Export-led growth is not dead

Looking back at nearly 40 years of Vietnam's Renovation, Dr. Jonathan Pincus - Director of the Fulbright School of Public Policy and Management and former Chief Economist of UNDP in Vietnam - shares his perspective and recommendations for Vietnam's development.

Garment workers at a garment factory in Thai Nguyen province, Vietnam in July 2025. Photo: AFP

The Vietnam-US Bilateral Trade Agreement (BTA) signed in July 2000 was an important milestone in Vietnam's trade history.

BTA also paved the way for Vietnam to join the World Trade Organization (WTO) in 2007. Accordingly, from 2002-2008, Vietnam's manufactured exports grew by an average of 24% per year, and increased fivefold in the period from 2001-2008, from 6.8 billion USD to 34.1 billion USD.

Great export achievement

By 2009, the world was facing a financial crisis, and Vietnam's manufacturing export growth also slowed down. However, this figure quickly recovered from 2010 with an average growth rate of 20% per year until 2019.

During this second phase of export-led growth, Vietnam rapidly integrated into the East Asian regional supply chain for electronics, including phones, computer components, and many other products.

Thanks to the attraction of low labor costs and increasingly improved infrastructure, Vietnam's growth has been fueled by large inflows of foreign investment.

In my opinion, Vietnam has made the most of the free trade era, which began after the Uruguay Round of negotiations of the General Agreement on Tariffs and Trade (GATT) in 1994 - the event that led to the establishment of the WTO.

Sustaining manufacturing export growth over such a long period is a major achievement, bringing Vietnam closer to upper-middle-income status, creating millions of jobs and bringing in trillions of dollars in foreign exchange.

With the US unilaterally imposing tariffs on virtually every country, the WTO era seems to be coming to an end. Does the end of the WTO era mean the end of Vietnam’s export-led growth model? For me, the answer is NO.

Thus, there will still be many countries, including Vietnam, that benefit from globalization to ensure that global trade volume will not decline.

Dr. Jonathan Pincus

Globalization of production does not happen just because tariffs and quotas are eliminated, but because it makes economic sense. Most countries, especially those in Asia, are well aware of this.

Dr. Jonathan Pincus

Competition is key

Over the centuries, we have learned that competition is a key driver of efficiency. Businesses operating in a competitive environment are forced to do better in order to survive.

Vietnam’s exports are now competitive. This is true both for agricultural products harvested from domestic growers and for manufactured goods, which are largely produced by foreign-invested enterprises (FDI).

These FDI enterprises have to compete with global companies, so they are forced to optimize costs and ensure quality meets international standards. However, some sectors in the domestic market are limited in competition, which is holding back productivity growth.

In the early stages of the export-led growth model, many economists expected technology spillovers from FDI enterprises to domestic enterprises, as domestic enterprises were integrated into the export supply chain.

The idea is that domestic companies will learn to produce components more cheaply than imports, taking advantage of local advantages such as local knowledge and low labor costs. This has happened in some industries, but not as much as hoped.

Currently, Vietnam's manufacturing exports still depend heavily on imported raw materials and components. The localization rate in Vietnam's exports is lower than that of many other ASEAN countries.

In reality, competing with Chinese suppliers is quite difficult, as they take advantage of scale and more advanced technology. Faced with challenges, Vietnamese enterprises have largely avoided these sectors, instead focusing on domestic service sectors and industries such as real estate and finance.

Vietnam can learn from countries that have effectively leveraged FDI to develop domestic capabilities. Ireland, Poland, the Czech Republic and Estonia are good examples of countries that have successfully promoted domestic value addition in exports in FDI-led sectors.

These countries have built National Innovation Systems, thereby supporting domestic enterprises to be ready to compete with foreign suppliers.

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NGHI VU

Source: https://tuoitre.vn/tang-truong-dua-tren-xuat-khau-se-khong-chet-20250828152810503.htm