How can the value added of Vietnam’s export industries be increased?

Abstract

Vietnam became an important exporter of cellphones after the introduction of foreign direct investments by multinational companies. Cellphones account for around 20% of Vietnam’s total exports and contribute to its ability to overcome its trade deficit. However, the share of domestic value added in Vietnam’s electronics industry has been declining. This study suggests that this is related to the increase in cellphones as the main export item for Vietnam. Along with the upgrading of products produced in the country, the country’s electronics industry is increasingly relying on the import of parts. By decomposing Vietnam’s major export items—smartphones and printers–this study reveals that parts of the latter are more technologically accessible for domestic manufacturers to supply, while most of the former’s parts are beyond the technical capabilities of local manufacturers. This study suggests that when developing countries such as Vietnam consider targeting an industry to realize its latent comparative advantage, they should consider not only the possibility of gaining an advantage in the assembly of the product but also the possibility of creating backward linkages and developing ancillary industries.