Export dynamics of vietnam

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 IN

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

Shashi Kant Prasad Chaudhary

Student Number: MSHV 15058009

TABLE OF CONTENTS

LIST OF ACRONYMS USED i

LIST OF TABLES iii

LIST OF FIGURES vi

EXECUTIVE SUMMARY vii

CHAPTER 1: INTRODUCTION 1

1.1 Background 1

1.2 Statement of the problem 3

1.3 Objectives of the study 5

1.4 Significances of the study 6

1.5 Delimitations of the study 6

1.6 Organisation of the dissertation 7

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

LIST OF ACRONYMS USED

3 ARDL Autoregressive Distributive Lag

4 ASEAN Association of South East Asian Nations

6 BRIS Brazil Russia India and South Africa (BRICS minus China)

7 BURT Structural Break Unit Root Test

9 CPTPP Comprehensive and Progressive Agreement for Trans-Pacific

Partnership

13 DVA_EXGR Domestic Value Added embodied in Gross Exports

21 GSO General Statistic Office, Vietnam

24 I2E Importing inputs for exporting (Import to export)

No Acronyms Original

27 ISIC International Standard Industrial Classification of All

Economic Activities

29 n.e.c Not Elsewhere Classified

30 NAFTA North Atlantic Free Trade Area

31 OECD Organisation for Economic Cooperation and Development

33 R&D Research and Development

41 UNCTAD United Nations Conference on Trade and Development

LIST OF TABLES

1 Table 2.1: The equivalence of reported and value added trade

balances at the level of trade with the entire world 15

2 Table 3.1: List of industries used in the text with their ISIC codes 24

3 Table 4.1: Major sources of DVA exports by merchandised

4 Table 4.2: Major originators of DVA exports by service industries,

5 Table 4.3: Sources of FVA by industries (major contributors) 46

6 Table 4.4: Major contributors to the value added exports by

7 Table 5.1: Empirical works using exports and GDP series of

9 Table 5.3: Results of Breusch-Godfrey Serial Correlation LM Test 61

13 Table 5.7: Results of Breusch-Godfrey Serial Correlation LM Test 68

16 Table 5.10: Results of breakpoint unit root test for EXGR 69

17 Table 6.1: RCA indices of selected industries in the World market,

18 Table 6.2: Pattern of specialisation by industries in the World

No Table Content Page

19 Table 6.3: Results of Galtonian cross-section regression

21 Table 6.5: RCA indices of selected industries in East Asia, 2011 84

22 Table 6.6: Pattern of specialisation by industries in East Asia

23 Table 6.7: Results of Galtonian cross-section regression

24 Table 6.8: RCA indices of Vietnam in East Asian market 88

25 Table 6.9: RCA indices of selected industries in NAFTA, 2011 90

26 Table 6.10: Pattern of specialisation by industries in NAFTA

27 Table 6.11: Results of Galtonian cross-section regression

29 Table 6.13: RCA indices of selected industries in the EU, 2011 96

30 Table 6.14: Pattern of specialisation by industries in the EU

31 Table 6.15: Results of Galtonian cross-section regression

33 Table 6.17: RCA indices of selected industries in the ASEAN, 2011 102

34 Table 6.18: Pattern of specialisation by industries in ASEAN

No Table Content Page

37 Table 6.21: RCA indices of selected industries in BRIS, 2011 108

38 Table 6.22: Pattern of specialisation by industries in BRIS

39 Table 6.23: Results of Galtonian cross-section regression

43 Table 8.1: Selection of industries in which Vietnam has expertise,

LIST OF FIGURES

1 Figure 4.1: Shares of DVA & FVA, and growth rates of DVA 35

2 Figure 4.2: Contribution in DVA by merchandised industries 35

7 Figure 4.7: DVA by final and intermediate goods and services 43

8 Figure 4.8: Origin of foreign value added by regions and countries 45

9 Figure 5.1: Trends of export and GDP, and their proportion 54

11 Figure 5.3: CUSUM Test for the chosen ARDL (1, 4) model 62

13 Figure 7.2: GVC Participation of Vietnam by years (1995-2011) 130

14 Figure 7.3: Vietnam's participation in GVCs by industries (1995

15 Figure 7.4: Initial look at the GVC position by industry 132

16 Figure 7.5: DFD indices and value added contributions by industry 134

17 Figure 7.6: GVC position index and value added contributions by

EXECUTIVE SUMMARY

Vietnam is an open case to the world in terms of achieving remarkable economic growth in a very short period of time utilizing its strong exports bases, and still stands stronger in terms of economic growth and exports outlook This study has examined the „export dynamics of Vietnam‟ from the perspective of (i) industries‟ contribution in value added exports, (ii) export‟s cointegration with economic growth, (iii) industries‟ trade competitiveness, and (iv) industries‟ participation in global value chain, applying „trade in value added‟ (TiVA) approach, which has also helped to identify presence of exaggerations in conventional export values, contributions, and competitiveness of exporting industries of Vietnam For instance,

a clear exaggeration of 29 percentage points as ratio of GDP in export values of Vietnam in 2014 can be observed when its gross exports value (US$147) is compared with the domestic value added exports value (US$94) of the same year

In 2014, the gross exports forms 79.3 percent of GDP while that of the domestic value added exports forms 50.5 percent

This study follows a longitudinal design that has used timeseries secondary data of various TiVA indicators covering the period of 1995 to 2011 The procedure applied here to assess the export dynamics of Vietnam using TiVA approach bases

on explanation and analysis of those secondary data Analysis of sources and destinations of the value added exports of Vietnam has been conducted in descriptive manner On the other hand, cointegration of exports with economic growth of Vietnam has been examined using ARDL bounds test Likewise, Balassa‟s index has been used to assess industries revealed comparative advantage in six major export markets for Vietnam viz the World, East Asia, the European Union, NAFTA, ASEAN and BRIS markets The GVC participation index of industries as well as Vietnam itself has been estimated using Koopman et al.‟s (2010) GVC participation index and Fally‟s (2012) distance to final demand index

