Comment on “Revisiting Exports and Foreign Direct Investment in Vietnam”

• Date: 01 June 2011
• Published date: 01 June 2011
• DOI: http://doi.org/10.1111/j.1748-3131.2011.01188.x
• Author: Van Tho TRAN

Comment on “Revisiting Exports and

Foreign Direct Investment in Vietnam”

TRAN Van Tho†

Waseda University

JEL codes: F14, F15, F21

Since the early 1990s, the Vietnamese economy has been characterized as high growth,

trade-oriented, and highly dependent on foreign direct investment (FDI). In the context

of the East Asian dynamism, characterized by the nexus of trade and FDI, Vietnam

appears to join the multilayered catching-up process of economic development in this

region. From these perspectives, Thanh and Duong’s (2011), which focuses on exports

and FDI is highly welcome.aepr_1188132..133

The paper uses various analytical techniques to identify the characteristics and the role

of exports and FDI in the economic development of Vietnam. Thanh and Duong reach a

number of important conclusions, such as those regarding the changes in export structure,

the sources of export expansion, and the impacts of FDI on exports. The analysis of the

paper is useful for understanding important aspects of the Vietnamese economy.However,

the analytical techniques using aggregated trade and FDI data may not fully discoverthe real

story. A closer look at the picturefrom other angles would give us other insights.

First, Thanh and Duong attribute the sources of export expansion to the growth of

world trade and the competitiveness of Vietnamese products. In my view, however, the

growth of world trade is just a necessary condition, and the competitiveness is also not

important since, as seen below, it remained static over a long period. Institutional factors

were much more important. Before 1990,Vietnam’s trade had been undertaken by a small

number of state-owned enterprises (SOEs). Along with substantial reforms in the 1990s,

private and FDI firms have been allowed to engage in trade activities. By1998, the number

of domestic firms and FDI firms engaging in foreign trade rose to 2250 and 1500,

respectively.Institutional changes in the world’s largest market also contributed greatly to

Vietnam’s exports. The most favorednation status given to Vietnam by the USA, according

to the USA–Vietnam Commercial Treaty (effective in 2001), has resulted in a jump in the

share of the US market in Vietnamese exports fromonly 5% in 2000 to nearly 20% in 2008.

Most of these export products, however, are unskilled labor-intensive items such as

footwear and garments, and natural resources-based such as marine products. Moreover,

Vietnam’s manufactured exports have heavily depended on the import of parts and other

intermediate goods. Therefore, the expansion of exports has been due to institutional

changes which revealed the static comparativeadvantage of Vietnam, rather than improve-

ments in competitiveness. This observation is further strengthened by the next point.

†Correspondence: Tran Van Tho, Graduate School of Social Sciences, Waseda University, 1-6-1

Nishi-Waseda Shinjuku-ku Tokyo 169-8050, Japan. Email: tvttran@waseda.jp

doi: 10.1111/j.1748-3131.2011.01188.x Asian Economic Policy Review (2011) 6, 132–133

© 2011 The Author

Asian Economic Policy Review © 2011 Japan Center for Economic Research

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