return icon

Vietnam’s participation in the global value chain

The ratio of Vietnamese goods imported and used as input materials by foreign countries is decreasing, while the ratio of Vietnam’s import of input materials to produce goods for end-consumption is increasing. 

Vietnam thus has backward participation in the global value chain.

The global value chain (GVC) index reflects an economy’s connection with the global value chain in foreign trade. The index comprises two factors which show backward and forward GVC participation.





In essence, separate economies (the second countries) participate in the GVC by importing input materials from foreign countries (the first countries) to produce goods and services which they (the second countries) export to third countries. This activity is backward GVC participation.

The other form of participation in the GVC of the second countries is exporting domestic goods to third countries which are used as input materials for those countries to produce goods for export to fourth countries. This activity is forward GVC participation.

Vietnam: More backward than forward participation

The table below shows that Vietnam has participated more in the GVC over the past years, with the share of both backward and forward participation rising, from 50.6% in 2005 to 52.5% in 2010 and 55.6% in 2015. These ratios reflect the increasing participation of Vietnam’s production and export sectors in the GVC. In Asia, Vietnam’s GVC participation is only after Malaysia and Singapore.

Still, there are some notable points over Vietnam’s participation in the GVC in the short term.

First, Vietnam has more backward and than forward GVC participation. This means that Vietnam uses the added value of foreign countries for her exports more than foreign countries use Vietnamese goods for their exports. The illustrative figures are 36.1% (backward participation) and 14.5% (forward participation) in 2005, 40.5% and 12.5% in 2010, and 44.5% and 11.1% in 2015, respectively.

Second, Vietnam’s forward GVC participation was declining, from 14.5% in 2005 to 12.5% in 2010 and 11.1% in 2015. The decline tells two things. First, since the assembly activities in Vietnam are continuously growing and devoted primarily to end-consumption goods, Vietnamese products are consumed directly in third countries instead of being used as input supplies (intermediary products) for another product; or put in other words, made-in Vietnam goods are favored in foreign countries. Second, this can be seen as an achievement of the economic restructuring process, specifically, the transformation of export, from raw materials (crude oil, coal and raw agro-products) to goods for consumption with high production content.

Nevertheless, the above figures also reflect a weakness in local added value, which has been decreasing while the ratio of backward participation has been increasing. They show that Vietnam has to import large amounts of components and intermediary goods for export production and domestic consumption. This is the often-stated weakness: the supporting industry. The industry plays a key role in supplying inputs for the assembly industry. With a weak supporting industry, the local added value will not be high.

Some discussions

In view of the (objective) weakness mentioned above, the matter is to upgrade the economy, which requires the creation of more local added value in exports. An example is the case of iPad in the studies by Xing and Detert in 2010 and Kraemer and associates in 2011 where they emphasized the low added value of assembly in the production process, which is less than 5% of the sale price of an iPad produced in China.

However, it’s not a complete assessment if only the local added value is used to make an overall assessment of the efficiency of production in the long term, as it may miss another key factor, the volume of assembly which may be equally important to the local added value. Though assembly generally makes up a very small share of the value of the finished product, the single activity of assembly on a large scale can bring about important benefits possible.

As an example, specialization in electronics assembly benefits greatly some companies in Asia. They have become excellent assemblers and attracted customers like Apple, Dell, Amazon, Nokia and Samsung.

Nevertheless, in the long term, a country or an economy cannot stand still and benefit from a production phase like assembly, be it a subjective will, as with the progress of technology and the low labor cost being no more an advantage, companies will relocate assembly activities to countries where the labor cost is lower or there is advanced technology with high efficiency automation. As an illustration, Taiwan has moved assembly activities to China and China is applying exactly this strategy.



Essential guidance beefing up domestic supporting industries

Essential guidance beefing up domestic supporting industries

While highly appreciating the solutions and policies set forth in the government’s Resolution No.115/NQ-CP on the development of supporting industries, Truong Thi Chi Binh, 



Vietnam to have 184 fishing ports by 2050: draft plan

Omicron subvariants under close scrutiny in Vietnam

The Vietnamese Ministry of Health said it is closely monitoring the emergence of new sub-lineages of the Omicron variant that causes the COVID-19 disease worldwide to promptly adopt control measures if they are reported in Vietnam.

Vietnam elected as member of two ESCAP Regional Center Executive Councils

Two Vietnamese agencies have won election to the Executive Councils of the UN Statistical Institute for Asia and the Pacific and Centre for Sustainable Agricultural Mechanisation under the UN Economic and Social Commission for Asia and the Pacific.


Dien Bien rushes to evacuate 26 more households over landslide risk

Shelter cares for 20 breast cancer patients in HCM City

No longer allowed to stay in a hospital, a breast cancer patient sold her house to rent and provide a shelter for 20 patients coming from all over the country to Ho Chi Minh City for chemotherapy and radiation treatment.

G&P Global Ratings raises Vietnam’s sovereign credit rating

The S&P Global Ratings on May 26 raised its long-term sovereign credit rating on Vietnam to “BB+” with a “stable” outlook on the back of strong economic recovery, according to the Ministry of Finance.

Domestic airlines offer millions of tickets for summer travel season

Anticipating that travel demand during the upcoming summer will rise sharply, and even higher than the pre-pandemic levels, local carriers are offering millions of air tickets.

American doctor’s endless love for Vietnamese ethnic minority cultures

When listening to him talk for hours and hours about the objects he found by chance on trips to different mountainous regions, it is easy to see Mark Rapoport's passion for the ethnic groups of Vietnam.

Two new Viettel inventions granted exclusive protection certificate in the US

Viettel Aerospace Institute (VTX), a member of Viettel Group, was officially granted an exclusive protection certificate by the US Patent and Trademark Office (USPTO) for two works in the field of optoelectronics and materials industry.

SEA Games 31 fuels recovery of local tourism industry

The hosting of the recent 31st Southeast Asian Games (SEA Games 31) between May 12 and May 23 can be viewed as a golden chance for the local tourism industry to recover after months of little activity due to the impact of the COVID-19 pandemic.

HCM City Mayor shows concerns as doctors turn from ‘heroes’ to ‘violators’

With great efforts in the fight against Covid-19, medical workers have been honored as heroes.

Stopping the licensing of new airlines, restricting the expansion of fleets

Controlling the number of new airlines until the market recovers and restricting licensing to expand fleets in the immediate time are solutions proposed by the State Capital Management Commission (SCMC).

Luxury-tax hike should be postponed until after 2024

Discussing the luxury tax law, experts said it is necessary to design a reasonable taxation roadmap and begin raising the tax only after 2024.

Huge haul in new markets for Vietnam’s tra fish exports

Demand for Vietnam’s tra fish (pangasius) is up in major markets, driving the export of the catfish overseas, reports the Vietnam Association of Seafood Exporters and Producers (VASEP).

Facebook collects money from partners to pay tax in Vietnam

The amount of money Facebook is planning to collect from Vietnamese partners accounts for 5 percent of invoice value. The money will be used to fulfill tax obligations.