VIETNAM NATIONAL UNIVERSITY, HANOI

International School

FINAL ASSIGNMENT
International Economics
Lecture: Dr. Nguyen Mai Phuong
Class: INS2005.03

Group 1.2

Vương Thị Bích Ngọc 20070278

Phạm Thị Hải Yến 20070388
Nguyễn Minh Thu 20070336
Ngô Hữu Biển 20070133
Nguyễn Thế Vũ 19071272

Hanoi, May 2023

 Table of contents
A. Part 1: ................................................................................ 3
I. Executive Summary ......................................................................................... 3
II. Introduction........................................................................................................ 3
III. Balance international payments of VietNam. ........................................ 4
1. The export and import ............................................................................................................................................ 5
1.1. Import ........................................................................................................................................................................ 5
1.2. Export ........................................................................................................................................................................ 6
2. Comparative advantage & disadvantage: ......................................................................................................... 7
3. Surplus & Deficit........................................................................................................................................................ 8

IV. Conclusion ........................................................................................................... 9

B. Part 2 ................................................................................. 9
I. Executive summary ......................................................................................... 9
II. Introduction...................................................................................................... 10
III. Main Body .......................................................................................................... 10
1. The export of agricultural products..................................................................................................................10
1.1. Domestic agricultural production ..................................................................................................................10
1.2. Agricultural export activities ...........................................................................................................................11
2. The shift to exporting electronic components. .............................................................................................12
2.1. Overview of export activities ...........................................................................................................................12
2.2. Opportunities and challenges ..........................................................................................................................14
2.3. The shift to exporting electrical machinery and equipment .................................................................14
3. Comparative advantage ........................................................................................................................................15
3.1 Labour force ...........................................................................................................................................................16
3.2 Geographic location .............................................................................................................................................16
3.3. Growing domestic market.................................................................................................................................17
3.4. Government support...........................................................................................................................................17
4. Trade Integration ....................................................................................................................................................18
4.1. Vietnam's trade integration..............................................................................................................................18
4.2. Benefits of joining Trade intergation. ...........................................................................................................19
5. Gravity model ...........................................................................................................................................................20

IV. Conclusion ......................................................................................................... 22

C. Conclusion ...................................................................... 22
D. References ....................................................................... 23
E. Individual contribution ................................................... 26

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A. Part 1:
Choose one nation. Find the 2022 data for that country’s balance of payments. Please provide
your conclusion of the current account, including the export and import, comparative
advantage and disadvantage, and understand its surplus or deficit.

I. Executive Summary
The Balance of Payments (BoP) is an important macroeconomic indicator that reflects the
overall international economic picture of a country. Observing the fluctuations of the BoP
2022, in Vietnam, the BoP was continuously in surplus, even when it was heavily affected by
the Covid-19 pandemic. The surplus in Vietnam's BoP has enhanced Vietnam's foreign
position. However, it has put pressure on the local currency and possibly the macroeconomics
in the future. The following study analyzes the import and export situation, comparative
advantage & disadvantage and surplus & deficit, the surplus situation in the trade balance of
Vietnam and makes some recommendations for Vietnam. In particular, in the coming time,
Vietnam needs to clearly define priority targets in its policy to ensure macroeconomic stability;
structure and quality of FDI.

II. Introduction
Socio-economic of our country in 2022 takes place in the context that the world economy is
facing great challenges, rapid and unpredictable fluctuations and high instability; Inflation rose
to its highest level in decades forcing countries to tighten monetary policy. Strategic and
geopolitical competition between major powers, military conflict between Russia and Ukraine;
natural disasters, epidemics, climate change, storms, droughts... have increased risks to
financial markets, currency, energy security, and global food security.

Gross domestic product (GDP) in 2022 is estimated to increase by 8.02% over the previous
year, reaching the highest increase in the period 2011-2022 due to the recovery of the economy.

In the area of agriculture, forestry and fishery, the agricultural sector increased by 2.88%,
contributing 0.27 percentage points to the growth rate of total added value of the whole
economy; forestry increased by 6.13%, contributing 0.03 percentage points; the fisheries sector
increased by 4.43%, contributing 0.12 percentage points.

In the industry and construction sector, the processing and manufacturing industry continued
to be the growth engine of the whole economy with an increase of 8.10%, contributing 2.09
percentage points to the growth rate. total value added of the whole economy. Water supply,
management and treatment of waste and wastewater increased by 7.45%, contributing 0.04%
of percentage points. Electricity production and distribution increased by 7.05%, contributing
0.26 percentage points. Mining industry increased by 5.19%, contributed 0.17 percentage
points. Construction industry increased 8.17%, contributed 0.59 percentage points.

