; Eurostat, 2008). Parra and Wodon (2008, p.61) explained that the forward linkage (in percentage terms) of a sector quantifies the change in the income in that sector relative to the average change in the economy caused by a unitary injection in the final demand of all sectors.

Parra and Wodon (2008) documented that a sector can be considered a key sector of an economy when its backward and/or forward linkage is greater than one. The authors further reported that if none of the linkages is greater than one, the sector is assumed to be a weak sector in that economy. However, Andreosso-O’Callghan and Yue (2004) argued that if the values of both the backward and forward linkage indicators of a sector are above the corresponding averages, the sector is a key sector in the economy.

Table 5.4 shows the differences in the linkage values between 2003 and 2008 in the 14 economic sectors of the Lao PDR. In 2003, the tourism sector was ranked third highest in backward linkages with an index of 1.093 but ranked fifth in forward linkages (0.972) among the economic sectors in the same year. The tourism sector (with a value of 1.240) along with transport and communication; food and beverages manufacturing; tourism and the wholesale and retail trade sectors obtained higher backward linkages in the economy in 2008. Based on the value of the forward linkages, the tourism sector achieved 0.970 for forward linkages (close to 1) and nearly qualified as key sector and ranked fifth in 2008.

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Table 5.4 Backward and forward linkages of Lao PDR economic sectors, 2003 and 2008.

Economic sectors Backward linkages Difference Forward linkages Difference

2003 2008 2003 2008

Agriculture and livestock 0.977 0.889 -0.088 1.441 1.589 +0.148

Forestry and logging 0.942 0.855 -0.087 1.017 0.963 -0.054

Mining and quarrying 0.998 0.894 -0.104 0.968 1.040 +0.072

Food and beverages manufacturing 1.144 1.146 +0.002 0.935 0.912 -0.023

All other manufacturing 0.990 0.977 -0.013 0.918 0.885 -0.033

Electricity and water supply 1.114 1.026 -0.088 0.877 0.815 -0.062

Construction 0.936 1.002 +0.066 0.968 0.937 -0.031

Transport and communication 0.992 1.174 +0.182 0.925 0.889 -0.036

Wholesale and retail trade 1.013 1.014 +0.001 1.421 1.631 +0.210

Banking and finance 0.913 0.941 +0.028 1.028 1.061 +0.033

Real estate and business services 0.975 0.959 -0.016 0.872 0.819 -0.053

Public administration 0.972 0.929 -0.043 0.828 0.742 -0.086

Personal, community and social services 0.940 0.955 +0.015 0.830 0.749 -0.081

Tourism 1.093 1.240 +0.147 0.972 0.970 -0.002

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Tourism was one of the four sectors that had a backward linkage index value greater than one for both years along with the food and beverages manufacturing, electricity and water supply, and wholesale and retail trade (see Table 5.4). This implies that the power as a purchaser of inputs of the four sectors had increased greater than the average of all sectors in the economy. High backward linkage values indicate that these sectors have a greater influence on the purchase of inputs from all sectors of the economy and vice versa (Sonis et al., 1995). The sectors that have a forward linkage index value greater than one for both years were agriculture and livestock, wholesale and retail trade, and banking and finance. This indicates that these sectors provided their outputs to a wide range of sectors and their influence on the economy as suppliers was greater than the average of all sectors in the economy.

Secretario et al. (2009) computed the backward and forward linkage values of the hotel and restaurant sector as follows: Cambodia: 1.30 and 0.97; Thailand: 1.16 and 0.72 and Vietnam: 1.05 and 0.75, respectively. The low value of the forward linkages of the tourism sector (low indices of sensitivity) indicates that the output of the sector’s products goes mainly to the personal and final consumption and the sector is more service oriented in the current study. The food and beverages manufacturing (1.144) had the highest backward linkages index followed by the electricity and water supply sector with an index of 1.114 (see Table 5.4). The banking and finance sector was the lowest sector in backward linkages in 2003 (0.913). In terms of forward linkages, the wholesale and retail trade (1.63) and agriculture and livestock (1.58) ranked number two as the most important sectors in the Lao PDR economy in 2008.

In terms of backward linkages, transportation and communication (0.18), tourism (0.14), construction (0.06), banking and finance (0.02), personal, social and community services (0.02), food and beverages manufacturing (0.01), and the wholesale and retail trade (0.01) sectors achieved higher backward linkages in 2008 than in 2003 in the country (see Table 5.4). The other sectors had negative growth in backward linkages for the study period. For forward linkages, the wholesale and retail trade (0.21), agriculture and livestock (0.14), mining and quarrying (0.07), and banking and finance (0.03) were the four sectors that obtained higher forward linkages in 2008 compared with 2003. The tourism sector’s forward linkage value remained virtually the same during the study period (a decrease of only -0.001).