The key findings of this study are as follows:

i A long-run relationship exists between exports and GDP of Vietnam and shows a substantial long-run contribution of exports in the real GDP, as much as 0.73 percent for one percent changes in the domestic value added exports

ii There are 10 industries viz agriculture, mining, foods and beverages, textile and footwear, computer and electronics, electrical machinery, manufacturing not elsewhere classified, wholesale and retail trade, hotels and restaurants, and transport and storage that have contributed significantly in the domestic value added export

of Vietnam

iii Among those 10 industries, except agriculture, mining, and hotels and restaurant, other seven do also have significant contributions in foreign value added exports of Vietnam Most active industries in importing for exporting (I2E) activities are computer and electronics, textile and footwear, foods and beverages, and electrical machinery

iv China, Japan and South Korea are key suppliers of inputs as well as buyers

of Vietnamese intermediate products

v Three manufacturing industries viz agriculture, foods and beverage, and textile and footwear are „globally competitive‟ showing comparative advantages across all six markets (the World, East Asia, ASEAN, EU, NAFTA, and BRIS) consistently through 1995-2011

vi Four manufacturing industries and two service industries are „regionally competitive‟ Mining is competitive in East Asia, European Union and NAFTA; wood products in the World, East Asia, EU and NAFTA; non-metallic minerals in NAFTA only; computers and electronics in BRIS only; wholesale and retail trade in other than ASEAN market; and hotels and restaurants in the World, East Asia, EU, and BRIS Apart from these, furniture that falls into manufacturing n.e.c also has shown greater potential in recent period in terms of domestic value added exports vii Despite the natural resource-intensive industries (mining, wood products, petroleum products etc.) add high domestic value in exports, their comparative

advantages have been underestimated by gross exports data In contrary, the assembly activities in the human capital and technology intensive industries have contributed in ballooning up both the gross exports and their comparative advantages However gross exports are aligned with the domestic value added exports for low skilled labour intensive (e.g foods and beverage, textile and footwear), and services industries (e.g trade, hotels and restaurants)

viii Vietnam‟s participation in GVC has increased significantly via backward participation in computer and electronics, textile and footwear, foods and beverages, electrical machinery, basic metals, wholesale and retail trade, and transport and storage industries Importantly, the GVC participation rate has shown positive correlation with the RCA index and shares of domestic value added exports, while negative relationship with the distance to final demand (exceptions are textile and footwear, trade and hotels, and financial intermediation)

ix Among four models of export-led growth strategies viz German and Japanese model, Asian Tigers‟ model, Mexico model, and Chinese model, Vietnam closely resembles Mexico model, whereby it has turned itself into export production platforms for foreign multinational companies by suppressing the wages, rather than developing own indigenous industrial capacity

x Vietnam requires collaborating domestic firms with MNCs in order to densify domestic firms into global value chain and also to acquire foreign technologies in the prioritised industries

xi Moving up the value chain into higher value added functions by enhancing the current level of global participation and in the meantime also developing own indigenous industrial base seems a better way ahead for sustainable economic growth of Vietnam This will bring opportunity to drive the country toward long-term success with own „invented and made in Vietnam‟ products

CHAPTER 1: INTRODUCTION

1.1 Background

The period of 1991-1995 is widely considered as the turning point in the history of economic growth of modern Vietnam In this period, Vietnam achieved remarkable economic growth, on average 8.2 percent, as a result of some comprehensive and radical economic reforms that were adopted in the late 1980s in sectors including foreign trade and foreign investment, as an attempt to overhaul the economy Apart from these reforms, some trade related developments also took place in order to open the economy, for instance, Vietnam signed trade agreement with EU, its first western trading partner in 1992; it established its full diplomatic relationship with the US and also joined ASEAN in 1995 These developments would turn into milestones in the later period whenever there is talk about the

„success story‟ of Vietnam

Vietnam started reaping the benefits of those reforms, and trade developments immediately For instance, the Vietnamese economy boomed to 9.3 percent in 1996, and on an average of 7 percent over the period of 1996-2000 despite occurrence of „Asian Financial Crisis‟ in the ASEAN region during which also Vietnam stood stronger with a fair economic growth of about 6 percent Along with stronger economic growth, Vietnam also achieved remarkable progress in socio-economic indicators, for example life expectancy increased from 70.5 years in

1990 to 73.3 years in 2000; GDP per capita increased to US$ 434 in 2000 from US$

98 in 1990; poverty reduced from 60 percent in 1990 to 38.78 percent in 2002 Those significant progresses in those socio-economic indicators were also reflected

in improvement of the country‟s position in HDI report, from 0.477 in 1990 to 0.576 in 2000 (UNDP, 2016)

Now it has been over 30 years since the adoption of those comprehensive and radical economic reforms, however the story of economic success of Vietnam has not stopped yet Vietnam still stands stronger in terms of economic growth and

progress in socio-economic indicators, which can also be seen in its quick jump from the category of a „poor country‟ to a „middle income country‟ in 2010 A significant number of studies, for example Anwar and Nguyen (2010), and Hoang et

al (2010) are now available identifying the growth drivers of Vietnam‟s spectacular growth These studies have identified foreign direct investment (FDI), exports, labour productivity, cheap labour, and macroeconomic reforms in specific as important growth drivers so far In this study, however the objective is not to compare the 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 of Vietnam‟

it is meant here the characteristics of Vietnamese exports that have stimulated its economic growth, in particular, its export competitiveness, and its integration into global production network In broader definition of export dynamics, its relationship with trade balance, foreign exchange rates, and environmental consequences may also be considered However, those extremities aspects have been excluded from this study and focused has been made to assess Vietnamese industries‟ contribution

to value added exports, their export competitiveness, and their integration into global value chain from the perspective of TiVA approach

