Export dynamics of vietnam trade in value added (TiVA) approach

VIETNAM NATIONAL UNIVERSITY, HANOI UNIVERSITY OF ECONOMICS AND BUSINESS SHASHI KANT PRASAD CHAUDHARY EXPORT DYNAMICS OF VIETNAM: TRADE IN VALUE ADDED (TIVA) APPROACH DISSERTATION IN INTERNATIONAL ECONOMICS Hanoi – 2020 VIETNAM NATIONAL UNIVERSITY, HANOI UNIVERSITY OF ECONOMICS AND BUSINESS SHASHI KANT PRASAD CHAUDHARY EXPORT DYNAMICS OF VIETNAM: TRADE IN VALUE ADDED (TIVA) APPROACH (ĐỘNG LỰC CHO XUẤT KHẨU CỦA VIỆT NAM: TIẾP CẬN TỪ PHƯƠNG PHÁP GIÁ TRỊ GIA TĂNG THƯƠNG MẠI) Major: International Economics (Chuyên ngành: Kinh tế Quốc tế) Code: 9310106.01 Mã số: 9310106.01 DISSERTATION IN INTERNATIONAL ECONOMICS (LUẬN ÁN TIẾN SĨ KINH TẾ QUỐC TẾ) SUPERVISOR: Associate Professor Dr Nguyen Viet Khoi Hanoi - 2020 ACKNOWLEDGEMENT I would like to express my sincere gratitude to my supervisor Associate Professor Dr Nguyen Viet Khoi who has been a constant source of inspiration and encouragement Without his invaluable suggestions and encouragement, my research work would not have taken this form I would also like to express my sincere thanks and appreciation to Dr Nguyen Cam Nhung (UEB, VNU), Dr Nguyen Thi Kim Anh (UEB, VNU), Dr Nguyen Tien Minh (UEB, VNU), Dr Nagendra Lal Srivastava (TU, Nepal), Dr Dilli Ram Pokhrel (Nepal Rastra Bank) and Dr Jun Alejo Bathan (British University Vietnam) for their invaluable comments and suggestions to improve the quality of dissertation I would also like to thank anonymous referees for their valuable comments in terms of enhancing the quality of this dissertation I also acknowledge the motivation and support that I received from my lecturers while undertaking the PhD modules, in specific to Dr Le Quoc Hoi, Dr Nguyen Thi Kim Anh, Dr Nguyen Xuan Thien, Dr Nguyen Thi Kim Chi, and Dr Ha Van Hoi Apart from them, I also say a big thank to Mr Tuan, Mr Quang, Mr Dat and all other support staffs at the office of Academic and Training Department, UEB A special thank goes to Chris Jeffery, the Dean of British University Vietnam who constantly supported me in providing flexible working schedule and constant encouragement Last but not the least, my family deserves a special credit for bringing me so far in this utmost academic journey Words cannot compensate the sacrifices they have made on my behalf Thank you very much all DECLARATION I declare that this dissertation, which I have submitted to the University of Economics and Business (UEB), Vietnam National University, Hanoi for assessment in consideration for the award of the degree of Doctor of Philosophy (PhD) has been composed solely by myself Except where states otherwise by reference or acknowledgment, the work presented is entirely my own I have not submitted before, in whole or in part of this work to UEB or any other institution for any professional qualification I have taken due care to ensure that the work is original and does not breach any copyright law Signed: _ Shashi Kant Prasad Chaudhary Student Number: MSHV 15058009 Date: 10 March 2020 