From the above fluctuations, we choose Vietnam as the analyzed country. We will release a
detailed report on the impact on Vietnam's balance of payments in 2022.

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III. Balance international payments of VietNam.
The Balance of International Payments (BOP) is a report that details all transactions between
a country's residents and noncitizens for a given time frame. The import and export of goods,
services, and capital, as well as transfer payments like remittances and foreign aid, all have an
impact on the balance of payments (BOP).
Five main parts, or five aspects, make up the balance of international payments, including the
following:
● Capital and financial balance (KA)
● Current Balance or Current Account (CA)
● Official Financing Balance (OFB)
● Overall Balance (OB)
● Capital and financial balance (OFB).
● Omission and Mistake (OM): Errors and Mistakes

Source: The State Bank of Viet Nam

Table 1: Balance of International Payment of Vietnam in 2022

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 Source: The State Bank of Viet Nam

Figure 1: The current account and data about VN

1. The export and import

The General Department of Customs recorded that the total import and export value of foreign
direct investment (FDI) enterprises in the month was 38.04 billion USD, down 4% compared
to the previous month, bringing the total import and export value to USD 38.04 billion. of
enterprises with foreign direct investment (FDI) in 2022 to 506.83 billion USD, up 9.3%
(equivalent to 43.22 billion USD) compared to 2021.
In which, the export of goods of FDI enterprises this month was 20.94 billion USD, down 2.4%
compared to the previous month, thereby raising the export value of goods in 2022 of FDI
enterprises to 273 .63 billion USD, up 11.6% (equivalent to 28.5 billion USD) compared to
2021 and accounting for 73.7% of the total export value of the country.
In the opposite direction, the import value of FDI enterprises in December 2022 was 17.1
billion USD, down 5.9% compared to the previous month, bringing the import value of this
sector in 2022 to 233. 2 billion USD, up 6.7% (equivalent to 14.7 billion USD) compared to
2021, accounting for 65% of the total import value of the whole country.
The merchandise trade balance of FDI enterprises in December 2022 reached a surplus of 3.83
billion USD, bringing the trade balance for the whole year to a surplus of 40.42 billion USD.

1.1. Import
Import value of goods in December 2022 reached USD 27.29 billion, down 3.5% (equivalent
to USD 985 million) compared to the previous month; in which, the decrease was mainly in
the product groups: phones of all kinds & components down by 526 million USD; other
machinery, equipment, tools & spare parts decreased by USD 246 million; Plastic raw materials
reduced by 222 million USD…
For the whole year of 2022, the total import value of Vietnam's goods reached 358.9 billion
USD, up 7.8% compared to 2021. In which, the biggest increase was in computers, electronic
products and components. 6.33 billion USD, equivalent to an increase of 8.4%; petrol and oil

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of all kinds increased by USD 4.86 billion, equivalent to an increase of 118.5%; chemicals
increased by 1.5 billion USD, corresponding to an increase of 19.6%; coal increased by 2.69
billion USD, equivalent to 60.2%; crude oil increased by 2.61 billion USD, equivalent to 50.1%
increase...

Source: General Department of Custom

Figure 2:10 commodity groups with the highest import value in 2022 compared to 2021.

1.2. Export
The export value of goods nationwide in the month reached 29.03 billion USD, a slight increase
of 10 million USD compared to the previous month.
Some commodity groups decreased compared to the previous month, such as: phones and
components down by USD 1.42 billion, equivalent to a decrease of 31.4%; cameras,
camcorders & components decreased by USD 108 million, corresponding to a decrease of
17.6%...
On the contrary, some commodity groups increased compared to the previous month such as:
computers, electronic products & components increased by 716 million USD, equivalent to
17.6%; wood & wood products increased by 135 million USD, equivalent to 11.5%; coffee
increased by 121 million USD, equivalent to 32%; iron and steel increased by 114 million
USD, equivalent to 24.2% increase...
In 2022, the total export value of Vietnam reached 371.3 billion USD, up 10.5%, corresponding
to 35.14 billion USD increase over the previous year. In which, other machinery, equipment,
tools and spare parts increased by 7.43 billion USD; footwear of all kinds increased by 6.15
billion USD; textiles and garments increased by 4.82 billion USD; computers, electronic
products and components increased by 4.74 billion USD; seafood increased by 2.04 billion
USD…

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 Source: General Department of Custom

Figure 3:10 largest export commodity groups of Vietnam in 2022 and compared to 2021