At this juncture, the obvious question would be „why TiVA approach‟ The underlying answer is that efficacy of conventional approach of trade measure has been questioned by several academicians upon finding presence of multiple counting in trade data of export-led economies There are increasing number of papers including Dervis et al (2013), and Koopman et al (2013) that have established that conventional trade measure has exaggerated the exports value In addition, Johnson (2014), and Koopman et al (2014) also found that the revealed comparative advantage of China and India respectively got reversed while using TiVA approach in their analyses Such possibilities cannot be denied in export measures of Vietnam too Therefore, assessing export dynamics of Vietnam from the perspective of TiVA approach would identify presence of such exaggeration if

any in exports value, contributions of exporting industries and/or their competitiveness Moreover, only TiVA approach can assess industries‟ (or Vietnam itself) participation in global value chain More details about TiVA approach has been discussed in subsequent sections For now, in short, TiVA approach disaggregates the value added embodied in gross exports into domestic and foreign value added, and thereby recognises the exports of domestic value added as actual exports of an economy, thus eliminating the problem of multiple counting from the conventional trade statistics This makes TiVA statistics reliable for measuring the actual competitiveness of exporting industries, thereby helping the policy makers in developing appropriate trade policies

1.2 Statement of the problem

The conventional trade statistics approach captures the value of exported products at national custom borders only; thereby disregarding the value of intermediate inputs used in the production of such exported products, which results into presence of multiple counting in the gross exports value This has led to question the reliability and significance of conventional trade data for policy formulation The well-known case of Apple „iPhone 4‟ as mentioned by Xing and Detert (2010)1 explains this issue very well, showing that, of the US$178.96 factory gate price of an iPhone 4 that is assembled in China, only US$6.50 was contributed

by China The bulk of the components were imported from Japan, Germany, Korea and the US which shares respectively US$60.60, US$30.15, US$22.96, and US$10.75 The remaining US$48 was contributed by other countries than China However, the conventional trade measure does not apportion the value of inputs according to the countries of origin and record the export value of iPhone i.e US$178.96 per piece of the phone as export of China As a result, US for instance would have a deficit of US$168.21 per iPhone 4 with China Had this transaction been measured by TiVA approach, at least the US would not have had such a huge trade deficit with China alone Instead, this trade deficit would have been

1

The detail has been discussed later in chapter VII

redistributed over Japan, Germany and Korea However, this is not the situation under conventional trade approach As a result, it might cause serious repercussions

if trade policies are designed and formulated with an aim to reduce the US trade deficit with China ignoring the true trade partners like Japan, Germany and Korea One such exemplary repercussion is the case of „anti-dumping duty‟ that the European Commission (EC) imposed on entry of Chinese and Vietnamese leather shoes to EU market in 2006 The duty was imposed on evidence of unfair trade practices in form of disguised subsidies and unfair state intervention to the leather footwear industry in those two countries with an argument that the anti-dumping duty would help to correct the injury caused to European leather shoe producers (European Commission, 2006) Later in 2012, the National Board of Trade (NBT) conducted a study using TiVA approach to examine the efficacy of this anti-dumping provision, and surprisingly found that leather shoes manufactured in China and Vietnam had incorporated 50 to 80 percent of their value addition from European Union in forms of activities like designing, marketing, sales and distribution This means that shoes „manufactured in China or in Vietnam‟ were not truly manufactured in China or in Vietnam Rather they still could have been regarded as „made in Europe‟ This report concludes that European shoes companies were not protected, rather damaged by this anti-dumping provision (NBT, 2012) This is a clear case that shows how a policy, based on conventional trade statistics might be misguiding Had the initial analysis on leather shoes made

in China and Vietnam been based on TiVA approach, the anti-dumping duty might have not been justified Therefore, measuring trade in value added would give a new perspective to analyse the efficacy and effectiveness of the trade policies From these aforementioned examples of „iPhone‟ and „EC‟s anti-dumping duty‟ at least two things become very clear- firstly, the international trade requires re-measurement in terms of value added, otherwise exports of countries at the end stage of manufacturing process would always be exaggerated; and secondly, a trade policy based on such exaggerated trade data might be misguiding In addition, such

exaggeration of exports would also lead to question the competitiveness of a particular exporting industry which until now has been measured employing conventional exports data Therefore, this study aims at assessing the export dynamics of Vietnam from the perspective of TiVA approach, so that any such deviation in the export competitiveness if exists can be brought to the attention of the policy makers In the meantime, one shall not overlook the changing pattern in the Vietnamese trade structure in which the dominance of intermediate products in both import and export values is growing Therefore, this study also aims at assessing the participation of Vietnamese industries in global value chain Apart from these main assessments, this study also seeks answers for the following questions in Vietnamese context:

i Where is „domestic value added embodied in gross exports‟ originated in domestic economy?

ii Which industries are contributing in the increasing „foreign value added embodied in gross exports‟?

iii What is the contribution of domestic value added exports in economic growth of Vietnam?