Table 5.5 shows the total linkage values of the economic sectors of the Lao PDR for 2003 and 2008. Total linkages were obtained by adding the backward and forward linkages of each sector, which represents both the direct and indirect capacity of the services to increase economic activity throughout the country’s economy following an increase in their own

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demand. In terms of total linkages, wholesale and retail trade (2.43), agriculture and livestock (2.41), food and beverages manufacturing (2.07) and the tourism (2.06) sectors have the highest total linkages in 2003 among the 14 economic sectors of Lao PDR. The electricity and water supply (1.99), mining and quarrying (1.96), forestry and logging (1.95), and banking and finance (1.94) sectors were average sectors in 2003. The remaining six sectors were considered weak sectors in the economy in the same year.

Table 5.5 Total linkage indices of the economic sectors of Lao PDR, 2003 and 2008.

Economic sectors TL (2003) Rank TL (2008) Rank

Agriculture and livestock 2.419 2 2.478 2

Forestry and logging 1.959 7 1.818 11

Mining and quarrying 1.966 6 1.934 8

Food and beverages manufacturing 2.079 3 2.058 5

All other manufacturing 1.908 10 1.861 9

Electricity and water supply 1.992 5 1.840 10

Construction 1.904 11 1.938 7

Transport and communication 1.916 9 2.063 4

Wholesale and retail trade 2.433 1 2.645 1

Banking, finance and insurance 1.941 8 2.001 6 Real estate and business services 1.848 12 1.778 12

Public administration 1.800 13 1.671 14

Personal, community and social services 1.770 14 1.704 13

Tourism 2.065 4 2.210 3

Source: Lao PDR I-O tables using SimSIP SAM software

Note: The strongest/highest value obtained sectors are ranked 1 and the least as 14. TL = Total Linkages

Cella (1984) used the total linkage perspective to show sectors that might be key in developing macro level competitiveness. The aggregation of backward and forward linkages provides an alternative basis for comparison and the sector(s) which has(have) the greatest value of the total linkages are considered key sectors in the economy. The tourism sector (2.21) along with wholesale and retail trade (2.64), agriculture and livestock (2.47), and the transport and communication (2.06) sectors achieved higher total linkages values among the economic sectors in Lao PDR in 2008 (see Table 5.5). The banking and finance, food and beverages manufacturing, construction and mining and quarrying sectors obtained higher linkages values than the average of all sectors’ value in 2008. The rest of the economic sectors achieved the lower values of linkages than the average value of all sectors in 2008.

Tables 5.6 and 5.7 show the key sectors of Lao PDR economy in 2003 and 2008, respectively, based on the backward and forward linkage values. In 2003, the tourism sector together with

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agriculture and livestock, food and beverages manufacturing, wholesale and retail trade, and the banking and finance sectors qualified as key sectors in the Lao PDR economy (see Table 5.6).

Table 5.6 Key sectors of the Lao PDR economy in 2003.

Key sectors Backward oriented sectors

Agriculture and livestock

Food and beverages manufacturing Wholesale and retail trade

Tourism

Banking, finance and insurance

Electricity and water supply Forestry and logging Mining and quarrying

Forward oriented sectors Weak sectors

All other manufacturing Transport and communication Construction

Real estate and business services Public administration

Personal, social and community services

The transport and communication sector was added as a key sector to the five key sectors of 2003 in the Lao PDR economy in 2008 (see Table 5.7). The key sectors imply that the power of purchaser of inputs and sellers of output of these sectors had increased more than the average of all economic sectors in the respective years in the economy. The electricity and water supply, forestry and logging, and mining and quarrying sectors were backward oriented sectors in 2003 whereas the forestry and logging and other manufacturing sectors were backward oriented in 2008 (see Tables 5.6 and 5.7). This implies that the power as purchaser of input requirements of these sectors had increased more than the average of all sectors in the Lao PDR economy.

Table 5.7 Key sectors of the Lao PDR economy in 2008.

Key sectors Backward oriented sectors

Agriculture and livestock

Food and beverages manufacturing Wholesale and retail trade

Tourism

Banking, finance and insurance Transport and communication

Forestry and logging All other manufacturing

Forward oriented sectors Weak sectors

Construction

Mining and quarrying Electricity and water supply

Real estate and business services Public administration

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The sectors possessing stronger forward linkages were other manufacturing, transport and communication, and construction in 2003 whereas the construction, mining and quarrying, and electricity and water supply sectors possessed stronger forward linkages in 2008. This shows that these sectors provided their output to a wide range of sectors and their influence on the economy was greater than the average of all sectors in the Lao PDR economy. The sectors possessing weak backward and forward linkages were real estate and business services, public administration, and personal, social and community services for both years (see Tables 5.6 and 5.7). Therefore, these sectors can be considered weak sectors in the economy.