2. Comparative advantage & disadvantage:

Source: Statista

Figure 4: Export value of major commodities in Vietnam in 2022(in billion U.S. dollars)
In 2022, exporting phones and components with the largest value of Vietnam's main export
goods reached approximately US $ 59.3 billion. Meanwhile, electronics, computers and
components contributed more than $ 55 billion to the total export turnover that year. This
demonstrates other countries' faith in Vietnam's quality and processing level. Furthermore,
Vietnam is located in an area with a vibrant economy, as well as a long coastline that facilitates
the exchange and exchange process between other economies, and Vietnam is still in an
industry-rich area. Grow and be dynamic. These advantages demonstrated a high potential for

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attracting investment capital, transfertech, learning management, and human resource training
from the region's developing technologies.
Furthermore, the main player's global supply chain is increasingly focusing on Vietnam: In its
supply chain, Apple has relocated 11 Taiwanese factories to Vietnam. When Samsung
increased its investment in Vietnam to $20 billion USD, with a focus on artificial intelligence
and big data… Import and export activity will confront several hurdles in the last months of
2022. Petrol and oil prices, in particular, remain complicated; oil price increases while this is
the primary source of raw materials for production and consumption; interruption in supply,
production costs, global transport increases... putting pressure on inflation, domestic goods
prices, and consumer stimulus for trade. Furthermore, when the supply of fractures is disrupted,
the trend of commercial protection increases in many countries.

3. Surplus & Deficit

In December 2022, Vietnam's current account showed a surplus of $3.9 billion, which
translates to a surplus of $1.7 billion the previous quarter. Vietnam Current Account
Balance: Available from March 1996 through December 2022 with quarterly updates,
with an average value of -104.1 million USD.

The realized capital of foreign investment projects (FDI) in the first seven months of
2022 is anticipated to be close to $1.57 billion, up 10.2% over the same period of 2021,
according to data that was just released by the Ministry of Planning and Investment. As
of July 20, 2022, there was a 7.1% decline in capital compared to the same period in
2021, with about 15.41 billion USD of newly registered, adjusted, and contributed
capital to buy shares and capital contributions from foreign investors.

Recent BoP changes reveal that Vietnam's BoP has consistently washed its hair, even
during the Covid-19 pandemic's worst outbreaks. Vietnam's BoP surplus has improved
its external position, but it has also increased pressure on the national currency to rise
and may eventually have an impact on macroeconomics. This article examines the
redundancy issue in the BoP of Vietnam and offers some recommendations for Vietnam
based on descriptive statistics, comparison, analysis, and synthesis. In particular, as the
capital account is liberalized more in the future, Vietnam needs to state clearly what its
top priority is in terms of policy: either stabilizing the exchange rate or achieving
independence from monetary policy.

As of January 6, 2022, there is a negative balance of trade in goods of 1.42 billion USD.
From the start of the year until June 15th, there was a deficit of more than 1.3 billion
USD in the goods trade balance. Vietnam's trade balance of goods in the first half of
2022 was positive, with an extraordinary surplus of 740 million USD due to rising
import and export of goods.

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 Source: Ministry of Planning and Investment Portal

IV. Conclusion

From the results of the research on the balance of payments of Vietnam in the period of 2022,
it is shown that, although many positive results have been achieved in both the balance of
payments and macroeconomic stability, there are still a number of problems to be found.
Therefore, it is necessary to continue to ensure and resolve to ensure the balance of payments
and stabilize the macro-economy, to encourage and promote economic growth, and to ensure
macroeconomic stability; structure and quality of FDI to improve the added value of goods
exported from this region. On the other hand, the policy of attracting FDI enterprises in
Vietnam still has loopholes for enterprises to take advantage of to implement forms of
transfer pricing; Financial development is still far behind some countries in the region and the
world in terms of scale, liquidity, level of development,...

B. Part 2
Recently, Vietnam has experienced changes in its export structure. Previously, Vietnam
exported more agricultural products (for example, rice). Currently, the country’s crucial
export products are electrical machinery and equipment. Based on the comparative advantage,
gravity model, and trade integration, please study the Vietnamese export dynamics and explain
this shift.

I. Executive summary
Since the early 20th century, when Vietnam began to emerge as a major exporter of agricultural
goods, its export structure has undergone tremendous transformation. This research examines
these shifts from agriculture exports to exports of machinery and electronic equipment in terms

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of competitive advantage, gravity modeling, trade integration, and Vietnam's export dynamics.
In order to understand the effects of export restructuring on the supply chain, the potential for
integration, and Vietnam's trade promotion for the global supply chain, this study also provides
readers with information about the economic background of Vietnam and the dynamics of
Vietnam's exports.