1.3 Objectives of the study

The main objective of this study is to assess the export dynamics of Vietnam from the perspective of TiVA approach Nonetheless, in the light of the above research questions, the specific objectives of this study have been designed as below that aim to:

i Identify and assess exporting industries that are contributing to the domestic value added embedded in the gross exports of Vietnam

ii Identify and assess exporting industries that are contributing to the foreign value added embedded in the gross exports of Vietnam

iii Assess cointegration of domestic value added exports with economic growth

of Vietnam

iv Assess export competitiveness of Vietnam

v Assess position of Vietnam in global value chain

1.4 Significances of the study

Researcher considers the following three points as clear significance of this study:

i Researcher has not come across yet any thorough study on export dynamics

of Vietnam based on trade in value added statistics Though two earlier works by Tran et al (2011) and Thanh et al (2015) have had some rigorous level of quantitative estimations of import contents and domestic value added content of Vietnam‟s exports based on Hummels et al (2001) approach of vertical specialisation, these works have adopted many restrictive assumptions In addition, these papers have not attempted to estimate the forward 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 added contents of the gross exports of Vietnam It has also assessed the forward and backward linkages of Vietnam in global value chain

ii As there is always possibility of multiple counting in the conventional approach to trade measurement, the earlier „export competitive list‟ for Vietnam which is based on the conventional gross exports value is, thus subject to be noisy and misleading It may also not reveal the true picture of Vietnam‟s export competitiveness Hence, this study has assessed the export competitiveness of different exporting industries of Vietnam again using TiVA approach and provides

a clear picture of those industries in terms of their competitiveness

iii This dissertation will serve as literature for anyone who wishes to undertake

a research in the field of international trade of Vietnam or doing trade analysis using TiVA approach

1.5 Delimitations of the study

i This study has extracted the necessary data on value added exports from OECD TiVA database (2016 edition), in which the TiVA indicators‟ series are available for a period from 1995 to 2011 only This has constrained the covered period of this study as well Though in its recent edition (2018), OECD has published new series of TiVA indicators covering a period of 2005 to 2015, but it is not directly comparable with the 2016 edition

ii This study does not analyse the export dynamics of Vietnam in comparison with other ASEAN countries or any other comparative economies

iii The research questions to assess in this study have already been so broad that some other extremities aspects of it such as its relationship with trade balances, or foreign exchange rates, and environmental consequences have been skipped in this study Researcher has considered those extremities aspects of export dynamics as future direction of the research

1.6 Organisation of the dissertation

This dissertation is spread over EIGHT chapters, each summarised as below:

Chapter 1: ‘Introduction’

This is introductory part of the dissertation that discusses the background of study and statement of the problem in details in the beginning These give rise of research questions based upon which overall and specific objectives of the study have been set In the later part, significances and limitations of the study have been discussed

In the text, researcher has also discussed the motivation for this study

Chapter 2: ‘Literature review’

This chapter starts with discussion on the works of some prominent researchers that have delved into the problems associated with the conventional way of measuring exports and have proposed the way to measure the trade in value added terms It also discusses importance of trade in value added approach for policy makers In the end, this chapter also reviews previous relevant studies on this aspect of exports in Vietnam In specific to the Vietnam‟s participation in global value chain and domestic value added exports, there are limited numbers of studies available Discussion on other aspects of Literature Review such as research methods, analytical techniques, policy comments, other relevant concepts etc have been presented in relevant chapters of the dissertation

Chapter 3: ‘Research methodology’

This chapter discusses the research methodology, processes and procedures under sections related to research design, sources of data, estimation of TiVA, measure of

GVC participation and position, analysis of the revealed comparative advantage of Vietnam etc Discussion on the specific research methods and techniques such unit root test, ARDL bounds test, Balassa‟s index, GVC participation etc have been presented in the relevant chapters of the dissertation

Chapter 4: ‘Sources and destinations of value added embodied in gross exports

of Vietnam’

This chapter analyses and identifies the exporting industries that have contributed significantly in the domestic value added (DVA) and foreign value added (FVA) exports of Vietnam It takes pictorial approach to present the contributions of industries in DVA and FVA, as well as in identifying the origin and destinations of those sorts of value addition

Chapter 5: ‘An empirical analysis of export-led growth of Vietnam’

This chapter provides a comparative analysis of the existence of long-run relationship between export and GDP of Vietnam using ARDL bounds test of cointegration from the perspective of both gross exports and value added exports There is ample discussion on diagnosis of the data series and the models used

Chapter 6: ‘Export competitiveness of Vietnam’

This chapter deals with the re-computation of the RCA index at the industrial level

of Vietnam using „domestic value added exports‟ data to assess the export competitiveness of those exporting industries At the same time, the value added exports based RCA indices have been compared with that of the conventional statistics based RCA in order to find presence of noise in export competitiveness if any

Chapter 7: ‘Where is Vietnam in global value chain?’

This chapter discusses in detail the participation of Vietnam in global value chain along with identification of industries that have deeper integration into the global value chain Moreover, it also validates the position of Vietnam as „assembly powerhouse‟ in the value chain

Chapter 8: Summary, findings and suggestions

This is the end chapter of the dissertation that includes the summary, findings and suggestions for developing strategies to increase value added exports or competitiveness and global integration of industries This chapter is also a broader discussion on what Vietnam has achieved and what challenges or bottlenecks it faces or will face in the future and what might be the way ahead from strategic point

of view

The references and appendices are given at the end of the dissertation

CHAPTER 2: LITERATURE REVIEW

2.1 Overview

This chapter discusses the conceptual arguments, development of framework, and the importance of TiVA approach Discussion on other aspects of literature review such as research methods, analytical techniques, policy discussion, and other relevant concepts have been presented in the relevant chapters of dissertation