TABLE OF CONTENTS LIST OF ACRONYMS USED i LIST OF TABLES iii LIST OF FIGURES vi EXECUTIVE SUMMARY vii CHAPTER 1: INTRODUCTION 1.1 Background 1.2 Statement of the problem 1.3 Objectives of the study 1.4 Significances of the study 1.5 Delimitations of the study 1.6 Organisation of the dissertation CHAPTER 2: LITERATURE REVIEW 10 2.1 Overview 10 2.2 Importance of „Trade in Value Added (TiVA)‟ approach 13 2.2.1 A better understanding of bilateral trade imbalances 14 2.2.2 An effective measure of the efficacy of trade barriers and trade measures 16 2.2.3 A better way to analyse job contribution of trade 16 2.2.4 A better measure of trade competitiveness 17 2.2.5 Measuring backward and forward linkages of an economy 18 2.2.6 Fair assessment of the environmental impact of trade 19 2.3 Earlier Studies in context of Vietnam 20 CHAPTER 3: RESEARCH METHODOLOGY 23 3.1 Research design 23 3.2 Sources of data and study period 23 3.3 Estimation of „Trade in Value Added‟ 25 3.3.1 Construction of an inter-country input output (ICIO) table: one country, N industries case 26 3.3.2 Computation of „Trade in Value Added‟ 27 3.4 Validating export-led growth of Vietnam 28 3.5 Assessing export competitiveness of Vietnam 28 3.6 Measuring Vietnam‟s participation in global value chain 31 CHAPTER 4: SOURCES AND DESTINATIONS OF VALUE ADDED EMBODIED IN GROSS EXPORTS OF VIETNAM 32 4.1 Introduction 32 4.2 Sources of domestic value added embodied in gross exports 33 4.3 Destinations of domestic value added embodied in gross exports 38 4.4 Domestic value added embodied in exports by „Types of Goods‟ 42 4.5 „Foreign Value Added‟ embodied in gross exports 44 4.5.1 Sources of foreign value added by partners 44 4.5.2 Sources of foreign value added by industries 45 4.6 Concluding remarks 46 CHAPTER 5: AN EMPIRICAL ANALYSIS OF EXPORT-LED GROWTH OF VIETNAM 49 5.1 Introduction 49 5.2 Early initiatives and the achievements 51 5.3 Methodology 55 5.4 Variables and data 57 5.5 Empirical results 58 5.5.1 Testing presence of unit root and structural break 58 5.5.2 Estimating ARDL models and checking their robustness 61 5.5.3 Bounds test of cointegration and error correction model 62 5.6 Concluding remarks and policy discussion 64 CHAPTER 6: EXPORT COMPETITIVENESS OF VIETNAM 70 6.1 Introduction 70 6.2 Methodological framework 71 Discussing Balassa‟s Index 72 6.3 Empirical Findings 75 6.3.1 Export competitiveness of Vietnam in the World 75 6.3.2 Export competitiveness of Vietnam in East Asian market 83 6.3.3 Export competitiveness of Vietnam in NAFTA market 87 6.3.4 Export competitiveness of Vietnam in European Union (EU) .93 6.3.5 Export competitiveness of Vietnam in ASEAN market .99 6.3.6 Export competitiveness of Vietnam in in BRIS (BRICS-China) .105 6.4 Concluding remarks and policy discussion 113 CHAPTER 7: WHERE IS VIETNAM IN GLOBAL VALUE CHAIN? .116 7.1 Introduction 116 7.2 Understanding Global Value Chain 121 7.3 Sources of Data and Study Period 128 7.4 Empirical findings 129 7.4.1 GVC Participation of Vietnam 129 7.4.2 