II. Introduction
Vietnam's economy is a socialist-oriented market economy, in which the government plays a
direct role in economic development and decision-making. Currently, it is a mix between this
state-planned economy and a market economy, which is controlled by supply and demand.
To foster growth, Vietnam's economy is heavily reliant on foreign direct investments. During
the last two decades, however, under the reform policy known as Doi Moi (Renovation),
Vietnam's economy has made tremendous strides. The country has established institutions of
a market system and dramatically improved living standards. Agricultural production meets
Vietnamese needs, and it has become a major supplier in world markets, notably agricultural.
Vietnam's main export goods are now equipment and electrical machinery. Moreover, in the
world economic context, digital transformation has been one of the most discussed topics
during the past decade due to its inevitability for the sustainable development of each
country. Vietnam has long been regarded as a country with significant potential for building a
digital economy, with particular benefits. With many technology platforms focusing on
artificial intelligence - AI, Blockchain, Big Data, the Internet of things - IoT, and Cloud
Computing, the digital economy opens up many opportunities for Vietnam.Vietnam is
growing its exports of carbon-intensive items while lowering its exports of value-added
products. As a result, tighter environmental laws for all firms in Vietnam, particularly those
with export activity, must be established and enforced.

III. Main Body

1. The export of agricultural products

1.1. Domestic agricultural production

Vietnam’s plant-based agriculture is experiencing rapid growth and Vietnam is becoming a key
player in global agriculture. Here’s what potential foreign investors should think about when
considering entering Vietnam’s agricultural sector.

Vietnam has been selected by the United Nations to host the 4th Global Conference of the One
Planet Network’s Sustainable Food Systems Programme in April this year. This will bring
together experts from around the world to discuss how best to develop ‘sustainable, resilient,
healthy, and inclusive food systems’.

At the same time, the World Economic Forum (WEF) has selected Vietnam as one of the first
three countries to pilot the Food Innovation Hub, a flagship initiative of the Food Action
Alliance designed to improve sustainability in food production.

In 2022, Vietnam’s agricultural sector experienced its highest growth in recent years reaching
3.36 percent. Of this figure, farming increased by 2.88 percent, fisheries increased by 4.43

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percent, and forestry increased by 6.13 percent. The export turnover of the whole industry was
over US$53.22 billion.

Vietnam currently exports a broad range of agricultural products all over the world. Its main
exports are walnuts, coffee, and rice – accounting for just over US$5.7 billion worth of
agricultural exports in 2021.

# Description Value (US$1,000)

1 Walnuts, shelled 3,439,931
2 Coffee, green 2,327,922
3 Rice, milled 2,069,836
4 Pepper (Piper spp.), raw 1,818,418
5 Natural rubber in other forms 1,036,537
6 Other fruits, n.e.c. 777,974
7 Fruit prepared n.e.c. 606,425
8 Coffee extracts 409,362
9 Other vegetables, fresh n.e.c. 246,598
10 Pastry 223,451

*n.e.c. = Not Elsewhere Classified

Table 2: Top 10 Vietnamese agricultural exports in 2021

Source: Food and Agricultural Organisation of the United Nations

By the end of 2022, MARD had approved four ODA projects or had investment policies with
a total loan value of US$840 million. The ministry also coordinated with businesses to prepare
14 new project proposals requiring total capital of US$3.2 billion.

Last year, the agricultural sector also mobilized US$300 million in grant aid and approved 15
projects worth US$25 million for non-governmental organizations. It also attracted a large
amount of FDI with 12 new projects and US$68 million in newly registered capital.

But more capital is needed and, with few restrictions on foreign investment in Vietnam’s
agricultural sector (see below), foreign producers of agricultural products and their private
finance may be necessary in order to facilitate the sector’s continued development.

1.2. Agricultural export activities

Agricultural products have been a prominent export item in Vietnam's total export turnover
over the past time, setting a new record with export value reaching $41.2 billion in 2020 and
$22.83 billion in the first half of 2021. Products/groups of product with export turnover of over
3 billion USD include: Vegetables, shrimp, coffee, rice, rubber, wood and wood products.

In the first half of 2021, Asia still holds the largest export market share of Vietnam with 46.5%
of total turnover. Followed by markets: USA (27%), Europe (10.1%), Africa (1.7%) and
Oceania (1.3%). The four main export markets of Vietnamese agricultural products are: the
US, China, Japan and South Korea.