Progress in information and communication technology (ICT), reforms in trade policies and reduction in regulatory barriers on global logistics chain (transport, finance, telecommunications etc.) have led the production-line to be fragmented across several locations across the world (Jones and Kierzkowski, 2001) As a result, over past three decades, the share of intermediate products has increased significantly in international trade, in fact, more than half in value This is because

of dominance of intermediate products in international trade, participation of countries like China, Mexico and Vietnam, for instance in global value chain has increased significantly in comparison to their connectivity they used to have a decade ago In the light of these fundamental changes, the relevance of conventional trade statistics has now become questionable Maurer and Degain (2010) turn sarcastic on the relevance of conventional measure and say that „what you see is not what you get‟ Going further on the issue, Miroudot and Yamano (2013) identify three issues in particular with the conventional trade statistics viz.-

i presence of multiple counting,

ii unable to recognise the real contribution of a given sector‟s export in terms of income and employment creation to an economy, also unable to demonstrate sectors where value added actually originates,

iii unable to reflect the real contribution of trade to an economy‟s growth

Nonetheless, several papers, workshops and conferences have attempted to address those issues in recent time suggesting application of TiVA approach in trade measure The first intent to formalise it shall be attributed to Leontief in 1960s

(Leontief and Strout, 1963) Later, Sanyal and Jones (1982) in their seminal paper mention that the bulk of international trade is in intermediate products and that trade

in intermediates mainly consists not of raw material or primary inputs but of products that have already received some value added Growth of trade in intermediates has also been highlighted by several recent surveys, in particular in Asia However, in terms of decomposing the value added contents of gross exports and developing a broader framework for trade in value added, credit shall go to Hummels et al (2001), Daudin et al (2009), Johnson and Noguera (2012), Foster et

al (2011) and Koopman et al (2008, 2010, and 2012)

Hummels et al (2001) introduced the concept of „vertical specialisation (VS)‟ to measure both directly and indirectly imported content in a country‟s exports For this they use a country level input-output table on the assumption that input–output coefficients in the production for exports, and those in the production for domestic consumption are the same However, this assumption is more likely to get violated

in „processing based trade‟ where imported machinery and inputs are extensively used in the production of goods for export China may be a good reference for discussion, for which processing exports account for about half of the overall exports Wholly foreign owned firms and Sino-foreign joint ventures are the heavy users of processing based export scheme Likewise, in Mexico, processing based exports account for even greater shares, largely because of prevalence of exports by Maquiladora firms (Mattoo et al., 2013) Moreover, Koopman et al (2008, 2010, and 2012) have also shown concern on Hummels et al.‟s assumption stating that this may lead to a significant under-estimation of foreign value added content in gross exports when processing exports are pervasive

Daudin et al (2009) identify „who produces what and for whom‟ by re-allocating the value added contained in final goods for 113 countries or groups of countries and 55 sectors using GTAP (Global Trade Analysis project) database on multiregional input-output table However, this work follows an approach similar to Hummels et al (2001) to compute the „vertical specialisation trade (VS)‟ i.e share

of imported inputs in the exports of a country Daudin et al (2009) go further computing VS1 (the share of export used as inputs to further exports), and VS1* (the domestic content of imports)

Johnson and Noguera (2011) present similar calculations but based on the ratio of value added to gross exports (VAX ratio) as a measure of the intensity of production sharing They combine input-output and bilateral trade data to compute the value added content of bilateral trade As opposed to Hummels et al (2001), their framework allows two-way trade in intermediates (each country can both import and export intermediates, while in the VS framework the last country exports final goods only) (stated in Miroudot and Yamano, 2013)

Foster et al (2011) focus on net trade in value added, rather than exports or imports

of value added separately to show that a country‟s net export in value added equals its net exports in gross trade thus linking it to national accounting identities Their framework also splits trade in value added into various forms of domestic and foreign content of exports and imports which also links to recent measures of vertical specialization in production networks, thus linking the literature on trade in value added and vertical specialization and on the factor content of trade

Koopman et al.‟s (2008, 2010, and 2012) work provides a full decomposition of the value added embodied in exports in a single conceptual framework This framework encompasses all the previous measures of vertical specialization and value added trade in the literature and decomposes a country‟s gross exports into value added components by source In fact, the gross exports are disaggregated into four components of domestic value added- (i) domestic value added embodied in exports

of final goods and services consumed by the importing country, (ii) domestic value added embodied in exports of intermediate inputs used by the importing country to produce its domestically needed products, (iii) domestic value added embodied in intermediate exports used by the importing country to produce goods for exports to third countries, and (iv) domestic value added embodied in intermediate exports used by the importing country to produce goods shipped back to source country,

and the one component of foreign value added They verify that the component of foreign value added in a country‟s exports‟ is mathematically identical to the VS measure as proposed by Hummels et al (2001) in multi-country settings, however without their restrictive assumption Also, that the sum of domestic value added and

foreign value added of a country is equal to that of the country‟s gross exports

It is because of these sets of papers that we have now better understanding about the conceptual frameworks, methods of estimation of „trade in value added‟ embodied

in exports, and participation of a country in global value chain These have also been used in calculation of a series of indicators that shed light on trade reality and participation of a country in global value chain In this regard, Dean (2013) notes that greater the fragmentation and dispersion of the production tasks based on comparative advantage, the more low-income countries can participate in these production chains Saito and Salgado (2013) argue that the real effective exchange rates based on value added trade weights would measure competitiveness more accurately than those based on gross trade weights, thus improving the exchange rate assessments which in turn would improve ability to estimate the impact of changes in relative prices

2.2 Importance of ‘Trade in Value Added (TiVA)’ approach

TiVA is a statistical approach that estimates the sources of value added, by country and industry in exported goods and services by disaggregating the value added embodied in gross exports into domestic and foreign contents Thereby it recognises the „domestic value added embodied in gross exports‟ as the actual exports of the reference country