GVC Position of Vietnam 132 7.4.3 GVC Participation, position and domestic value added contribution 139 7.5 Concluding remarks and policy discussions 140 CHAPTER 8: SUMMARY, FINDINGS AND SUGGESTIONS 143 8.1 Summary and findings 143 8.2 Discussing the issues 145 8.2.1 Group I industries 150 8.2.2 Group II industries 151 8.2.3 Group III industries 152 8.3 Suggestions 153 8.3.1 Ways to improve domestic value added exports 153 8.3.2 Ways to improve export competitiveness 154 8.3.3 Ways to improve global integration 155 8.4 Ways ahead 156 REFERENCES 161 APPENDICES 172 No Acronyms ADF AO ARDL ASEAN BI BRIS BURT CMT CPTPP 10 CURT 11 DFD 12 DVA 13 DVA_EXGR 14 EC 15 EU 16 EXGR 17 FDI 18 FTAs 19 FVA 20 GDP 21 GSO 22 GVC 23 HDI 24 I2E i No Acronyms 25 ICIO 26 IO 27 ISIC 28 MNCs 29 n.e.c 30 NAFTA 31 OECD 32 PTAs 33 R&D 34 RCA 35 RCD 36 RSCA 37 TFP 38 TiVA 39 TU 40 UEB 41 UNCTAD 42 US 43 VAR 44 VNU 45 WTO APPENDIX E: Foreign value added embodied in gross exports (FVA_EXGR) in percent ISIC C01T05 C10T14 C15T16 C17T19 C20 C21T22 C23 C24 C25 C26 C27 C28 C29 C30T33X C31 C34 C35 C36T37 C50T52 C55 C60T63 C64 C65T67 Vietnam 1995 0.4 1.6 1.1 5.8 0.1 0.1 0.4 0.4 0.2 0.2 0.2 0.3 0.3 2.3 0.6 0.0 0.2 0.8 2.9 0.3 1.5 0.1 0.6 21.6 1996 0.5 1.9 1.4 6.6 0.1 0.1 0.4 0.4 0.2 0.2 0.2 0.3 0.3 2.6 0.6 0.0 0.3 1.0 3.9 0.5 1.8 0.1 0.7 25.5 1997 0.5 1.9 1.4 6.9 0.1 0.1 0.4 0.4 0.2 0.2 0.2 0.3 0.3 2.7 0.6 0.0 0.3 1.0 3.2 0.5 1.7 0.1 0.5 24.9 APPENDIX F: Global value chain (GVC) participation indices ISIC C01T05 C10T14 C15T16 C17T19 C20 C21T22 C23 C24 C25 C26 C27 C28 C29 C30T33X C31 C34 C35 C36T37 C50T52 C55 C60T63 C64 C65T67 Vietnam 1995 0.6 1.9 2.1 7.1 0.3 0.2 2.0 0.9 0.4 0.3 0.9 0.5 0.8 4.1 0.8 0.5 0.5 1.1 3.6 0.7 2.4 0.2 0.7 34.2 1996 0.7 2.2 2.3 7.9 0.3 0.2 1.8 1.0 0.4 0.4 1.2 0.6 0.8 4.2 0.9 0.5 0.5 1.3 4.6 0.8 2.7 0.2 0.7 37.8 APPENDIX G: Global value chain (GVC) position indices ISIC C01T05 C10T14 C15T16 C17T19 C20 C21T22 C23 C24 C25 C26 C27 C28 C29 C30T33X C31 C34 C35 C36T37 C50T52 C55 C60T63 C64 C65T67 Vietnam 1995 -0.11 -0.72 -0.06 -1.05 0.10 0.05 0.60 0.14 0.06 -0.03 0.41 -0.08 0.13 -0.17 -0.21 0.37 -0.03 -0.30 -0.82 0.01 -0.30 -0.07 -0.44 -0.51 1996 -0.17 -0.74 -0.24 -1.24 0.07 0.03 0.57 0.12 -0.03 -0.03 0.50 -0.10 0.10 -0.29 -0.25 0.35 -0.07 -0.40 -1.04 -0.15 -0.41 -0.08 -0.47 -0.69 1997 -0.15 -0.62 -0.19 -1.15 0.08 0.04 0.65 0.17 -0.01 -0.03 0.67 -0.01 0.13 -0.22 -0.20 0.39 -0.01 -0.37 -0.87 -0.15 -0.35 -0.05 -0.39 -0.51 APPENDIX H (i): RCA indices based on domestic value added exports (RCA_DVA): World ISIC C01T05 C10T14 C15T16 C17T19 C20 C21T22 C23 C24 C25 C26 C27 C28 C29 C30T33X C31 C34 C35 C36T37 C50T52 C55 C60T63 C64 C65T67 1995 1.8 2.3 2.8 2.7 1.1 0.2 0.2 0.1 0.4 0.7 0.1 0.3 0.1 0.3 0.4 0.0 0.1 0.8 1.0 1.4 0.5 2.2 4.2 1996 2.0 2.1 3.0 2.5 1.3 0.2 0.2 0.1 0.4 0.6 0.0 0.2 0.1 0.2 0.4 0.0 0.1 0.8 1.0 1.7 0.6 1.7 4.1 APPENDIX H (ii): RCA indices based on domestic value added exports (RCA_DVA): East Asia ISIC C01T05 C10T14 C15T16 C17T19 C20 C21T22 C23 C24 C25 C26 C27 C28 C29 C30T33X C31 C34 C35 C36T37 