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 Year Export share Total export
value
Animals Vegetable Food products
(Billion USD)
(%) (%) (%)
2008 6.43 11.19 2.31 62.68
2009 6.54 12.02 2.70 69.95
2010 5.90 11.09 2.88 84.84
2011 5.33 11.01 2.95 106.74
2012 4.49 10.72 2.68 113.78
2013 4.05 7.92 3.15 132.03
2014 4.06 8.40 2.97 150.21
2015 3.21 7.48 2.93 165.77
2016 3.18 7.56 2.67 174.97
2017 3.00 7.12 2.45 213.21
2018 2.62 6.01 2.42 236.86
2019 2.38 5.10 2.39 253.45
2020 2.05 4.69 2.45 281.44

Table 3: Export share of main agricultural industries

Source: World Integrated Trade Solution

The table of the proportion of export turnover over the years from 2008 to 2020 - shows the
contribution of the agricultural sector in the total export turnover of Vietnam. The period shows
a great change in the structure of Vietnam's export industry, shifting from agricultural exports
to service industries. In 2000, agricultural product export groups such as: Animal(10.93%),
vegetable(13.59%), and food product (1.34%) were the main export industries and accounted
for a large proportion of Vietnam's export turnover. In the period from 2008 to 2020, the share
of exports of these groups of industries decreased steadily, and decreased sharply from 11.09%
to 7.92% in the period 2010 to 2013. The explanation for this decrease is due to the rapid
increase in the export the Machinery and Electrical sectors. Development of electrical
machinery and equipment causes the share of Vietnam's agricultural exports to decrease
gradually, although the export volume still has increased steadily over the years.

2. The shift to exporting electronic components.

2.1. Overview of export activities

The electrical machinery and equipment is the industry group with the fastest growth rate in
the last 10 years. In 2020, this industry accounts for more than 40% of the total export turnover
of the country. The major export markets of this group are still the EU, the United States, and
China, in which the export of electronics, computers and components to the US increased
sharply by 17.2%, reaching nearly 3 billion USD.

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 Source: World Integrated Trade Solution

In the period 2011-2021, the electronics industry achieved remarkable achievements. Exports
of electronics, computers and components in this period grew by an average of 27.3% per year,
bringing Vietnam from the 47th position globally in 2001 to the 12th place in the world and
3rd in the ASEAN region in terms of electronics exports. (according to the General Statistics
Office). However, about 95% of the export value of this industry still belongs to foreign-
invested enterprises, mainly Japan and Korea.

In the period 2011-2020, exports of computers and electronic components increased rapidly,
especially, in 2012 with a growth rate of 68.4% compared to 2011. The main reason for this
growth is that large technology corporations such as Intel and Samsung have invested in
Vietnam. In 2012, products with high value-added content of FDI enterprises such as
computers, electronic chips, and mobile phones were exported with high value.The period
2011-2020 is a remarkable growth period for the export of computer electronics and
components. Export value rose from 4.5 billion USD in 2011 to 51.4 billion USD in 2020.

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 2.2. Opportunities and challenges

Challenges

Although it is considered a spearhead industry and has achieved some achievements in

attracting foreign direct investment, making a great contribution to Vietnam's export industry,
the electrical machinery and equipment industry still faces great challenges.The electrical
machinery and equipment industry depends largely on foreign direct investment enterprises.
Products of Vietnamese enterprises are not strongly oriented towards production, but mostly
assembled with foreign components. Besides, the capacity of domestic enterprises is still
limited, the quality and design of products have not met the requirements, so the domestic
electrical-electronics market in the country is currently dominated by foreign brands.

Opportunities

After the Covid-19 pandemic and a series of socio-economic upheavals in the world and in the
region, Vietnam still maintains a stable development and attracts the attention of the giants of
the technology industry. According to forecasts, Vietnam's electronics industry is having the
opportunity to welcome the wave of investment shift and value chain restructuring in the near
future. In fact, many large corporations in the world such as Apple, Pegatron, Intel, etc. have
expressed interest and plan to invest in new or expand the production of electronic products in
Vietnam, including: some products with high technology content. Besides, Samsung is also
promoting more activities to find and connect with domestic suppliers to increase the linkage
in the value chain of this group in Vietnam.

2.3. The shift to exporting electrical machinery and equipment

Table show export value and export share of agricultural and Machinery - Electronic industry
of Vietnam in the period 2008-2020.

Source: WIST- World Intergrated Trade Solusion

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The export share of the agricultural industry (with three main product groups: vegetables,
animals and food products) with the share of electrical machinery and equipment has changed
greatly in the period from 2008 to 2020. In 2009, the total export value of the agricultural sector
was billion USD, accounting for 21.26% of the export share and twice the share of the electrical
machinery and equipment industry (11.51%). However, only in 2012, the proportion of export
turnover of electrical machinery and equipment exceeded the export of agriculture and
accounted for 24.69% of the total export turnover of Vietnam. The reason for this shift has
been attributed to FDI from technology companies such as Intel and Samsung into the chip and
electronics manufacturing market in Vietnam (mentioned above). By 2020, the export share of
electrical machinery and equipment (46%) is almost 5 times that of the agricultural sector. The
above figures have shown a clear shift in Vietnam's export structure, shifting from exports of
agricultural industries to exports of electrical machinery and equipment.