The obvious question is that „what is the use of developing „trade in value added‟ statistics on international trade?‟ As discussed earlier that fragmented production process and trade in intermediate goods have become increasingly dominant features of global economic integration that have also challenged the conventional wisdom on how we look at and interpret trade and, in particular, the policies that we develop around it Few areas where measuring trade in value added brings a new perspective and is likely to impact policy choices, have been discussed as follows:

2.2.1 A better understanding of bilateral trade imbalances

In 2009, the conventional data reports that the US had a trade deficit with Mexico of US$48 billion and a trade deficit with Canada of US$22 billion However, in value added term these numbers were found 25 percent lesser in each case It further reveals that 12 and 8 percent of total exports from Mexico and Canada to the world, respectively, reflects US value added trade (Dervis et al., 2013) Likewise, Koopman et al (2013) in their research find that in 2010, US has 25 percent lesser trade deficit with China in value added terms (US$131 billion as compared to US$176 billion), while its trade deficit increased by 60 percent with that of Japan (from US$23 billion to US$36 billion) These two instances sufficiently reveal that the conventional approach apart from double counting problem, also fails to capture the role of third countries in bilateral trading relationships (for example roles of Japan, Korea etc are not adequately captured in the US-China iPhone trade despite adding a large value to iPhone exports to the US)

Benedetto‟s work (2012) throws ample light on this issue and highlights the significance of value added approach He establishes that the trade in value added approach does not change the overall trade balance of a country with the rest of the world; instead it redistributes the surpluses and deficits across partner countries, thus giving credits to the true trade partners (table 2.1) At the level of bilateral trade, however the (1) and (2) terms do not necessarily cancel and so a bilateral value added trade balance can be different from a reported bilateral trade balance (conventional data)

Differences between reported and value added bilateral trade relationships have important implications for trade policy For example, in 2012 the US had bilateral trade in goods deficits with China (US$315 billion), Japan (US$76 billion), Mexico (US$61 billion) and Germany (US$60 billion), and bilateral trade surpluses with Australia (US$22 billion), Brazil (US$12 billion), Chile (US$10 billion) and Panama (US$9 billion) And it is the size of the trade deficit that feeds all manner of concerns in the US about declining competitiveness, job losses, and unfair trade practices by Chinese companies However, the size of US trade deficit with China

decreases by 25 percent when measured in value added terms One important trade policy insight here from the value added data is that trade barriers to Chinese imports will often harm US consumers through higher prices for final goods In addition, US manufacturers would end up paying more for intermediate goods, which would reduce the competitiveness of their final goods in the US and in export markets overseas Furthermore, to the extent that US trade barriers reduce demand for Chinese imports, they also reduce demand for the US goods and services incorporated into China‟s exports Value added trade also reveals why it is also in China‟s interest to reduce its trade barriers Given the significant trade in intermediate goods and services used in China, reducing its trade barriers would make Chinese products even more competitive domestically and overseas (Dervis et al., 2013) This is only one example of how value added data can change the way

we understand the role of trade and its implications for trade policy

Table 2.1: The equivalence of reported and value added trade balances at the

level of trade with the entire world

Gross

basis

Domestic VA that stays

overseas (+)

Foreign VA that stays

home (+)

Domestic VA that stays overseas (-) Foreign VA that stays home

(1) Domestic VA that will

return home in imports

(+)

(1) Domestic VA that is embedded in imports

(+) (2) Foreign VA that is

embedded in exports

(2) Foreign VA that will

be embedded in exports Value

added

basis

Domestic value added

that stays overseas

Foreign value added that stays home

Domestic VA that stays overseas

(-) Foreign VA that stays home

Source: Benedetto (2012): p 43

2.2.2 An effective measure of the efficacy of trade barriers and trade measures

In a global value chain framework, competition is not between nations but between firms to access to competitive inputs and/or technology Also, domestic value added

is found not only in exports but also in imports (when exports are intermediate, and imports are final products) In such a condition, tariffs, non-tariff barriers and trade measures (such as anti-dumping rights) as a consequence are likely to impact domestic producers in addition to foreign producers

The case of „anti-dumping duty‟ that the European Commission (EC) imposed on entry of Chinese and Vietnamese leather shoes to EU market in 2006 reveals this issue clearly The duty was imposed on evidence of unfair trade practices in form of disguised subsidies and unfair state intervention to the leather footwear industry in these two countries with an argument that the anti-dumping duty would help to correct the injury caused to European leather shoe producers (European Commission, 2006) Later in 2012, the Swedish National Board of Trade (NBT) conducted a study using „trade in value added‟ approach to examine the efficacy of this anti-dumping provision, and interestingly found that leather shoes manufactured in China and Vietnam had had incorporated 50 to 80 per cent of their value addition from European Union This means that shoes manufactured in China

or in Vietnam were not truly manufactured in China or in Vietnam; rather these still could have been regarded as „made in Europe‟ shoes This report concluded that European shoes companies were not protected, in fact damaged by anti-dumping provision (NBT, 2012) From this case, one can see how a policy based on conventional gross trade data might be misguiding Had the initial analysis on leather shoes „made in China and Vietnam‟ been based on trade in value added approach, the anti-dumping duty might have not been justified From this what can

be inferred that measuring trade in value added gives a new perspective to analyse efficacy and effectiveness of trade policies