C50T52 C55 C60T63 C64 C65T67 1995 21.71 142.84 17.38 2.72 6.65 0.51 1.42 0.11 0.24 0.72 0.09 0.21 0.05 0.11 0.37 0.00 0.08 0.61 0.77 5.30 0.61 3.22 7.12 1996 22.85 118.48 18.60 2.46 8.21 0.53 1.10 0.11 0.32 0.44 0.08 0.19 0.05 0.11 0.32 0.00 0.06 0.55 0.76 5.99 0.61 2.17 5.95 APPENDIX H (iii): RCA indices based on domestic value added exports (RCA_DVA): European Union ISIC C01T05 C10T14 C15T16 C17T19 C20 C21T22 C23 C24 C25 C26 C27 C28 C29 C30T33X C31 C34 C35 C36T37 C50T52 C55 C60T63 C64 C65T67 1995 5.41 13.81 3.08 3.50 1.39 0.10 0.68 0.05 0.37 0.40 0.07 0.17 0.04 0.37 0.24 0.00 0.09 0.66 1.21 1.19 0.51 1.99 2.36 1996 5.82 15.33 3.20 3.08 1.59 0.10 0.56 0.05 0.28 0.42 0.08 0.14 0.03 0.33 0.23 0.00 0.07 0.66 1.15 1.49 0.57 1.65 2.32 199 6.80 17.4 3.48 3.44 1.61 0.12 0.51 0.05 0.30 0.44 0.08 0.14 0.04 0.32 0.22 0.00 0.08 0.76 1.20 1.51 0.54 1.39 1.71 APPENDIX H (iv): RCA indices based on domestic value added exports (RCA_DVA): NAFTA ISIC C01T05 C10T14 C15T16 C17T19 C20 C21T22 C23 C24 C25 C26 C27 C28 C29 C30T33X C31 C34 C35 C36T37 C50T52 C55 C60T63 C64 C65T67 1995 1.48 11.62 3.43 10.42 1.12 0.08 0.54 0.06 0.59 1.42 0.09 0.43 0.06 0.18 0.38 0.01 0.07 1.16 1.44 1.06 0.47 1.42 1.95 1996 1.58 11.79 3.64 9.17 1.46 0.09 0.42 0.07 0.61 1.61 0.10 0.36 0.06 0.17 0.43 0.01 0.05 1.12 1.38 1.43 0.49 1.16 1.77 1997 1.99 14.71 3.77 8.94 1.23 0.07 0.53 0.07 0.72 1.21 0.19 0.30 0.07 0.17 0.69 0.01 0.05 0.57 1.40 1.44 0.46 0.96 1.53 APPENDIX H (v): RCA indices based on domestic value added exports (RCA_DVA): ASEAN ISIC C01T05 C10T14 C15T16 C17T19 C20 C21T22 C23 C24 C25 C26 C27 C28 C29 C30T33X C31 C34 C35 C36T37 C50T52 C55 C60T63 C64 C65T67 1995 2.00 2.34 1.78 1.88 0.25 0.28 0.33 0.20 0.22 1.20 0.28 0.52 0.23 0.14 0.65 0.05 0.43 0.68 1.01 0.96 0.56 0.90 3.38 1996 1.70 2.47 2.02 1.96 0.30 0.30 0.23 0.19 0.40 1.17 0.22 0.70 0.24 0.12 0.60 0.06 0.28 0.58 0.99 1.29 0.59 0.81 3.00 APPENDIX H (vi): RCA indices based on domestic value added exports (RCA_DVA): BRIS ISIC C01T05 C10T14 C15T16 C17T19 C20 C21T22 C23 C24 C25 C26 C27 C28 C29 C30T33X C31 C34 C35 C36T37 C50T52 C55 C60T63 C64 C65T67 1995 1.51 1.65 1.88 2.64 0.68 0.09 0.15 0.07 0.54 0.88 0.02 0.19 0.12 1.48 0.61 0.01 0.12 0.58 1.02 2.05 0.71 5.01 12.93 1996 1.92 1.36 1.93 2.48 1.09 0.13 0.09 0.08 0.56 0.87 0.02 0.28 0.14 1.43 0.71 0.01 0.10 0.67 0.96 2.53 0.84 1.96 9.91 APPENDIX I (i): RCA indices based on gross exports (RCA_EXGR): World ISIC C01T05 C10T14 C15T16 C17T19 C20 C21T22 C23 C24 C25 C26 C27 C28 C29 C30T33X C31 C34 C35 C36T37 C50T52 C55 C60T63 C64 C65T67 1995 1.67 2.31 2.43 2.88 0.91 0.17 0.37 0.12 0.42 0.83 0.08 0.38 0.09 0.39 0.48 0.01 0.15 1.01 1.15 1.32 0.60 2.21 4.04 1996 1.77 2.05 2.56 2.89 1.06 0.19 0.31 0.14 0.45 0.69 0.08 0.35 0.09 0.38 0.49 0.01 0.14 1.07 1.16 1.60 0.66 1.63 3.84 APPENDIX I (ii): RCA indices based on gross exports (RCA_EXGR): East Asia ISIC C01T05 C10T14 C15T16 C17T19 C20 C21T22 C23 C24 C25 C26 C27 C28 C29 C30T33X C31 C34 C35 C36T37 C50T52 C55 C60T63 C64 C65T67 1995 19.66 105.82 13.30 2.74 4.68 0.48 1.57 0.17 0.25 