3. Comparative advantage
The machinery and electronics industry has emerged as a significant contributor to Vietnam's
economic growth in recent years. This industry has been supported by various Vietnam’s
comparative advantage. This has resulted in an increase in export of machinery and electronic
goods, leading to a boost in Vietnam's export-oriented economy.

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3.1 Labour force
Vietnam's attraction for investment in the machinery and electronics industry is partly due to
its abundant and inexpensive labor force. Vietnam has a proportion of the population of
working age accounting for 59%-67% of the total population during the period of 2000-2019.
Therefore, Vietnam is currently in the "golden population structure" period, with a young and
abundant labor force considered a great advantage for the country. Currently, Vietnam is
making substantial investments in education, particularly in technology and machinery to
improve the country's labor quality. In addition, Vietnam's labor cost is considered low
compared to other countries in the region. According to statistics on the average income of
countries worldwide in 2021, the average income of Vietnamese people is around $299 per
month (equivalent to over 7 million VND) and ranks 54th out of 69 surveyed countries.
Compared to countries in the region such as Indonesia ($348 per month), Thailand ($591), and
the Philippines ($296), Vietnam is classified as a low-income country. The abundant, young,
dynamic, and energetic labor force, along with low labor costs, is considered a significant
competitive advantage of Vietnam in dynamic industries such as electronics and machinery
production.

3.2 Geographic location

In terms of geography, Vietnam is located in Southeast Asia and borders strong technology
markets such as China, South Korea, and Japan. This creates favorable conditions for Vietnam
to export machinery and electronic goods. Additionally, Vietnam is a coastal country located
on the western side of the South China Sea with a coastline of 3,260 kilometers and bordering
the South China Sea. Vietnam's location is considered a strategic economic position because it
is a gateway to Southeast Asia and China. Moreover, Vietnam's coastline has many deep-water
bays suitable for building harbor. Some of Vietnam's important harbors are Hai Phong Port,
Saigon Port, Da Nang Port, and Quy Nhon Port. Vietnam's favorable geographical location
facilitates import and export activities and reduces transportation costs.

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3.3. Growing domestic market
The export of machinery and electronics from Vietnam has been increasing in recent years,
driven in part by the growing domestic market. Evidence from a report by the Vietnam Industry
Research and Consultancy (VIRAC) shows that consumer spending on electronics in Vietnam
has been growing rapidly, with an increase of 12.1% in 2018. This growth in domestic demand
for electronics has likely contributed to the growth of Vietnam's export industry in this sector.
As the middle class in Vietnam continues to grow, the demand for electronics is likely to
increase further, providing opportunities for Vietnam's export-oriented economy to continue to
grow.

3.4. Government support

The Vietnamese government has implemented tax incentives to encourage investment in
manufacturing, including the export of machinery and electronic equipment. These incentives
include exemptions and reductions in corporate income tax, import and export taxes, and land-
use fees for companies investing in high-tech fields. Additionally, the Vietnamese government
has heavily invested in infrastructure development to support the growth of the manufacturing

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sector. This includes expanding transportation networks such as highways, bridges, and new
airports, as well as the development of industrial parks and improvements in energy
infrastructure. The government's support policies in the machinery and technology industry
have helped this industry to develop strongly in recent years.

In conclusion, Vietnam's machinery and electronics industry has experienced significant

growth in recent years, driven by its abundant and low-cost labor force, favorable geographic
location, and strong government support through tax incentives and infrastructure
development. With a growing domestic market and increasing demand for electronics, the
country's export-oriented economy is well-positioned to continue to expand in this sector.

4. Trade Intergation

4.1. Vietnam's trade intergation

Vietnam has joined many trade integration agreements, including bilateral, regional and
agreements. Here are some of the most important trade agreements that Vietnam has signed:

The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP):

This is a trade agreement between 11 countries, including Vietnam, Japan, Canada, Australia,
and New Zealand. The CPTPP reduces tariffs on a wide range of products, including machinery
and electronics, and includes provisions for the protection of intellectual property rights and
the liberalization of investment rules.

The EU-Vietnam Free Trade Agreement (EVFTA): This is a trade agreement between
Vietnam and the European Union (EU) that reduces tariffs and non-tariff barriers on a wide
range of goods, including machinery and electronics. The EVFTA includes provisions for the
protection of intellectual property rights, the liberalization of investment rules, and the
simplification of customs procedures.

