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Where is Vietnam in the global value chain?

Friday 20, 09 2019
By participating in the global. value chain, Vietnam is hoping to thrive, becoming a country with higher income.
Where is Vietnam in the global value chain?
“You have performed accurately in the first phase of the global chain. In this second phase, the good news is that Vietnam’s participation in the next step still reached 25%, higher than the 20% threshold,” Doctor Pinelopi Goldberg, Senior Vice President and Chief Economist of World Bank said.

Pinelopi says Vietnam has participated in the global value chain in both this phase and the previous one. At the moment, Vietnam is hoping to thrive in this chain, becoming a country with higher income.

Different from other commercial transactions, companies in the global chain have specific missions with higher expertise. Transactions are also long-term, requiring technological exchange and specialization to ensure other standards of senior partners within the chain.

The participation of a nation in this chain is determined base on some platforms including geographical location, capital, labor, market scale, and institutional quality. Out of these platforms, capital is the one that most nations don’t have, but it could be easily compensated for with the FDI capital.

The deep participation in the global chain is confirmed by the World Bank to have a positive impact on the country's growth, welfare, and national environment.

“At the moment, Vietnam is a country participating actively in the chain in the field of textile”, Pinelopi said. However, the representatives of the World Bank think that Vietnam’s participation in the manufacturing industry is limited. Therefore, the question here is how to thrive in the chain. However, we also need to understand that there is no common formula for all countries in the value chain since it depends on the development, current stage, and challenges of each one of them.

Pinelopi says that at the current stage, the challenges facing Vietnam is the human capital. “You have performed accurately in the first phase of the global chain. In this second phase, the good news is that Vietnam’s participation in the next step still reached 25%, higher than the 20% threshold. However, the labor force needs to be further invested, meaning that there should be more investment in education”. This implies that the most important thing to focus on so Vietnam may thrive in the chain is the human factor.

The representatives of the World Bank also said that Vietnam should not worry too much about the wave of technology replacing the labor force, shifting employment towards advanced nations. Currently, there are not many evidences for this. Instead, technology is considered to have promoted trade, reduced costs and created more job opportunities.

Regarding the trade war, Pinelopi thinks that the tension between the US and China will affect developing countries, especially those in the South East Asia region. However, in the short term, Vietnam is a beneficiary of services and industry as exports from China to the US decline.
"Vietnam has already exported a lot to the US," she said, citing a number of items such as leather goods and travel bags as examples. Even though it is still unclear in the long run, but the trade war will also affect investment if the tension escalates.

Thus, she says that countries need to expand in trade, avoid temptations and participate in protection. "The countries that have risen in the global chain are those with many trade agreements," she said.
Source: Tri Thuc Tre – Translated by Vietnam Credit

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