0.79 0.14 0.27 0.08 0.19 0.47 0.00 0.13 0.76 0.85 4.97 0.70 3.15 6.97 1996 20.60 85.16 13.87 2.69 5.78 0.51 1.20 0.17 0.35 0.46 0.12 0.28 0.08 0.20 0.42 0.00 0.12 0.76 0.89 5.58 0.69 2.10 5.73 1997 18.12 75.32 14.42 2.48 4.73 0.53 1.11 0.17 0.31 0.85 0.12 0.28 0.09 0.21 0.46 0.00 0.13 0.71 0.90 6.24 0.65 1.43 5.74 APPENDIX I (iii): RCA indices based on gross exports (RCA_EXGR): European Union ISIC C01T05 C10T14 C15T16 C17T19 C20 C21T22 C23 C24 C25 C26 C27 C28 C29 C30T33X C31 C34 C35 C36T37 C50T52 C55 C60T63 C64 C65T67 1995 4.79 13.21 2.60 4.10 1.19 0.11 0.88 0.08 0.40 0.45 0.10 0.26 0.06 0.59 0.34 0.00 0.12 0.86 1.32 1.13 0.57 1.99 2.24 1996 5.01 14.32 2.65 3.92 1.34 0.11 0.67 0.09 0.31 0.47 0.11 0.23 0.05 0.58 0.34 0.00 0.12 0.93 1.31 1.38 0.63 1.59 2.15 19 5.9 16 2.9 4.4 1.3 0.1 0.5 0.0 0.3 0.4 0.1 0.2 0.0 0.5 0.3 0.0 0.1 1.0 1.3 1.4 0.6 1.3 1.5 APPENDIX I (iv): RCA indices based on gross exports (RCA_EXGR): NAFTA ISIC C01T05 C10T14 C15T16 C17T19 C20 C21T22 C23 C24 C25 C26 C27 C28 C29 C30T33X C31 C34 C35 C36T37 C50T52 C55 C60T63 C64 C65T67 1995 1.28 10.35 3.03 12.00 0.95 0.08 0.79 0.10 0.64 1.58 0.13 0.64 0.09 0.31 0.52 0.01 0.10 1.55 1.52 0.99 0.51 1.37 1.85 1996 1.33 10.17 3.12 11.28 1.18 0.09 0.61 0.12 0.69 1.78 0.16 0.58 0.09 0.30 0.62 0.01 0.09 1.60 1.52 1.29 0.53 1.09 1.63 19 1.6 12 3.2 11 1.0 0.0 0.7 0.1 0.8 1.3 0.2 0.4 0.1 0.3 0.9 0.0 0.0 0.8 1.4 1.3 0.5 0.9 1.4 APPENDIX I (v): RCA indices based on gross exports (RCA_EXGR): ASEAN ISIC C01T05 C10T14 C15T16 C17T19 C20 C21T22 C23 C24 C25 C26 C27 C28 C29 C30T33X C31 C34 C35 C36T37 C50T52 C55 C60T63 C64 C65T67 1995 2.11 2.63 1.76 2.42 0.25 0.29 0.40 0.30 0.24 1.37 0.37 0.66 0.27 0.19 0.69 0.06 0.57 0.85 1.20 0.97 0.61 0.95 3.42 1996 1.75 2.69 1.95 2.73 0.29 0.34 0.28 0.31 0.46 1.33 0.32 1.00 0.30 0.18 0.69 0.07 0.48 0.81 1.22 1.28 0.63 0.83 2.99 1997 2.05 2.50 1.89 2.94 0.30 0.28 0.31 0.28 0.46 1.48 0.27 0.90 0.35 0.18 0.70 0.05 0.48 0.90 1.23 1.40 0.62 0.71 2.77 APPENDIX I (vi): RCA indices based on gross exports (RCA_EXGR): BRIS ISIC C01T05 C10T14 C15T16 C17T19 C20 C21T22 C23 C24 C25 C26 C27 C28 C29 C30T33X C31 C34 C35 C36T37 C50T52 C55 C60T63 C64 C65T67 1995 1.31 1.48 1.66 3.20 0.57 0.09 0.24 0.11 0.57 0.97 0.03 0.28 0.17 2.51 0.84 0.01 0.18 0.76 1.07 1.87 0.76 4.64 11.98 1996 1.64 1.16 1.68 3.28 0.91 0.14 0.15 0.12 0.62 0.94 0.03 0.45 0.21 2.61 1.04 0.01 0.20 0.93 1.04 2.25 0.90 1.78 8.98 19 1 0 0 0 0 0 ... destinations of value added exports of Vietnam, - validation of export- led growth of Vietnam, - assessing export competitiveness of exporting industries of Vietnam, and - assessing exporting industries‟... contributions of those growth drivers in the economic growth of Vietnam Instead, the objective is to examine the export dynamics of Vietnam applying ? ?trade in value added? ?? (TiVA) approach By ? ?export dynamics. .. linkage of Vietnam in global value chain (i.e extent of Vietnam? ??s exports used in the export of direct importing countries) In this context, this study has presented a refined picture of the value