The Regional Comprehensive Economic Partnership (RCEP): This is a trade agreement

between 15 countries in the Asia-Pacific region, including Vietnam, China, Japan, and South
Korea. The RCEP reduces tariffs on a wide range of products, including machinery and

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electronics, and includes provisions for the protection of intellectual property rights and the
liberalization of investment rules.

The Vietnam-Korea Free Trade Agreement (VKFTA): This is a trade agreement between
Vietnam and South Korea that reduces tariffs and non-tariff barriers on a wide range of goods,
including machinery and electronics. The VKFTA includes provisions for the protection of
intellectual property rights, the liberalization of investment rules, and the simplification of
customs procedures.

European Free Trade Association (EFTA): Vietnam signed a free trade agreement (FTA)
with the EFTA, which includes Iceland, Liechtenstein, Norway, and Switzerland, in 2016. The
EFTA-Vietnam FTA has helped to reduce trade barriers and increase market access for
Vietnamese goods, including machinery and electronics, in EFTA member countries. Under
the agreement, EFTA and Vietnam have agreed to eliminate tariffs on most goods traded
between them, which has made Vietnamese exports more competitive in these markets.

Association of Southeast Asian Nations (ASEAN): As a member of ASEAN, Vietnam has

benefited from increased regional economic integration and trade liberalization. ASEAN has
helped to reduce trade barriers between its member countries, making it easier for Vietnamese
businesses to export their goods to other ASEAN countries. In particular, ASEAN has helped
to promote the development of regional value chains, which has been beneficial for the
machinery and electronics sector in Vietnam.

4.2. Benefits of joining Trade intergation.

One of the main benefits of trade agreements is the reduction or elimination of tariffs on exports
between the participating countries. By signing these agreements, Vietnam gained preferential
access to key markets for machinery and electronics, such as Japan, South Korea, and the EU,
among others. This means that the export market of machinery and electronics of Vietnam will
be reduced or free of tariffs or non-tariffs with a large country mentioned above. This has made
Vietnamese machinery and electronics more competitive on the global market by reducing their
cost, and enabling them to be more price competitive compared to products from other
countries. Besides, many trade agreements also include provisions related to standards and
regulations for trade. These provisions help to ensure that products meet certain quality and
safety standards, which can be a barrier to entry for some exporters. By complying with these
standards, Vietnamese companies are better positioned to compete in international markets for
machinery and electronics. Therefore, in recent years, Vietnam is a potential place where
investors from large technology companies look to invest.
Many trade treaties contain provisions encouraging foreign investment in participating
countries. This can take the shape of direct investment in factories and manufacturing facilities,
or collaborative ventures with local businesses. Foreign investment has had a key impact on
the growth of the industrial and electronics sectors in Vietnam. For example, multinational
firms such as Samsung and LG have made significant investments in the country's electronics
industry, establishing large-scale manufacturing facilities that employ thousands of people.

Technology transfer is another manner in which trade agreements might aid to strengthen
Vietnam's export sector for equipment and electronics. This can happen when foreign
businesses invest in local manufacturing facilities and bring new technologies, production
processes, and management practices with them. Vietnam, for example, has been able to create
its own semiconductor industry thanks to its relationship with Samsung, with local companies
now producing chips for a wide range of electronic gadgets.

19
In summary, trade integrations brings numerous benefits in terms of tariffs, non-tariffs, foreign
investment, and technology transfer from developed countries to Vietnam. This is an important
factor explaining why Vietnam's machinery and electronics export industry has grown strongly
in recent years.

5. Gravity model
The gravity model is based on three variables that account for the size and separation of the
two economies. The gravity model's fundamental premise is that only size and distance matter
in trading:

Tij = A x Yi x Yj /Dij
In there:
-A is a constant
-Tij is the trade value between country i and country j
-Yi is the GDP of country i
-Yj is the GDP of country j
-Dij is the distance between country i and country j
-T increases as GDP products of two countries increase
-T decreases as the distance between two countries increases

Vietnam's export structure model reveals that production capacity has been gradually
increasing in recent years, as seen by the prediction that exports will diverge from GDP.
Vietnam's industrial capacity and technological base have greatly risen over the past ten years
as a result of the formation of several new sectors and efforts in economic restructuring, and
economic reform will support these initiatives. The forces of diversification help Vietnam's
export goods, agricultural products, and electronics to be more competitive. This forecast is
based on events in Vietnam.

The Gravity model is an economic model used to predict the level of trade between two or
more countries. According to this model, the extent of trade between these countries depends
on the size of their economies, the geographical distance between the these countries, and the
similarity in economic characteristics between these countries.