2.2.3 A better way to analyse job contribution of trade

An analysis on „job content‟ of trade (i.e where is job created because of trade?) is relevant when one looks at the value added trade that tells where exactly jobs are

created Also, by decomposing the value of imports by source economy (including the domestic one) one can see who actually benefits from trade The above anti-dumping case can also be interpreted in terms of jobs protection or job loss in the EU‟s shoe industry Conventional thinking in gross terms may perceive that imports

of leather shoes from China and Vietnam to EU caused job transfer from EU to China and Vietnam However, rethinking the situation from the perspective of value added terms can make one realise that only assembly jobs have been transferred from the EU, while the jobs in the research and development, design and marketing activities are still contributing to the employment there Such shift occurred because the fragmented production process kept costs low and EU companies competitive It was in fact a case of application of comparative advantages to „tasks‟ rather than to

„final products.‟ Had the initial analysis on leather shoes „made in China and Vietnam‟ been based on trade in value added approach, the anti-dumping duty might have not been justified again

2.2.4 A better measure of trade competitiveness

In the light of the fact that gross exports suffer from double counting in the world of fragmented productions with high possibility of being inflated for the countries such

as China, Mexico, Vietnam etc which are located at the end of production process,

it is most likely that the indicators of trade competitiveness such as „revealed comparative advantage (RCA)‟ might be noisy and misleading The well-known Apple „iPhone 4‟ example (Xing and Detert, 2010) explains the issue very clearly taking example of „assembly of iPhone 4 in China‟ They found that of the US$178.96 factory gate price of an iPhone 4 assembled in China, only US$6.50 was contributed by China itself, and the bulk of the components were imported from Japan, Germany, Korea and the US which shares US$60.60, US$30.15, US$22.96, and US$10.75 respectively The remaining US$48 was contributed by other countries than China Under conventional trade approach we know that the gate price US$178.96 would be recorded as the exports of China per piece of the iPhone 4

In terms of trade specialisation, China seems to have a comparative advantage in producing iPhones on the basis of gross exports which is not true Instead, its

comparative advantage is in the assembly work In his empirical work, Johnson (2013) using gross exports finds that China has a comparative advantage in computers however his conclusion gets reversed while using value added terms In another empirical work, Koopman et al (2014) using gross exports find that both China and India have strong revealed comparative advantages in „finished metal products.‟ However, when using domestic value added exports of this sector, both countries RCA ranking drops precipitously For India in fact the sector switched from a comparative advantage sector to a comparative disadvantage sector These two empirical works clearly reveal how exaggeration in the gross exports can have serious repercussion in estimation of revealed comparative advantage for a sector or industry which may also alter the industrial policies as the policymakers may make incorrect decision while identifying the export sectors for promotion It makes a compelling case for the production of trade statistics in value added term No doubt, that such analysis is highly relevant from a policy perspective

2.2.5 Measuring backward and forward linkages of an economy

The domestic value added and foreign value added embodied in gross exports are components of „Trade in value added‟ that are essential for knowing how a reference country would involve into global value chain, that is whether via backward linkage as buyer of intermediate products, or via forward linkage as supplier of intermediate products for the exports of buyer countries The „backward linkage‟ here shows the extent to which imports from supplier countries are used in the production of the reference country‟s exports and is measured as the share of foreign value added embodied, in the gross exports of the reference country Likewise, the „forward linkage‟ shows the extent to which the reference country‟s intermediate products would form part of the buyer countries‟ exports to third countries, and is measured as the share of domestic value added contained in the export of such intermediate goods or services, in the gross exports of the reference country The sum of these two linkages is the global value chain (GVC) participation index Nonetheless, without looking at the individual component of the

reference country, it is almost impossible to tell the way it would participate in global value chain A country that is predominantly assembling the intermediate products into final goods; and subsequently exporting these will have a strong backward participation but a small forward participation On the other hand, a country which predominantly supplies domestically produced intermediate products

to an assembler will have a strong forward participation but a small backward participation

2.2.6 Fair assessment of the environmental impact of trade

Countries like China and India have managed rapid economic growth led by increase in exports, which of course significantly contribute to increased carbon emissions within their territories As the measurement of carbon emissions in the Kyoto Protocol follows the territorial (or production based) accounting principle, this method attributes all such emissions generated from production activities for exports within China and India to their total emissions The Chinese argument on this matter is noteworthy- that responsibility for emissions should lie not just with the producer but also with the final consumers of goods (BBC, 2009) This is because they produce goods that are consumed by other countries, but carbon emissions are charged to their national accounts In recent days, the transfer of carbon from developed to developing countries through trade has become a substantial and growing problem According to Ahmad and Wyckoff (2003) most of the production activities that have relocated from developed to developing countries are highly carbon-intensive goods which has refueled the dispute of transfer of carbon from developed to developing countries On fair distribution basis, it would

be rational to allocate the responsibility between the emitters and final consumers The unbundling of production and consumption and the international fragmentation

of production hence require a value added view of trade to understand where imported goods are produced and where are consumed This method would also attempt to unveil a debatable but crucial question whether „a developed country has cleaned up its own backyard throwing the garbage to its neighbors‟ Therefore,

assessing the environmental impact of trade is another area where the measuring trade in value added terms would support policymaking in reducing the environment related issues

2.3 Earlier Studies in context of Vietnam

In specific to Vietnam‟s domestic value added exports and its participation in global value chain, there are limited number of studies available These include Nadvi and Thoburn (2003), Bui et al (2008), World Bank (2011), Tran et al (2011), Ha (2012), Tran (2012), Dao and Nguyen (2013), Thanh et al (2015), and Hoang and Pham (2016) Moreover, most of these studies have focused on a particular sector, rather than the overall Vietnamese economy For example, Nadvi and Thoburn (2003), Tran (2012) and Ha (2012) have used the global value chain framework to analyse Vietnam‟s textiles and garments sector World Bank (2011) has concentrated on the value chain of rice products in the Mekong River Delta Likewise Hoang and Pham (2016) have analysed the global value chain of footwear industry, and Dao and Nguyen (2013) have examined the relationship between FTAs in the Asian region and the agricultural value chain Only Tran et al (2011) and Thanh et al (2015) have attempted to analyse the overall picture of Vietnam in terms of breaking the gross exports into imported and domestic values

