Vietnam and the Global Value Chain 1

Global empirical evidence shows that trade promotes growth. Through increased competition,
trade reallocates resources toward more productive sectors and firms and boosts real incomes by
lowering prices for consumers and firms. And by supporting growth, trade openness can also be an
important driver of poverty reduction. During the period between 1960 and 1990, eight high-
performing Asian economies in terms of trade—Japan; Republic of Korea; Taiwan, China; Hong Kong
SAR, China; Singapore; Malaysia; Indonesia; and Thailand—had an average growth rate of 5.5 percent
per year, higher and more sustainable than any other groups of countries in the world (Birdsall and
others 1993). Vietnam is no exception. The export-led growth strategy and global integration
adopted in Vietnam have been key factors, among other things, for Vietnam’s remarkable
achievement over the last more than two-and-half decades in generating economic growth and
poverty reduction.

During the period from 1992 to 2017, Vietnam developed into one of the world’s most
open trading countries, with an export-to-GDP ratio of more than 100 percent in 2017.
Figure 2.1 shows the interlink between the trade (export to GDP ratio), the growth trend reflected by
GDP per capita, and the poverty reduction (headcount ratio at US$3.2 per day) for the period. As an
export power house, in the past ten years, Vietnam’s merchandise export growth averaged more
than 15 percent, almost five times the global growth. As a result of this remarkable trade
performance, Vietnam’s GDP per capita, measured by constant price in 2010, realized a nearly four-
fold increase during this period, from less than US$500 in 1992 to more than US$1,800 in 2017. The
poverty rate of Vietnam also decreased remarkably over the same timeframe—with the poverty line
threshold at US$3.20 a day, the poverty headcount as a percentage of Vietnam’s total population
decreased from nearly 52.9 percent in 1992 to 2.2 percent in 2017.

FIGURE 2.1. Export-Led Growth and Poverty Reduction, 1992–2017

2,000 80
GDP per capita (US$)

Export to GDP (%)

1,500 60
52.9
1,000 40
35.5 38
26.5
500 19.5 20
14.8
4.2 2.8 2
- -
AFT

2.7
-199

WTO
6

2000

-200
7

-201
7
2008

2016
A

BTA
-

PP
CPT
US
1992
1993
1994
1995

1997
1998
1999

2001
2002
2003
2004
2005
2006

2009
2010
2011
2012
2013

2015

GDP per capita (current US$) Poverty headcount (% of population)

Source: UNComtrade database, available at

Chapter 2: Integrating with Global Markets 29