20
 Source: General Department of Vietnam Customs
Regarding the influence of gravity model on Vietnam's export structure, it can be understood
as follows:

Economy Size: The size of a country's economy affects its ability to export. With a developing
economy like Vietnam, export opportunities to major markets such as the US, China, Korea,...
will be improved. This will affect the export structure of Vietnam.

According to the Gravity Model formula, we see the relationship of GDP between Vietnam
and other countries, which influence each other to create trade values. According to some
reputable sources from the governments of countries or the World Bank, we see a great change
in GDP growth of countries from 2008 to 2022.

According to World Bank Gross domestic product (GDP) reached 30.067 trillion yuan (4.594
trillion U.S. dollars) in 2008 after that Xinhua News Agency, Beijing, January 17 (Reporters
Wei Yukun and Zhou Yuan) The National Bureau of Statistics released data on the 17th,
indicating that the preliminary calculation shows that the annual gross domestic product (GDP)
of China in 2022 will be 121020.7 billion yuan equal 18.1 trillion U.S. dollars.

In US, Current-dollar GDP increased 9.2 percent, or $2.15 trillion, in 2022 to a level of $25.46
trillion USD in 2022 and in 2008 will be 14.77 trillion USD.

In 2008,the gross domestic product (GDP) produced from the manufacturing sector in South
Korea amounted to approximately 1.047 trillion USD. In 2022, the gross domestic product
(GDP) produced from the manufacturing sector in South Korea amounted to approximately
524.5 trillion South Korean won equal to 1.73 trillion USD, being the most valuable sector by
far in comparison to other sectors of the country.

21
Large countries always focus on improving technology and machinery. They will focus on
partners with competitive prices on human and physical resources. Joining hands with Vietnam
in the machinery and equipment manufacturing industry is a right decision because foreign
companies always have preferential policies from businesses and the government.

Therefore, since the world trend has turned to industry, Vietnam's export structure has also
made great strides when there is a strong shift from agricultural exports to electricity exports.
To the General Statistics Office, Vietnam's GDP in 2008 was 99.13 billion USD, but this
number according to increase significantly in 2022 when Vietnam's GDP reached 409 billion
USD, and according to the IMF, this number is slightly higher at 413. $81 billion.

Geographical distance: Geographical distance is also an important factor affecting the level of
a country's exports. Therefore, Vietnam tends to focus on export markets such as China,
Korea,US,... to reduce transportation costs and increase competitiveness.

Economic similarity: Similarity in economic characteristics between Vietnam and other

countries also affects the ability to export. If there is a similarity in products, product quality,
or in accordance with the culture and tastes of the export market, the ability to export will be
improved.

In summary, the gravity model affects the export structure of Vietnam because economic
factors, geography and economic and cultural characteristics of export markets all affect
Vietnam's exports.

IV. Conclusion
Electronics, computers, and phone exports have drastically altered the composition of
Vietnam's exports, making this sector a viable investment opportunity for major international
IT companies. The cost of electronics and telecommunications items will drop dramatically
after tariff barriers are removed and a number of important electronics and telecoms companies
announce their exodus from the Chinese market and relocate to Southeast Asia.

C. Conclusion
In summary, Vietnam's trade balance has improved in recent years, with a significant increase
in surplus and key export items. However, there are still many challenges to balance the trade
balance, such as the low status of importing raw materials for production and the low added
value in exported products. Vietnam needs to focus on developing high-value-added industries,
improving product quality, and strengthening import-export management to achieve a
sustainable trade balance.
The explanation for the shift in Vietnam's share of exports from agriculture to machinery and
electronics is driven by many factors, including Vietnam's competitive advantage in machinery
and electronics manufacturing, global commercial integration and the influence of the Gravity
Model. The focus on developing high value-added industries is also one of the key factors in
this process. However, it is necessary to ensure that this change in the share of exports does not
affect agriculture and other economic sectors, and at the same time ensure the balance of
Vietnam's trade balance.

22
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E. Individual contribution
No. Member’s Name Student ID Task Evaluation

1 Vương Thị Bích Ngọc 20070278 Question 1: I,II, III 100%

Question 2: III (1)
Edit report

2 Phạm Thị Hải Yến 20070388 Question 1: II (3) 100%

Question 2: I, II, III(5)

3 Nguyễn Minh Thu 20070336 Question 1: III 100%

Question 2: III (3,4), C

4 Ngô Hữu Biển 20070113 Question 1:II (2) 100%

Question 2: III (2-2.3), IV

5 Nguyễn Thế Vũ 19071272 Question 1: II (1) 100%

Question 2: III (2 – 2.1,2.2)

26