In fact, work of Tran et al (2011) should be considered as the first rigorous quantitative estimation of import contents of Vietnam‟s exports that follow Hummels et al (2001) approach of vertical specialisation The study is based on the input-output table 2007 for Vietnam and found that the overall import content in Vietnam‟s exports was 40.8 percent in 2007: the lowest in paddy (3.1 percent), and the highest in animal and vegetable oil and fat (75.9 percent) Other key industries

of Vietnam that consume higher proportion of imported inputs are garments (59.7 percent), automotive (65.4 percent), shipbuilding (61.7 percent), and electronics components (58.0 percent) However, as discussed earlier that „vertical specialisation‟ approach has some assumptive limitations on its input-output coefficients causing significant under-estimation of foreign added value in gross exports, especially when processing exports are pervasive, and this study too is not

free from it Apart from its built-in limitation, its assumption of homogeneity (i.e quality of locally consumed products and exported products is the same) also seems impractical

Thanh et al (2015), on other hand using recent input-output table 2011 for Vietnam have calculated the domestic value added contents of gross exports The findings of this paper though correctly indicate the pattern in domestic value added contents of gross exports, its estimates differ significantly from that of the OECD TiVA estimates In fact, Thanh et al.‟s (2015) have followed Hummels et al (2001) approach which focuses on measuring the imported content in a country‟s exports rather than domestic value added in the exports As a result, its estimates differ significantly from OECD TiVA estimates In addition, as they have used domestic input-output table, the approach has not been able to capture the flow of „export to re-import‟ values for Vietnam Moreover, their approach has had some assumptive limitations such as product homogeneity, and consumption of imported inputs within the same year

Interestingly, none of these papers have had insight and discussion about integration

of Vietnam into global production network which is a quite significant feature of Vietnamese economy in recent time In addition, available works in Vietnamese context are focused more on discussion at „item level‟ which is more useful for investment purpose rather than policy making purpose That‟s why, researcher believes that there are still a lot to explore about the export dynamics of Vietnam considering that there is „variables gap‟ (gross export vs value added export variables); there is „significance gap‟ (results based on domestic input-output table

vs results based on inter-country input-output table); there is „approach gap‟ (Hummels et al (2001) vs Koopman et al (2010)); and there is „scope gap‟ (none of the existing works has attempted the integration of Vietnam into global production network) too

In the light of those gaps, researcher got motivated to undertake a research on the export dynamics in Vietnamese context which he has analysed from the following two perspectives:

i Industries‟ export competitiveness based on domestic value added exports (details in chapter VI), and

ii Industries‟ and Vietnam‟s integration into global production network (details

in chapter VII)

However, significance of policy discussions on aforementioned perspectives would

be incomplete without assessing the cointegration of value added exports with economic growth of Vietnam Researcher could have used existing set of works to know the true contribution of exports in Vietnamese economic growth, if he has not encountered the following three concerns in the current available literature in this context in Vietnam- firstly, those works have used gross exports (and NOT value added exports) values to assess its contribution on GDP growth; secondly, those papers have used a long time series data, as long as from 1986 to 2015, however, those have not tested presence of either stationarity or structural breaks or both; and thirdly, there are conflicting results on how export of Vietnam has impacted its economic growth Mostly the outcomes are to have positive effect (which shall be the obvious outcome), but researcher also came across Nguyen (2017) that concludes a negative effect of exports on GDP growth of Vietnam That‟s why, researcher realised that assessing cointegration of value added export with economic growth of Vietnam would establish an informed long-run relationship between its exports and GDP growth and also consolidates the policy discussions This has been presented in chapter V

Researcher would like to mention that chapter two presents literatures that are relevant to the concept, importance and measurement of trade in value added Further discussion about the perspectives as mentioned above have been presented

in the subsequent chapters in appropriate place in the text

CHAPTER 3: RESEARCH METHODOLOGY

3.1 Research design

This study follows a longitudinal research design that has used the timeseries secondary data of various TiVA indicators covering the period of 1995 to 2011 The procedure applied here to assess the export dynamics of Vietnam using TiVA approach bases on explanation and analysis of those secondary data

The research procedure adopted in this study has been described in appropriate place in the following text A bulk of data has been extracted from OECD TiVA database (2016 edition) for the purpose of analysis Once the data on trade in value added for the major exporting industries of Vietnam were obtained, the following analyses have been undertaken:

- analysis of sources and 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‟ and Vietnam‟s participation in global value chain

3.2 Sources of data and study period

Bulk of data has been extracted from OECD TiVA database (2016 edition), and some country level data on national accounts from World Bank Indicators, UNCTAD Data Centre, and GSO, Vietnam (see appendices B and C) The OECD-TiVA database includes TiVA exports series for 50 industries according to ISIC3.1 (International Standard Industrial Classification of All Economic Activities version 3.1) nomenclature, at division level (i.e two-digit level) covering a period of 1995

to 2011 at the time of writing this paper2 Among those 50 industries, some are presented in individual form, whereas others are presented in aggregated form presented as below:

2 The final draft of this dissertation was completed in December 2017 By then, the 2018 edition of TiVA indicators (coverage years 2005 to 2015) had not been published Nonetheless, the 2016 edition and the 2018 edition of TiVA indicators are not directly comparable because they are published in format of different versions of ISIC nomenclature (ISIC3.1 and ISIC4.0)

Table 3.1: List of industries used in the text with their ISIC codes